The Great Resign meets the Great Reset (Great R… un down these valuations please)
Welcome to Startups Weekly, a fresh, human take on this week's startup news and trends. To get this delivered to your inbox, sign up here.
We love a counter-speech angle these days, and this week's pick is a look at why lower valuations may actually be a good thing for startups these days.
>Over the past few months, Stripe and Instacart have had their internal ratings updated as part of a 409A review process. Startups saw their valuations slashed by 28% and 38%, respectively, following the ratings. Anita Ramaswamy and I looked into 409As and discovered a totally different meaning of a "valuation rating".
Here is an excerpt from our article:
Many founders and industry experts consider a company that receives a lower 409A valuation than that assigned by investors to be a boon. This is because a low 409A valuation allows companies to award their employees stock options at a lower price. Businesses can also use the new lower 409A assessment as a recruiting tool, enticing potential employees with cheap options and the promise of cashing in at a higher price when the business retires.
Sumukh Sridhara, Head of Founder Products at AngelList, says companies see 409As as an “internal equity granting mechanism, not them thinking we’re worth less.”
“If these companies were successful, they would say they are worth 5% of what their public tenders represent. But they won't really make it," he said.
For our full version, read the full story, "WTF is a 409A" live on TechCrunch right now or read the TechCrunch+ companion article, "Stripe's New Lower Internal Rating, Explained ".
Also, if you want to hear more of the weeds of this conversation, join Anita Ramaswamy and me on a Twitter space next Tuesday at noon PDT, 3:00 p.m. EDT. We'll have guests from the room on the mic, and of course riffs on whatever was cut from the story.
In the rest of this newsletter, we'll tackle a fintech favorite, bots and software devouring head office. As always, you can support me by forwarding this newsletter to a friend or by following me on Twitter or subscribing to my blog.
Offer of the weekTomoCredit! The fintech has raised $22 million to make credit scores obsolete. I know, I know it's not the first fintech to try this, but there is something that stands out.
Here's why that's important, via Mary Ann Azevedo: "Tomo is different from a lot of other credit offerings in that it doesn't rely on FICO scores to underwrite. Instead, it applies a "proprietary" underwriting algorithm (Tomo Score) to identify "high potential borrowers" with no credit score. The TomoCredit card requires no credit checks, no deposits, 0% APR and no fees."
Welcome to Startups Weekly, a fresh, human take on this week's startup news and trends. To get this delivered to your inbox, sign up here.
We love a counter-speech angle these days, and this week's pick is a look at why lower valuations may actually be a good thing for startups these days.
>Over the past few months, Stripe and Instacart have had their internal ratings updated as part of a 409A review process. Startups saw their valuations slashed by 28% and 38%, respectively, following the ratings. Anita Ramaswamy and I looked into 409As and discovered a totally different meaning of a "valuation rating".
Here is an excerpt from our article:
Many founders and industry experts consider a company that receives a lower 409A valuation than that assigned by investors to be a boon. This is because a low 409A valuation allows companies to award their employees stock options at a lower price. Businesses can also use the new lower 409A assessment as a recruiting tool, enticing potential employees with cheap options and the promise of cashing in at a higher price when the business retires.
Sumukh Sridhara, Head of Founder Products at AngelList, says companies see 409As as an “internal equity granting mechanism, not them thinking we’re worth less.”
“If these companies were successful, they would say they are worth 5% of what their public tenders represent. But they won't really make it," he said.
For our full version, read the full story, "WTF is a 409A" live on TechCrunch right now or read the TechCrunch+ companion article, "Stripe's New Lower Internal Rating, Explained ".
Also, if you want to hear more of the weeds of this conversation, join Anita Ramaswamy and me on a Twitter space next Tuesday at noon PDT, 3:00 p.m. EDT. We'll have guests from the room on the mic, and of course riffs on whatever was cut from the story.
In the rest of this newsletter, we'll tackle a fintech favorite, bots and software devouring head office. As always, you can support me by forwarding this newsletter to a friend or by following me on Twitter or subscribing to my blog.
Offer of the weekTomoCredit! The fintech has raised $22 million to make credit scores obsolete. I know, I know it's not the first fintech to try this, but there is something that stands out.
Here's why that's important, via Mary Ann Azevedo: "Tomo is different from a lot of other credit offerings in that it doesn't rely on FICO scores to underwrite. Instead, it applies a "proprietary" underwriting algorithm (Tomo Score) to identify "high potential borrowers" with no credit score. The TomoCredit card requires no credit checks, no deposits, 0% APR and no fees."
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