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Tech IPOs "dried up"

Barron's, in its weekly bearish take on Snap (this time comparing it to "Ill-Fated GoPro"), points out that "tech IPOs have all but dried up in recent years":

  • "There were just 20 such offerings in 2016, the worst year since 2009.
  • "Now we get to see if the well-received Snap offering is enough to usher in the next wave of IPOs, particularly with big 'unicorns' such as Uber Technologies, Airbnb, Spotify, and Dropbox lurking in the pipeline.
  • "[T]he good times won't last forever. Eventually the market will correct, suspending IPOs yet again. For all the unicorns planning to go public, it could be now or never."
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SoundCloud needs saving

Graham Smith/flickr

Recode reports that Soundcloud has been unsuccessfully trying to raise $100 million in funding since the summer, and is now talking to potential buyers, including Spotify, who opted not to buy the streaming service last year.

Why it matters: Investors initially valued SoundCloud at $750 million, but now Recode reports that SoundCloud may be willing to consider bids so long as they are higher than the roughly $250 million they've raised to date. Despite going back to investors for two additional round of funding, including a $70 million investment from Twitter in 2016, investors say SoundCloud's valuation remains the same.

What's in it for Spotify? SoundCloud's competitive advantage is its music library, not its user base. Last year, SoundCloud introduced a $10 monthly subscription service, similar to Spotify's, but the offering hasn't gained much traction against its competitors, mainly Spotify and Apple Music, which have 50 million and 20 million paid subscribers each.

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California prepares for fully driverless cars later this year

AP Photo/Eric Risberg

California is laying the groundwork to regulate self-driving cars, according to new regulations the state's DMV published on Friday.

The state plans to allow for testing of fully driverless cars on public road by the end of the year. Now vehicles need to have controls like a steering wheel and pedals and a safety driver who can take over when needed, but that will no longer be the case if manufacturers meet federal standards or get an exemption. Driverless cars will need a remote operator who can monitor their operation and communicate with passengers.

High demand: There are already more than two dozen companies testing self-driving technology in California, including Alphabet's Waymo, Tesla, and Uber, which obtained its permit this week after a disagreement with DMV.

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Uber hires veteran headhunting firm to find COO

AP File

Uber, which earlier this week said it will seek to hire a COO to help chief executive Travis Kalanick steer the ship, has settled on headhunting firm Heidrick & Struggles for the job, as Business Insider reported and Uber confirmed to Axios.

Track record: Heidrick & Struggles is responsible for the hiring of several high-profile executives, including Eric Schmidt as CEO of Google in 2001, and Satya Nadella as CEO of Microsoft in 2014.

The story has been corrected to show that Business Insider, not CNBC, first reported the news.

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PayPal co-founder: Ignoring refugees is "profoundly inhumane"

TechCrunch / Flickr CC

Much of Silicon Valley has been up in arms over Trump's recent travel ban. Max Levchin, an entrepreneur and investor best known for helping found PayPal, had some pointed comments on the topic during an event hosted by FWD.us and his company, Affirm:

There's a notion of morality and humane treatment of refugees, and I think that's a problem that we have successfully—to our shame— ignored, even during the last administration, and we're now institutionalizing the ignoring. And I don't think that's good. I think that's profoundly inhumane.
You can sort of pretend like it's their crisis over there in foreign lands but these people are very human, they have very real problems. I don't think that's an immigration issue so much as a humanitarian issue.

Personal experience: Levchin himself came to the U.S. in 1991 on a refugee visa from the Ukraine with his family, though he notes he was lucky in that his family had a clear path to citizenship, unlike many other refugees.

If we want to be "America First," that doesn't prevent us from being humane and participating in parts of the world that need our help. —Max Levchin

Why it matters: Studies suggest that more than 40 percent of Fortune 500 companies were founded by immigrants or the children of immigrants. Silicon Valley employees a large number of immigrants, including in executive positions, which helps fuel the vocal concern about U.S. immigration policy.

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Democrats target FCC chief over press freedom questions

Robin Groulx / Axios

Democrats are stepping up their questions about FCC Chairman Ajit Pai's views on press freedom, a new line of criticism as Pai rolls back agency rules they supported. The Democratic members of the Senate Commerce Committee said in a letter they are concerned that at a hearing this week Pai wouldn't say directly whether he agreed with President Trump that some media outlets are the "enemy of the American people."

Why it matters ... words

More than once, Pai said he didn't want to get involved in a political debate broader than the FCC, but reiterated his support for the First Amendment. The letter shows this isn't an issue Senate Democrats are ready to let go:

"While you have long claimed to be an advocate for the freedom of the press and the First Amendment, your silence on the matter and refusal to take a stand against threats levied at the media is troubling given your regulatory and oversight role over the industry. Moreover, such a lack of response could call into question the ongoing independence of the FCC under your watch."

What Pai says: Asked about the letter, an FCC spokesman pointed to a Pai statement from 2016 where he said that "newspaper reporters continue to do important work throughout our country each and every day."

"Chairman Pai continues to believe that," the spokesman said. "Chairman Pai is a strong supporter of the First Amendment rights of the media and all Americans. He has protected those rights at the FCC and will continue to do so as long as he is privileged to serve at the Commission."

Pai pledged at the hearing to run an agency independent of the White House.

Why this matters:

  • Pai is up to be reconfirmed by the Senate for another term on the commission. The Democratic lawmakers said in their letter that his answers to the press freedom questions in their letter "will inform our ongoing consideration of your renomination for an additional five-year term on the FCC."
  • Even though the president appoints the FCC Chairman, the agency is supposed to be independent. Questioning an FCC chairman's autonomy from the White House is a way to paint their policies as politically motivated. It's a criticism conservatives know well: they argued that Pai's Democratic predecessor, Tom Wheeler, was in the pocket of the Obama administration.

What to watch: How Democrats handle Pai's renomination, and if their broader concerns seem to be gaining traction. The Democrats behind a letter want an answer to their questions by the end of next week.

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Snap stock slides in first full week of trading

Greg Ruben / Axios

Snap had a rough first week in the public markets, with its shares closing down in four out of five days. The lowest close came today, at $22.07 per share.

Data: Money.net; Chart: Andrew Witherspoon / Axios

Here are the closing company valuations, fully-diluted:

  • IPO: $23.63 billion
  • First market open: $33.36 billion
  • Peak: $40.64 billion
  • Market close today: $30.67 billion
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Featured

SEC shoots down Winklevii bitcoin ETF

AP Photo/Evan Agostini

The U.S. Securities and Exchange Commission today decided not to mainstream bitcoin, by ruling that it will not permit the public listing of an ETF (exchange traded fund) that would have effectively allowed people to buy and sell the digital currency like stock.

What? The SEC disapproved a request to allow the BATS stock exchange to list the Winklevoss Bitcoin Trust ETF, which was founded back in 2013 by the Winklevoss Brothers of Facebook (and The Social Network) fame. It also may dump a giant roadblock in the way of other future publicly-traded bitcoin investment vehicles. For example, the future is now a bit fuzzier for Barry Silbert's Bitcoin Investment Trust, which recently filed for a $500 million IPO (although it's structured differently from Winklevoss, and is already publicly traded on the OTC).

Keep reading ... words

Giphy

So? Had the SEC approved the Winklevoss effort, it could have significantly increased liquidity for the bitcoin market ― not only by encouraging retail investors to participate, but also investment advisors with larger bankrolls. More diverse bitcoin exposure also could have helped reduce price volatility, although anticipation of a more favorable ruling had caused the price of bitcoin to spike:


Bitcoin prices are now tanking in reaction to the ruling, down more than $200 at last check.

SEC explanation for its ruling: "First, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated. Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated."

Industry reaction: "The Winklevoss ETF proposal was rejected because the SEC found that the significant markets for Bitcoin tend to be unregulated overseas markets that are potentially subject to price manipulation. But this creates a chicken and egg problem. How do we develop well-capitalized and regulated markets in the U.S. and Europe if financial innovators aren't allowed to bring products to market that grow domestic demand for digital currencies like Bitcoin?" ― Coin Center executive director Jerry Brito

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Waymo asks judge to block Uber's self-driving car project

AP Photo/Paul Sancya

Waymo, Alphabet's self-driving car unit, has asked a federal judge in California for a preliminary injunction to block Uber's self-driving car project, according to new court documents obtained by news outlets.

Expert testimony: Waymo also filed the sworn testimony of Gary Brown, a forensic security engineer at Google since 2013, according to The Verge. Brown says that according to logs from Google's secure network, Anthony Levandowski, a Google engineer who left the company to start the self-driving car startup Uber acquired last year, downloaded 14,000 files from Google containing proprietary information before leaving the company in early 2016. Brown also names two other engineers, Radu Raduta and Sameer Kshirsagar, who he claims also downloaded proprietary files before leaving Google to join Levandowski.

In late February, Waymo filed a lawsuit against Levandowski's startup and Uber, claiming they stole intellectual property from Google.

What to watch: Uber has called the lawsuit "baseless," so it's likely to try to prove that its own technology is different from Waymo's. Last year, in an interview with Forbes, Levandowski emphasized his team didn't steal any intellectual property from Google and it has "all the logs" to show that.

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Vista Equity surpasses $10 billion mark for tech fund

Vista co-founder Robert Smith

Vista Equity Partners has secured nearly $10.5 billion in capital commitments for its sixth flagship fund, according to SEC filings. The tech-focused private equity firm, which has primary offices in Texas and California, originally targeted $8 billion for the fund but later increased expectations to $10 billion.

Why it matters: Vista has been moving quickly up the capital stack, transitioning from a mid-market buyout firm to one of the world's largest private equity investors in technology companies. Historical returns have been extremely strong, with Vista on record as talking about how it has never lost money on a control deal. Going forward, the questions are if Vista can manage the speed and size of its scale-up, and if it has been letting leverage multiples get too rich on some of its deals (as some of its rivals argue).

Keep reading ... words

Caveat: The firm has not yet returned requests for comment, but word is that the $10.46 billion does not quite represent a final close for the fund. Expect the final figure to be $10.5 billion on the nose, with Vista still trying to work through final allocations.

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