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🛒The Bulletin #33: Instacart's IPO, Digital Tokens for VC and the Lawsuit against Fearless Fund
In this week's bulletin - Instacart's IPO, Japan's move to let startups sell digital tokens to venture capital funds, and the lawsuit against VC for women of colour.
Hey everyone! As shopping period draws to a close, I hope that you’ve settled on the classes that you will be taking, and have gotten into the swing of a new semester here on College Hill. With tornado warnings and the chilly breeze, stay warm and safe out there! Happy reading 🍵.
🍎 Lessons from Instacart’s IPO
Instacart, the online grocery delivery provider, recently filed for an IPO, and its journey offers valuable lessons for investors and late-stage players in the venture capital world.
Profitability Matters: Instacart's standout feature is its five consecutive quarters of profits, setting it apart from gig-economy peers like Uber, Lyft, and DoorDash, which are still grappling with annual losses. The company's profitability has been partly driven by advertising, which now contributes over a quarter of its annual revenue. This underscores the growing importance of turning a profit, as investors have become less tolerant of companies sacrificing profits for market share.
Challenges in Growth: Despite its profitability, Instacart faces challenges. It's experienced a slowdown in gross transaction volume (GTV) growth, rising by only 4% in the first half of this year compared to 15% in the same period in 2022. The number of orders has plateaued, hovering just above 66 million for three consecutive quarters. Inflation has affected order values, and competition from giants like Walmart, Kroger, Uber, and DoorDash is intensifying.
Advertising Dependency: Instacart's profitability is partly reliant on advertising, raising concerns about overdependence. While the company maintains an edge in average order value, its profitability ties closely to trends in its core grocery delivery operations.
Venture Capital Realities: On the other side of the coin, late-stage investors in Instacart may face substantial losses due to the significant drop in its IPO valuation. This reflects the changing landscape for venture capitalists, where late-stage investments during the era of abundant capital may result in losses, leading to more down round IPOs.
The IPO Landscape: Instacart's IPO also serves as a litmus test for Wall Street's appetite for new offerings. The recent rally in tech stocks has boosted founder confidence in going public, but it's a different landscape compared to previous years.
💻Raising capital through digital assets
Japan is set to revolutionize startup funding by allowing them to raise capital through cryptocurrency and digital assets, departing from the traditional stock route. This change expands options for limited partnerships, enabling venture capital firms to diversify.
Previously, Japan restricted limited partnerships to conventional assets, but the new rule will include other tokens and crypto assets, unlocking a previously underdeveloped investment area. The legal revisions are expected in 2024.
Blockchain-based tokens offer speed and efficiency, attracting Web3 startups. In 2022, global Web3 startups raised $15.1 billion, a significant leap from 2018.
Restrictions on limited partnerships had kept Japanese venture capital firms from investing in tokens and benefiting from Web3 growth. Tax code revisions to exempt crypto assets from certain taxes are also under consideration.
While the rule change is pivotal, other factors will influence cryptocurrency fundraising's success. Japan aims to remove restrictions, allowing limited partnerships to invest abroad, potentially boosting profits and domestic startup investments.
Read more here 🖇️
⚖️Lawsuit Targets Fearless Fund's Grant Program for Black Female Entrepreneurs
The Fearless Fund, an Atlanta-based venture capital firm supporting Black female entrepreneurs, has been caught up in a legal battle over affirmative action. Edward Blum, a conservative activist known for challenging racial preferences in college admissions, filed a lawsuit against the Fearless Fund, alleging that it engages in "explicit racial exclusion" by limiting its grant program to Black women. This lawsuit represents one of several recent legal actions by conservative activists aimed at extending the principle of race-blind practices from college admissions into the corporate world, affecting areas such as hiring, contracting, and investment.
Blum's lawsuits have raised serious concerns among those who posit that initiatives like the Fearless Fund play a pivotal role in expanding economic opportunities for people of color and other underrepresented groups. Data from Crunchbase indicates that only 1.1 percent of the $214 billion in venture capital funding allocated last year went to companies founded by Black individuals. Additionally, a Stanford University study from 2019 revealed that founders of color face more bias from professional investors, even when they perform well. By focusing its grant program on Black women, the Fearless Fund plays an important role in counteracting the trends mentioned above and has helped to create a more inclusive entrepreneurial ecosystem.
Blum's legal actions undermine the critical work being done to level the playing field for professionals and entrepreneurs of color. This lawsuit can be viewed as an attempt to dismantle efforts to promote equal opportunity, especially in a city like Atlanta, which holds a significant place in the civil rights movement and boasts the highest concentration of Black-owned businesses in the country.
As the legal battle unfolds in the U.S. District Court for the Northern District of Georgia, it is a momentous test case that will determine whether programs like the Fearless Fund can continue their mission to address economic disparities and foster equal opportunities for Black entrepreneurs. Judge Thomas W. Thrash Jr. will ultimately decide whether the Fearless Fund can continue issuing grants during the litigation process. The outcome of this case will have significant implications for diversity and inclusion efforts not only in Atlanta but across the corporate landscape in America as a whole.
Read more here🖇️
💖What we’re consuming in Venture
This podcast, featuring ex-CEO & co-founder of Twitch, Emmett Shear, where he discusses AI's potential, the impact of small ideas, and lessons from Silicon Valley luminaries like Paul Graham and Andy Jassey.
👯 Recruitment Reminders
Here are some important deadlines to keep in mind during this season of VWV recruitment!
Monday, 9/18 - Information Session #2
Friday, 9/22 23:59H - Applications Due
Monday, 9/25 - 1st Round Interviews Begin
Monday, 10/2 - 2nd Round Interviews Begin
Monday, 10/7 - Decisions
Sign up for a Coffee Chat with a member of VWV here to learn more about VWV from a personal perspective (Coffee Chats run till Thu 9/21).
We can’t wait to read your applications (linked here) and meet all of you <3
That’s it for this week, feel free to email me at firstname.lastname@example.org with any inquiries!
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