Secondary Thoughts #28
a16z's Media Empire
“…the line between public and private markets continues to blur.”
a16z’s Media Empire
// Just take a look at Andreessen Horowitz’s website. And now look at Benchmark’s, Accel’s, and Sequoia’s. a16z has taken the VC content marketing game to the next level. Their homepage looks like a media company with a plethora of articles, insights, and education.
After reading Frederic Filloux’s article, Inside a16z’s Media Operations, it got me thinking, what is the value of a16z’s media arm? Through their website, all their newsletters, and their podcast platform, the company has magnified the firm’s brand. But how much is all of this worth? What price would this component fetch if it were to be spun off? Morning Brew and it’s newsletter was acquired for $75 million. Joe Rogan is making $300 million from Spotify. Andreesseen’s reach most likely isn’t as great, but you could argue the content a16z is putting out is worth just as much or more than those two combined.
Let’s say it’s worth $500 million. Would they sell it? Probably not when you’re a multi-billion dollar venture fund/(RIA). In this day and age where “capital is a commodity” investors need to demonstrate how they add value and differentiate from the pack. Not that Andreessen has to do that, they’re just parlaying their media success to further separate themselves from their competitors. They may be sitting on a $500 million media company, but this media company most likely will attract multiple billion dollar investment opportunities.
Company to Know
// SuroCap, also known as Sutter Rock, formerly known as GSV, is a good example of the private/pubic investment theme.
The investment firm “invests principally in the equity securities of what it believes to be rapidly growing venture-capital-backed emerging companies. The Company may acquire its investments in these portfolio companies through: offerings of the prospective portfolio companies, transactions on secondary marketplaces for private companies, or negotiations with selling stockholders.”
The firm was founded in 2010, which shows you how long the private/public strategy has been around.
The interesting thing about SuroCap is, it’s a public company where you get to see what’s behind the curtain on how they invest in the private markets. It’s also a way for the non-accredited public investor to participate in pre-IPO growth.
On Thursday, the firm released its Q3 results and had their earnings call which unveils quite a bit. It’s interesting to read the questions from the analysts who had a few questions for a management team that didn’t have all the information (like most private investors) about the private companies they’re investing in.
From the company’s 10-Q in August you can see their positions starting on page 7, but here are a few highlights from this week’s numbers:
“SuRo Capital’s top five positions as of September 30 were Coursera, Palantir, Course Hero, Nextdoor and OZY Media. These positions accounted for approximately 71% of the investment portfolio. As of September 30, our top 10 positions accounted for approximately 89% of the portfolio.”
“Consistent with Palantir’s lock-up agreement 20% of Palantir shares were freely tradable upon the execution of Palantir’s direct listing. Consistent with our view of monetizing our public securities, we sold a portion of our unrestricted shares on September 30 and the remaining freely tradable shares shortly after quarters end. We continue to hold the remaining restricted 80% of our Palantir Class A common stock, and we’ll evaluate further monetization of this investment after the lock-up period expired.”
“Segmented by six general investment themes, the top allocation of our investment portfolio is education technology, representing approximately 45% of investment portfolio at fair value. Big data and cloud was the second largest category representing approximately 26% of the portfolio. Our financial technology and services category accounted for approximately 11% of our portfolio at fair value. Our social and mobile category accounted for approximately 10% of our portfolio and marketplaces accounted for approximately 9% of our investment portfolio at fair value.”
There’s a private/public ARB in here somewhere, I’ll let you know when I find it.
Public Market Premium
// Tomasz Tunguz of Redpoint Ventures recently put out a piece that highlights how “the public market premium is back after a multi-decade hiatus.” Whereas before, this liquidity premium had been replaced with an access premium in the private markets.
The WSJ picked up on this data in Tech Startups Drop Stay-Private Mantra as Wall Street Beckons where they reference Tunguz and explain how it might be more advantageous for early-stage companies to become a public company sooner rather than later.
This makes sense with the recent popularity of SPAC’s along with a market that continues to defy gravity. However, if the market loses steam I wouldn’t be surprised if market premium pendulum swings back to the private side.
If You’d Like to Know
SEC Extends Effort to Help Private Companies Raise Capital (WSJ)
How Discord (Somewhat Accidentally) Invented the Future of the Internet (Protocol)
DoorDash and Instacart Face Brighter IPO Prospects After Ballot Victory in California (CNBC)
2020 Cohort Shows Huge Increase In Valuation On IPO Day (Crunchbase)
Addepar Introduces its Investor Sentiment Index (Addepar)
How Billionaire Jack Ma Fell to Earth and Took Ant's Mega IPO With Him (Reuters)
IAC Considers Vimeo Spinoff After Achieving $2.75B Valuation (CNBC)
JPMorgan Readies for Post-Election Market Shift by Cutting Tech (Bloomberg)
A Terrible, Horrible, No-Good Year for Quants (FT)
More stories from the week on Pipeline.
Data (Listen x2)
// “57% of companies have a chief data officers. This has become a strategic initiative by the largest companies on the planet who understand that data is oil. And Snowflake sits at the center of the operation to help those companies turn it into a strategic asset.” ~ Brad Gerstner on Invest Like the Best this past week. The seven minutes or so where he starts talking at 31:00 are really good.
// From a16z, Data Alone Is Not Enough: The Evolution of Data Architectures, Ali Ghodsi, CEO and founder of Databricks, talks to a16z general partner Martin Casado. The conversation gets a bit into the weeds, but interesting nonetheless.
This newsletter is created and authored by Bryce Tolman and is published and provided for informational purposes only. The information in the newsletter constitutes the Author’s own opinions. None of the information contained in the newsletter constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You understand that the Author is not advising, and will not advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the information contained in the newsletter may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.