Trump calls TikTok a hot brand, demands a chunk of its sale price

Today the president appeared to bless the budding Microsoft-TikTok deal, continuing his evolution on a possible transaction. After stating last Friday that he’d rather see TikTok banned than sold to a U.S.-based company, Trump changed his tune over the weekend. TikTok is owned by China-based company ByteDance, which owns a portfolio of apps and services.

A weekend phone call between Satya Nadella, the CEO of Microsoft, and the American premier appeared to change his mind, leading to the software company sharing publicly on Sunday that it was pursuing a deal.

Then today the president, endorsing a deal between an American company and ByteDance over TikTok, also said that he expects a chunk of the sale price to wind up in the accounts of the American government.

The American president has long struggled with basic economic concepts. For example, who pays tariffs. But to see Trump state that he expects to receive a chunk of a deal between two private companies that he is effectively forcing to the altar is surreal.

To fully grok his take, we’ve roughly transcribed the pertinent few minutes of his explanation from this morning, when asked about the weekend call with Microsoft’s Nadella. It’s worth a read (bold highlights are TechCrunch’s):

We had a great conversation, uh, he called me, to see whether or not, uh, how I felt about it. And I said look, it can’t be controlled, for security reasons, by China. Too big, too invasive. And it can’t be. And here’s the deal. I don’t mind if, whether it’s Microsoft or somebody else — a big company, a secure company, a very American company — buy it.

It’s probably easier to buy the whole thing than to buy 30% of it. ‘Cause I say how do you do 30%? Who’s going to get the name? The name is hot, the brand is hot. And who’s going to get the name? How do you do that if it’s owned by two different companies? So, my personal opinion was, you are probably better off buying the whole thing rather than buying 30% of it. I think buying 30% is complicated.

And, uh, I suggested that he can go ahead, he can try. We set a date, I set a date, of around September 15th, at which point it’s going to be out of business in the United States. But if somebody, whether it’s Microsoft or somebody else, buys it, that’ll be interesting.

I did say that if you buy it, whatever the price is, that goes to whoever owns it, because I guess it’s China, essentially, but more than anything else, I said a very substantial portion of that price is going to have to come into the Treasury of the United States. Because we’re making it possible for this deal to happen. Right now they don’t have any rights, unless we give it to ’em. So if we’re going to give them the rights, then it has to come into, it has to come into this country.

It’s a little bit like the landlord-tenant [relationship]. Uh, without a lease, the tenant has nothing. So they pay what is called “key money” or they pay something. But the United States should be reimbursed, or should be paid a substantial amount of money because without the United States they don’t have anything, at least having to do with the 30%.

So, uh, I told him that. I think we are going to have, uh, maybe a deal is going to be made, it’s a great asset, it’s a great asset. But it’s not a great asset in the United States unless they have the approval of the United States.

So it’ll close down on September 15th, unless Microsoft or somebody else is able to buy it, and work out a deal, an appropriate deal, so the Treasury of the — really the Treasury, I suppose you would say, of the United States, gets a lot of money. A lot of money.

After Shopify’s huge quarter, BigCommerce raises its IPO price range

When BigCommerce, the Texas-based Shopify competitor, first announced an IPO price range, the numbers looked a little light.

With a range of just $18 to $20 per share, it appeared that the firm was targeting a valuation of around $1.18 billion to $1.31 billion. Given that BigCommerce had revenue of “between $35.5 million and $35.8 million” in Q2 2020, up a little over 30% from the year-ago period (and better margins than Shopify) its implied revenue multiple that its IPO price range indicated felt low.

At the time, TechCrunch wrote that “BigCommerce feels cheap at its current multiple,” and that if you added “recent market exuberance for cloud shares that we’ve see in other IPOs … it feels even more underpriced.”

Those feelings have been borne out. Today, BigCommerce announced a new, higher IPO price range. The firm now intends to price its IPO between $21 and $23 per share. Let’s calculate its new valuation, compare that to its preliminary Q2 results to get new multiples for the impending e-commerce software IPO, and figure how its most recent investors are set to fare in its impending debut.


By moving its pricing up from $18 to $20 to $21 to $23, BigCommerce boosted its IPO range by 16.7% at its lower end and 15% at the upper end. At its new prices BigCommerce is worth between $1.38 billion and $1.51 billion.

Is the 2020 SPAC boom an echo of the 2017 ICO craze?

I wanted to write an essay about Microsoft and TikTok today, because I was effectively a full-time reporter covering the software giant when it hired Satya Nadella in 2014. But, everyone else has already done that and, frankly, there’s a more pressing financial topic for us to parse.

Let’s take a minute to take stock of SPAC (special purpose acquisition companies) which have risen sharply to fresh prominence in recent months. Also known as blank-check companies, SPACS are firms that are sent public with a bunch of cash and the reputation of their backers. Then, they combine with a private company, effectively allowing yet-private firms to go public with far less hassle than with a traditional IPO.

The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.

And less scrutiny, which is why historically SPACs haven’t been the path forward for companies of the highest-quality; a look at the historical data doesn’t paint a great picture of post-IPO performance.

But that historical stigma isn’t stopping a flow of SPACs taking private companies public this year. A host of SPACs have already happened, something we should have remarked on more in Q1 and Q2.

Still, better late than never. This morning, let’s peek at two new pieces of SPAC news: electric truck company Lordstown Motors merging with a SPAC to go public, and fintech company Paya going public via FinTech III, another SPAC.

We’ll see that in hot sectors there’s ample capital hunting for deals of any stripe. How the boom in alt-liquidity will fare long-term isn’t clear, but what is plain today is that where caution is lacking, yield-hunting is more than willing to step in.

Electric vehicles as SPAC nirvana

The boom in the value of Tesla shares has lifted all electric vehicle (EV) boats. The value of historically-struggling public EV companies like NIO have come back, and private companies in the space have been hot for SPACs as a way to go public in a hurry and cash in on investor interest.

The Exchange: Unicorn IPOs, tech earnings and my favorite VC round from the week

The TechCrunch Exchange newsletter just launched. Soon only a partial version will hit the site, so sign up to get the full download.

Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter for your weekend enjoyment. It’s broadly based on the daily column that appears on Extra Crunch, but free. And it’s made just for you.

You can sign up for the newsletter here. With that out of the way, let’s talk money, upstart companies and the latest spicy IPO rumors.

Affirm dreams of an 11-figure SPAC

If you are tired of reading about special purpose acquisition companies, or SPACs, we hear you. We’re sick of them as well. But they keep cropping up, this time in the form of a possible IPO alternative for Affirm, a fintech unicorn that has raised more than $1 billion to provide consumers with point-of-sale installment loans. (Rates from 0% to 30%, terms of up to 36 months.)

Affirm is effectively a lending company that plugs into e-commerce firms. Researching this entry I had an idea in the back of my head that Affirm had a super-neat credit system to rate users. But reading through its own FAQ and what NerdWallet has to say on the company, its methods seem somewhat pedestrian.

Regardless, distribution is key for the company, and Affirm recently linked up with Shopify. That should provide it another dose of growth. The very sort of thing that IPO investors want. The WSJ reported that Affirm could go public this year, perhaps via a SPAC, at a valuation of $5 to $10 billion.

I did my best to map out what those valuations implied, generally finding that Affirm needs to have hella loan volume to make the sort of money that a $10 billion figure implies. Of course, I was trying to make numerical sense. The stock market in 2020 is a bit more relaxed than that.

All this SPAC talk is still mostly bullshit, mind. We are seeing public debuts this year. And every single one of them that has been of note has been a traditional IPO, at least as far as I can recall. The running history of direct listings and SPAC debuts that matter is pretty slim.

Of course, Coinbase and Asana and DoorDash and Airbnb, among others, are in need of liquidity and could yet pull the trigger on a more exotic debut. Hell, Qualtrics could do something wild in its impending IPO but we doubt it will.

Market Notes

The biggest market news this week had little to do with startups. Instead, it came from the anti-startups, namely the largest American tech companies, which smashed their earnings reports. Alphabet actually shrank year-over-year, but it still beat expectations. Facebook and Amazon and Apple were juggernauts in the quarter.

  • Given the positive notes we’ve heard from startups and startup investors about how Q2 sales performance was better than expected, and is in some cases besting plans set at the start of the year, the SuperMegaTech results are not a shock.
  • Many tech-powered companies of all maturities seem to be catching a boost.

The startups that aren’t are DOA. As Freestyle Capital’s Jenny Lefcourt told TechCrunch the other week, every investor wants into the next round of startups that have caught a COVID tailwind. And precisely zero investors want into the proximate funding event for startups that haven’t.

Moving along, don’t re-invest your retirement funds just yet, but bitcoin is back over $10,000 and is currently trading for $11,300 as I write to you. Given that the price of bitcoin is a workable barometer for consumer interest, trading volume and, perhaps, development work in the crypto space, the recent market movement is good news for crypto-fans.

Turning our heads to breaking news this Friday, news was brewing that the Trump administration was looking to force ByteDance, a Chine-based mega-startup, to sell the U.S. operations of TikTok, the super-popular social app. 

  • How? When? We don’t know, but the political and economic situation between the United States and China is getting worse, not better. How you feel about that will depend on your politics.

There were 25 equity-only rounds of $50 million or more in the last week, 22 if you strip out private equity-led rounds and post-IPO investments. That’s a little over $2.6 billion in late-stage capital collected by Crunchbase in a single week. No matter what you might hear from startups stuck on the wrong side of the COVID-19 divide, money is still flowing and quickly.

Stack Overflow’s $85 million round was the tenth largest deal of the week. Damn.

Other rounds you may have missed: $33 million for San Mateo-based Helix, Argo AI is now worth $7.5 billion after its most recent fundraising, $11 million for Brazil-focused wealth manager Magnetis, $16 million for construction-tech company Buildots and $20 million for Instrumental, my favorite round of the week,

Investment into AI-focused startups suffered in Q2, but descended from all-time highs so the numbers were still pretty ok.

On the VC topic, TechCrunch’s own Danny Crichton (he’s on the podcast with me every week) has updated the TechCrunch list with another 116 VCs that are willing to write first checks. The project has been oceans of work, so please do check it out if you have the time, or are looking to fundraise.

Various and Sundry

And, to wrap up, as always, here’s a collection of data, news and other miscellania that is worth your time from this super insane week:

Moving toward the close, Redpoint VP Jamin Ball is writing a series on cloud/SaaS that I’m reading here and there. Take a peek.

And, speaking of VCs out there doing my job, Floodgate partner Iris Choi (an Equity regular) does frequent live streams that she calls Market Musings that I try to snag when I can. It’s always interesting to hear how people with more money than I do think about the market as they are ever-so-slightly more invested in its outcomes. 

Excuse the pun, give yourself a hug for making it through the week, make sure to hit up the latest Equity episode and let’s all go for a run. — Alex

Working to understand Affirm’s reported IPO pricing hopes

News broke last night that Affirm, a well-known fintech unicorn, could approach the public markets at a valuation of $5 to $10 billion. The Wall Street Journal, which broke the news, said that Affirm could begin trading this year and that its IPO options include debuting via a special purpose acquisition company, also known as a SPAC.

That Affirm is considering listing is not a surprise. The company is around eight years old and has raised north of $1 billion, meaning it has locked up investor cash during its life as a private company. And liquidity has become an increasingly attractive possibility in 2020, when new offerings of all quality levels are enjoying strong reception from investors and traders who are hungry for equity in growing companies.

The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.

But $10 billion? That price tag is a multiple of what Affirm was worth last year when it added $300 million to its coffer at a post-money price of $2.9 billion. There were rumors that the firm was hunting a far larger round later in 2019, though it doesn’t appear — per PitchBook records — that Affirm raised more capital since its Series F.

This morning let’s chat about the company’s possible IPO valuation. The Journal noted the strong public performance of Afterpay as a possible cognate for Affirm — the Australian buy-now, pay-later firm saw its value dip to $8.01 per share inside the last year before soaring to around $68 today. But given the firm’s reporting cycle, it’s a hard company to use as a comp.

Happily, we have another option to lean on that is domestically listed, meaning it has more regular and recent financial disclosures. So let’s how learn much revenue it takes to earn an eleven-figure valuation on the public markets by offering consumers credit.

Affirm’s business

Affirm loans consumers funds at the point of sale that are repaid on a schedule at a certain cost of capital. Affirm customers can select different repayment periods, raising or lowering their regular payments, and total interest cost.

Synchrony offers similar installment loans to consumers, along with other forms of capital access, including privately-branded credit cards. (Verizon, TechCrunch’s parent company, recent offered a card with the company, I should note.)  Synchrony is worth $13.5 billion as of this morning, making it a company of similar-ish value compared to the top end of the possible Affirm valuation range.

The iron rule of founder compensation is dead

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

We had the full team this week: Myself, Danny and Natasha on the mics, with Chris running skipper as always.

Sadly this week we had to kick off with a correction as I am 1) dumb, and, 2) see point one. But after we got past SPAC nuances (shout-out to David Ethridge), we had a full show of good stuff, including:

And that’s Equity for this week. We are back Monday morning early, so make sure you are keeping tabs on our socials. Hugs, talk soon!

Equity drops every Monday at 7:00 a.m. PT and Friday at 6:00 a.m. PT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

Big tech crushes Q2 earnings expectations

Today after the bell, Apple, Alphabet, Facebook and Amazon reported their earnings results. Each bested expectations, and all but one are up sharply in after-hours trading.

Coming on the heels of a day’s worth of congressional hearings in which the four companies highlighted competition and downplayed their market position, the results are loud. The group’s collected earnings beats are especially impressive given that they came during a quarter in which the economy contracted, meaning that their combined, relative share of the U.S. economy went up sharply during the period.

Let’s chat about each to collect high-level results, and check in on Apple’s stock-split news that is sure to keep Wall Street talking for days to come.


Image Credits: TechCrunch

Apple reported Q2 2020 revenue of $59.7 billion, up 11% from the year-ago period. This was ahead of expectations, with the street anticipating $52.25 billion, according to Yahoo Finance averages.

The hardware-and-software giant also reported earnings per share (GAAP, diluted) of $2.58, up 18% from the year-ago quarter. This also beat expectations, with investors expecting a slimmer $2.04, again, according to Yahoo Finance data.

And Cupertino announced that it will split its stock four for one, something that Apple said that will make its “stock more accessible to a broader base of investors.” In the age of fractional-share investing, the move feels somewhat meaningless. The Dow Jones Industrial Average, however, is price-weighted, and Apple is a component, so perhaps that has something to do with the choice.

Apple shares are up 4.7% in after-hours trading, after gaining more than a point during regular hours.


Image Credits: TechCrunch

Alphabet is a slightly more complicated story, with the company actually shrinking on a year-over-year basis, though still besting expectations.

The search giant reported $38.3 billion in revenue in Q2 2020, ahead of an expected result of $37.36 billion. As Alphabet reported $38.9 billion in the year-ago quarter, Alphabet was smaller this year than the last.

The company’s earnings per share also fell, from $14.21 in the year-ago quarter to $10.13 per share (GAAP, diluted). Again, however, that was ahead of an expected result of $8.34. Shares of Alphabet are roughly flat after its report.

Why is its stock down despite beating expectations? Because shrinking is not great, and perhaps because its “Other Bets” business collection posted negative operating income of $1.12 billion in the quarter, a worse result than it recorded in Q2 2019. That’s a big expense.


Image Credits: TechCrunch

Amazon had a killer quarter, including revenue of $88.9 billion, up from $63.4 billion in the year-ago quarter, and ahead of an expected result of $81.53 billion.

The company also managed to earn $10.30 per share (GAAP, diluted), far ahead of an expected result of $1.46, per Yahoo Finance figures.

The only possible mark against Amazon was that AWS, the company’s cloud computing service, only grew 29% in the quarter. That was slower than the 33% it recorded during Q1 2020, and, as CNBC notes, was dramatically slower than what Microsoft’s competing Azure product managed when it reported recently.

Still, shares of Amazon are up around 4.9% in after-hours trading, after gaining 0.6% during regular trading.


Image Credits: TechCrunch

Facebook’s quarter was a single, extended finger at those trying to nudge the social giant into shaking up its content policies. The company reported $18.7 billion in revenue, up 11% from its year-ago result of $16.9 billion. Investors had expected just $17.4 billion in top-line.

Unsurprisingly, off the back of that revenue beat, Facebook bested earnings per share expectations, reporting $1.80 in per-share profit, up nearly 100% from its year-ago result of $0.91 per share, and far ahead of an expected $1.39.

Facebook shares are up nearly 6.5% in after-hours trading, after gaining about half a point during regular trading.


Hot damn, is tech doing better than the rest of the economy as millions are out of work, and Congress can’t figure out if supporting its own population during a global pandemic and economic crisis is, you know, a good idea. These results will do precisely nothing to dampen concern that Big Tech is too big.

Investment in AI startups slips to three-year low

The fortunes of startups that leverage artificial intelligence have soared dramatically in recent years.

These AI-powered startups have seen quarterly investment totals rise from a few hundred rounds and a few billion dollars each quarter to 1,245 rounds and $17.3 billion in the second and third quarters of 2019, according to data from CB Insights. The rise in dollars chasing AI startups has been huge, demonstrating strong venture capital interest in the cohort.

But in recent quarters, the trend has slowed as VC deals for AI-powered startups fell off.

The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.

A new report from the business-data company looking at the second quarter of venture capital results for global AI startups shows historically strong but declining investing rates for the upstart firms. During a pandemic and widespread recession, this is not a complete surprise; other areas of VC investment have also fallen in recent quarters. This is The Exchange’s second look at quarterly data in the startup category, something partially spurred by our interest in the economics of the startups that make up the group.

The scale of decline is notable, however, as is the national breakdown of VC investment into AI. (The United States is doing better than you probably guessed, if you have only listened to politicians lately.)

Let’s unpack the latest results, determine how investing patterns have changed by stage and examine how different countries compare when it comes to deal and dollar volume for AI-powered startups.

Global declines, US dominance

In the second quarter of 2020, global investment into AI startups fell to 458 deals worth $7.2 billion. According to the CB Insights dataset, the deal volume is the lowest for 12 quarters, or since Q2 2017 when 387 investments into AI startups were worth $4.7 billion.

Why aren’t Rackspace and BigCommerce worth more?

This week has brought with it two tasty pieces of IPO news — Rackspace’s return to the public markets and BigCommerce’s debut will be far more interesting now that we know what a first-draft valuation for each looks like.

But amidst the numbers is a question worth answering: why aren’t cloud-focused Rackspace and e-commerce-powering BigCommerce worth more?

Using a basic share count and the top end of their initial ranges, Rackspace is targeting a roughly $4.8 billion valuation, and BigCommerce a $1.3 billion price tag. Given that Rackspace had $652.7 million in Q1 2020 revenue and BigCommerce reaped $33.2 million in the same period, we have a puzzle on our hands.

Let me explain. At its IPO price, Rackspace is worth around 2x its current revenue run rate. For a company we associate with the cloud, that feels cheap at first glance. And BigCommerce is targeting a valuation of around a little under 10x its current annual run rate, which feels light compared to its competitor Shopify’s current price/sales ratio of of 66.4x (per YCharts data).

We did some maths to hammer away at what’s going on in each case. The mystery boils down to somewhat mundane margin and growth considerations. Let’s dive into the data, figure out what’s going on and ask ourselves if these companies aren’t heading for a second, higher IPO price range before they formally price and begin trading.

Margins and growth

Let’s unpack Rackspace’s IPO pricing first and BigCommerce’s own set of numbers second.


While Rackspace has a public cloud component, its core business is service-driven, so it isn’t a major cloud platform that competes with Microsoft’s Azure, Google’s GCP or Amazon’s AWS.  This isn’t a diss, mind, but a point of categorization.

The company has three reporting segments:

  • Multicloud Services
  • Apps & Cross Platform
  • OpenStack Public Cloud