Late-stage VCs may be preventing their startups from going public in 2024 Founders might have unintentionally given their VCs too much power to block an IPOWhile some investors are loudly bemoaning that the IPO window can’t stay shut forever, other VCs themselves are actually part of the problem.
It’s a common term for late-stage investors agreeing to pay higher prices for their stake to boost a startup’s valuation.
When late-stage startups raised at sky-high valuations in 2021 they may not have realized how much power they were giving their late-stage investors if the market cooled, which it did.
“People confuse up and to the right, with a god-given right,” Hinkle said.
He added that there is always a lot more friction between investors and startups about the decision to IPO than investors would like to admit.
Hey, folks, welcome to Week in Review (WiR), TechCrunch’s regular newsletter recapping noteworthy happenings in tech over the past few days.
This week, TechCrunch viewed leaked documents out of SpaceX showing some questionable practices related to employee stock options.
X CEO Elon Musk announced that he would open source Grok, X’s AI-powered chatbot meant to compete with OpenAI’s ChatGPT.
Grok — developed by Musk’s AI startup, xAI — was released last year, armed with features such as access to “real-time” information on X and views undeterred by “politically correct” norms.
On Found, Becca and Dom spoke with Rebecca Hu, the CEO and co-founder of Glacier, an AI robotics company that’s building robots to accurately sort recycling.
Leaked SpaceX documents show company forbids employees to sell stock if it deems they’ve misbehaved 'An act of dishonesty against the company' is among the violations citedSpaceX requires employees to agree to some unusual terms related to their stock awards, which have a chilling effect on staff, according to sources and internal documents viewed by TechCrunch.
Employees pay taxes on their sharesLike most tech companies, SpaceX includes stock options and restricted stock units (RSUs) as part of its compensation package to attract top talent.
Unlike stock in public companies, stock in private companies cannot be sold without the company’s permission.
Yet no employee at startups and private companies are entitled to sell their stock.
Like other private companies, its stock is split into preferred and common stock.
In a new SEC filing, Reddit says it’s planning to sell around 22 million shares, priced between $31 to $34, potentially raising around $748 million at the high end of that range.
But the IPO could be volatile given that Reddit will allow its community members to sell their shares immediately, instead of being subject to the usual lock-up agreements that typically prevent investors from selling shares for six months after the IPO.
The move sets up Reddit to become a meme stock — a term coined in reference to the wild GameStop short squeeze of 2021, which was driven by a group of Reddit users on its community r/WallStreetBets.
The users had taken on the hedge funds that had shorted GameStop’s stock by over 100% by working collectively to buy the stock.
By allowing the Reddit community to buy into the IPO, there’s again potential for the stock to be manipulated — this time, possibly in Reddit’s favor — by Redditors’ collective action.
Apparently Frank Slootman, the veteran tech executive, was popular with investors, at least judging from their reaction that he will be stepping down as CEO of Snowflake.
The company stock price has plunged over 24% in after hours trading on the news.
Slootman came on board in 2019, taking over for veteran executive Bob Muglia, and was charged with taking the company public the following year.
In fact, Fortune reported that the chief executive was making an eye popping $95 million a month at one point.
Prior to coming to Snowflake, he spent six years as chairman and CEO at ServiceNow.
Reddit users wonder if the next big meme stock is Reddit itself Reddit invites power users in on its IPO, but other Redditors are also considering an investmentJeremiah Johnson says he has “an embarrassing amount” of Reddit karma.
They’re also wondering if Reddit could be the next meme stock, which could prove lucrative or disastrous.
Though she wasn’t invited to invest early, she plans to buy stock in Reddit once it officially goes public.
“Reddit is really dependent on power users who moderate the site, and because they’ve given those power users actual power, power users did for a day or two literally make the site unusable,” Johnson said.
Max Spero, a startup founder in his twenties, plans to buy Reddit stock post-IPO because he’s a fan of the platform, which he’s been using for 11 years.
As Reddit finally files to go public, the company wrote in its S-1 filing that “meme stock” schemes on r/WallStreetBets could pose a risk to investors.
The stock was so volatile, jumping more than 600% within days, that trading was halted multiple times.
Retail traders tried to replicate the GameStop saga by investing in other heavily shorted stocks like AMC and Bed, Bath & Beyond, solidifying this phenomenon of trading “meme stocks,” to mixed results.
This is a rare move that would let community members buy stock at the same price as institutional investors upon IPO.
In 2023, Reddit incurred a net loss of $90.8 million, adding to the company’s cumulative deficit of $716.6 million.
Investing app Grifin today officially launched its anticipated investing model called “Adaptive Investing,” which enables you to automatically invest in your favorite brands that you frequently shop from.
“Investing, and even having a healthy positive relationship with money, is an incredibly difficult thing to do and achieve,” co-founder Aaron Froug tells TechCrunch.
It also introduces a “Secret Cash” function, allowing for non-public purchases and putting more money away as cash for their future.
“I’ve been personally using our app for a little over two years and I’ve invested in 115 unique companies,” he notes.
Additionally, Grifin is planning a redesign of its app, which will include a premium version as well as an AI chatbot to help people learn how to invest.
MariaDB is the subject of another potential takeover bid, as the company behind the eponymous open source relational database management system (RDBMS) confirmed it had received a provisional offer from California-based K1 Investment Management.
In the months that followed, MariaDB received its first “unsolicited non-binding indicative proposal,” this time from existing investor Runa Capital which tentatively offered $0.56 per share in cash.
Three weeks later, Runa stated that it wouldn’t be acquiring MariaDB after all, but instead an associate company called RP Ventures would be providing a $26.5 million loan.
This news led MariaDB’s stock to more than double in a couple of days, which is why K1 is making its bid relative to MariaDB’s closing price before any forbearance agreement was announced.
So in many ways, K1 is perhaps better suited to take over MariaDB than Runa was, even if it ultimately decides against it.
Carta’s decision to exit the secondary share trading business was a quick response to the controversy that emerged after it was chastised by customers for using private data to foster its equity transactions.
The Exchange explores startups, markets and money.
Read it every morning on TechCrunch+ or get The Exchange newsletter every Saturday.
After a customer criticized Carta for working to connect buyers and sellers of startup shares on its secondary trading platform without permissions, there have been several questions regarding data security and just what — or who — its product is.
Cloudflare’s CEO and co-founder, Matthew Prince, argued in the aftermath, for example, that the only way for Carta to “justify [its] multiple [and] valuation” was to pitch investors that it was going to build “the world’s biggest secondary market” predicated on the data it holds on behalf of its customers.
