Pod Insights Equity Podcast Coinbase goes fishing for Opensea’s catch About this episode This week was one of our strongest shows yet, with a wide diversity of news items that were genuinely fun (and complicated) to chew through. And even though we started off kind of grumpy, we laughed through tech difficulties, crypto puns, and fintech CAC. It's called coping.
Here's what we got into:
Magic Leap raised $500 million about which we have thoughts, Mindbody's acquisition of ClassPass caught our eye for obvious reasons (and the fact that it also raised $500 million), and we dug into SoWork's fascinating business proposition.
mPharma and the race to horizontal, holistic mental health: Telehealth is great and useful but no panacea. However, in the realm of mental health it's potentially life-changing for millions.
OpenSea went from being one of the main characters in our fraud show, to being the underdog that we're rooting for - now that Coinbase is building a copycat.
Since we tried to keep the show tight, a ton of news was left on the cutting room floor. The good news, though, is that we're back tomorrow with a spicy bonus episode about Microsoft pulling LinkedIn from the Chinese market. Oof.
Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products.
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Transcript 0:10 Speaker 00 Hello and welcome back to Equity, TechCrunch's venture capital focused podcast where we unpack the numbers behind the headlines. My name is Alex and I'm here with the crew. We have Natasha. Natasha, how are you?
0:20 Speaker 01 Honestly, Alex, I'm a little grumpy today.
0:22 Speaker 00 Good. We're gonna need that on this show. It's gonna be a long one. Mary Anne.
0:26 Speaker 02 You got two grumpy women on the show with you today, Alex.
0:29 Speaker 00 I really feel like any mother-in-law jokes at this point will blow up in my face. So we're just gonna move right along. Before we talk about the agenda though, guys, we are going to deliberately avoid the Microsoft LinkedIn China story because we will do a shot about that. So if you want to hear all about Microsoft and LinkedIn and its regulatory world in China, it's coming. We just have too much good stuff. We can't fit it in. So today, we're talking about Magic Leap, which is a funding round, amazingly enough, MindBody, which involves ClassPass, and a company called SoWork that I'm really, really happy to talk about. Then we're going to discuss healthcare accessibility through the lens of a couple of different startups, talk about Coinbase launching an NFT platform and what that means for OpenSea. So it's gonna be absolutely one hell of a show, frankly. Natasha, where should we start?
1:11 Speaker 01 Let's start with Magic Leap. That news broke earlier this week with, I think, one of the best headlines on TC. Lucas wrote the piece. He wrote, "Seven years after raising 542 million at a $2 billion valuation, Magic Leap raises 500 million at a $2 billion valuation." How did that happen?
1:28 Speaker 00 It's not what you normally see when companies tend to raise. Their valuation is supposed to go up. What's cool about Magic Leap is that they're trying to build technology that will put digital images into your world, AR essentially, augmented reality. Microsoft is working on this too. And it's a big, hard problem. It's software, it's hardware. As we saw before, there were some struggles with the company about direction and who the customer was and hardware quality. And now they have a new device coming out. And so I'm curious, how excited are you for Magic Leap 2?
1:55 Speaker 01 I'm honestly excited for more content about this company. It has given us so many different snapshots and windows is probably a better word, into what a company trying to pursue AR goes through. Like, just to run through some historical context if people don't know what a hot mess this company has really been over the past few years. It narrowly shut down last year, fired staff, replaced founder. Was working with pitching a consumer product now is refocusing entirely on enterprise audiences and my favorite metric, Magic Leap CEO at one point wanted to sell 1 million of its headsets and it only sold 6,000 in the first six months.
2:31 Speaker 00 In its defense, they cost like 100 KIPs. So that was an enormous amount of revenue. I mean, okay, they weren't that expensive, but they were expensive. To underscore your point, Natasha, about how hard this is, you're not just building a device that plugs into a market. There isn't kind of, at least that I'm aware of, a standard format for AR. You have to build the software, get people to build on your platform for your hardware and get the hardware and sell it. So you're building a two-sided marketplace while doing a technology challenge. It's a big lift. I mean, to the point to which Microsoft's Hololens product is really kind of focused on the enterprise space as opposed to consumers because it's hard to build a consumer network.
3:05 Speaker 01 But isn't that what Magic Leap is now doing? It's going after the enterprise?
3:08 Speaker 00 Yes, but Microsoft is also taking on the military. So, so, and there's a Microsoft connection here because a former Microsoft muckety muck, higher up VP type person in Microsoft land, she was, there's two levels, there used to be two levels of VPs that meant something to Microsoft. She was one of the top ones. So she was a big deal. Peggy Johnson is the CEO at Magic Leap and she's famously competent. So that's good. Are we shocked that they raised more money though? That was my biggest surprise.
3:35 Speaker 01 I was like, I don't know, Mary Ann, what about you?
3:38 Speaker 02 I mean, just hearing all this context and all that it's been through, it's kind of a miracle that it's still around, to be honest. I mean, much less raising more money. I don't know.
3:48 Speaker 01 The thing that like really stuck with me was, I remember maybe a few months ago, I don't know time, Magic Leap was rumored to be pursuing a sale at 10 billion. And now it's gone and raised again, AKA proven its valuation. And even the investors who are unnamed in this funding round, don't agree with that 10 billion number that was thrown out. I think at the time, Josh Constein was like, this feels like the thing a startup does when they want to get bought and want people to think that they're worth a lot of money. And so this just felt like the receipts, but to have why that was made no sense even then.
4:19 Speaker 00 Yeah, it's like I say, it's not that I don't have a date to prom is that so many people are asking me to go. I just can't choose between them. Also, they all go to a different school.
4:28 Speaker 01 Exactly.
4:29 Speaker 00 On the flip side, though, the company was worth 6.7 billion a couple of years ago. All jokes aside, I have turned around on this. Now Magic Leap is no longer a risible failure from Florida. It is an underdog and therefore I must become its friend because someone has to be in favor of it. So I guess I'll take the pro side of Magic Leap going forward.
4:47 Speaker 01 Well, we love underdogs. I love underdogs. It gives me serious like Quibi vibes. So I still am kind of like, I don't know if you are a real company, but I love the optimism.
4:58 Speaker 00 Let's pivot from one company that has pivoted many a time to another company that has pivoted many a time, which is ClassPass. But we have some good news about them today with a company that I'm not super familiar with called MindBody. What's going on?
5:10 Speaker 02 ClassPass is a subscription-based fitness marketplace, basically giving people a way to get access to various fitness classes without committing to a membership, you know, spending a hundred dollars a month, for example, at one gym. They just want to try out a class somewhere. ClassPass is giving people a way to do that. MindBody is a booking software that is used by gyms, studios. They help people book classes at these places. So they're two distinct companies, but they do have some complementary missions. And so it's not a huge shock that MindBody announced this week that they're acquiring ClassPass in an all-stock deal. They've raised $500 million to help with that.
5:49 Speaker 00 So Maria, this is essentially MindBody is acquiring ClassPass. And, and just to make sure that I have this right, and they raised $500 billion. But they're kind of like distinct transactions that were announced as a unit.
6:01 Speaker 02 Yeah, they were announced as a unit and it's a little confusing because the acquisition is described as an all-stock deal. That's a little confusing.
6:08 Speaker 01 MindBody has a consumer-facing part of its business too. So it does have a ClassPass part of its business where people can go to the website of a fitness class that they like and book something through MindBody's software. So to me, I think like the combination of ClassPass, which helps fill classes and MindBody, which does the software and some filling of classes, it felt like a very obvious mix of two businesses.
6:34 Speaker 02 I didn't know that. I thought MindBody just did the booking software. So in a way they were competitors then.
6:40 Speaker 01 To me, like this is. Maybe a little harsh, but it felt like a customer acquisition. Like they wanted to buy ClassPass as customers. Maybe they wanted to build more functionality in terms of bundling classes because that's ClassPass's biggest innovation, I'd say. So maybe that's what MindBody gets to do now.
6:56 Speaker 00 And we do know that a third of studios on ClassPass aren't using booking software at all today. And so this is going to be a way to kind of probably cross-sell versus just kind of the customers going one way. But it's consolidation in the fitness space and certainly a lot of capital also flowing in. The ClassPass story, though, for me, just to kind of put a bow on this, is a lot of fun because ClassPass struggled to get its business model right earlier in its career. It offered kind of an all-you-can-eat pass and there was different tiers and there was kind of like a token system. And the company just did not give up. You know, it's always good to see perseverance and kind of, I think what we call grit bear out. And now, a hard right pivot away from the physical world of exercise to the digital world of coworking. Natasha, SoWork is in the news.
7:36 Speaker 01 Yeah, so SoWork is yet another virtual HQ. I've been talking about it on this podcast since almost a year ago when I wrote my first feature on virtual HQs. They're just this bet built by a lot of engineers, actually, that are hoping that the way we're going to experience work is going to look less like Slack and email and more like a video game. We enter a universe that feels like, I don't know, this one, for example, was inspired by World of Warcraft. So we'd enter a universe of work, bump into our colleagues with our different avatars, and that would be the way we would cross-collaborate in this new distributed workforce. And that's what SoWork is all about. I'll pause there because I mentioned World of Warcraft and I feel like Alex has to have thoughts.
8:14 Speaker 00 Oh, okay. I've only played WoW for like a total of five hours, which for anyone else who's played WoW realizes that there's only two numbers of WoW you play. There's five hours or 5,000 hours. I need to up on that side of the coin. But it's not me that I'm curious about. It's Mary Anne because, Mary Anne, you and I have worked together remotely for three, four years now, something like that. We've met in person once.
8:36 Speaker 01 Twice.
8:38 Speaker 00 Oh, you came to the office and I was thinking about my trips to Austin. So yes, we met twice. Once we got to have barbecue together and the other time you came out for a while. I feel like we get along fine. So I'm curious, like, do you think that like this kind of like virtual HQ coworking thing would improve our longitudinal working relationship?
8:54 Speaker 02 You know, I've been thinking about that as I read the story and I was like, this might distract me, to be honest, like I'm already busy enough. Do I need avatars? Do I need to feel like I'm playing a video game to feel like the culture? But having said that, maybe I would love it. I don't know, never tried it. So it's really, it's hard to say.
9:15 Speaker 00 Okay, that's more, that's more positive than I thought because I get your email auto responder at least once a day. And I'm like, Mary Ann's busy enough that I'm getting her email auto responder. Like Natasha, I'll send a question over to you, though. Like, you know, we're a pretty remote team. Do you think TechCrunch would benefit from this?
9:31 Speaker 01 Honestly, I do want better ways, especially we've hired so many people over the past few months that I'm like itching to find ways that don't feel transactional to interact with them. And I'm someone who isn't great at existing on Slack because I just associate it with things I need to do and questions for story development and headline work. And so I was actually just talking to Amanda, I was like, what about virtual HQs? And she was like, I'm going to stick to our water cooler channel. So I do feel like I'm both, I see it, but I get that it may not be realistic for everyone.
10:01 Speaker 00 Yeah, the thing I throw in there on top of this, oh, and I forgot to mention, Silber raised 15 million led by Talus Capital, is that right?
10:07 Speaker 01 Right, right, yeah. Huge seed round. Can we talk about that? But we don't have to talk about it, actually.
10:12 Speaker 00 It's not a seed round, it's a 2008 Series B. Person listening to us, hi. I'm presuming you also use Slack, right? So just, or a similar service. Your workspace may have various GIFs that you've put in there. You might have different emoji that are specific to your team. For example, we now have a whole list of TechCrunch Plus emoji. They're great, they make my day. But you personalize your digital workspace. And to me, like, the whole Silber thing of having avatars and kind of like a more persistent world is just that to the nth degree. It would be fun to get to see my colleagues express themselves in that manner because we don't get to where I don't know, finding clothing around each other or like pick restaurants or express our individuality in ways other than just kind of plain text. So that sounds fun to me.
10:50 Speaker 02 It does. And a couple of other things about the company. One, that it's on this mission, it says, to combat climate change. Five of their six main teams are led by women. Tinder is part of their beta. So that's kind of interesting. I'm just curious to see how this goes. It's another one of those that I think will either do very well or just fail miserably. Or maybe not. Maybe it'll be in between. I don't know.
11:13 Speaker 01 I'll be honest, like, I think Tinder signing on as a customer is what made me cover this company. Because if you can convince a bigger company to sign on and not just like a five person pre-seed stage startup, it means something. And I know they have a couple other contracts coming up. The quote in the piece from Tinder was a lot about them finding a permanent way to scale hybrid work. Is virtual HQ the answer? They're trying this route, but like, I think you're spot on, Mary Ann, and like, this, like, these questions that they're asking are the questions they've gotten since inception. And now, one year later, still same questions. So.
11:46 Speaker 00 What I'll say is, I don't think we're going back to the office as much as people had thought six months ago. And that the amount of office time ahead of us seems to be going down with each month that the pandemic persists. The market seems to be moving in this direction. The only thing that I'll say is, like, Slack was supposed to kill email, and it absolutely did not. And now I just have more messages. And so for this to succeed for me, just personally, just from my own workflow, it has to replace something. It has to take something away from me. Like, gets me off of Slack, gets me out of email. Would I love to see an email service built in 3D World of Warcraft style? Maybe I shoot arrows at bad emails and they go into spam. I don't know. But like, that'll be a blast.
12:25 Speaker 01 Before we move on, I want to hear your thoughts on the argument the founder made when I was like, I work at TechCrunch, we are literally covering startups and are optimists all day long. Like, we are not thinking about bringing on a virtual HQ from what I know as a non-manager. So how are you like, how are you planning on convincing people who are already tech savvy, friendly people? And he was like, there was one point where TechCrunch didn't think Twitter was necessary part of their strategy until everyone else was on Twitter and then they added, they got a Twitter as well because the effects and benefits of joining that platform were so hard to pass up. And to me, that argument actually kind of worked. I was like, okay, yeah, I guess like if everyone has a virtual HQ, then maybe there'll be a network effect. But I'm curious, Mary Ann, I see you furrowing your brow. Does that argument make sense?
13:10 Speaker 02 Ah, I feel like they're very different. I mean, Twitter's, it's just, it's different. It's a way to network these days. Like, I used to just tweet out my stories, but now it's a way to network. I feel like these are very different motivations than an internal system or tool.
13:27 Speaker 00 Oh, boom. Mary Ann, come on.
13:32 Speaker 01 I love it. I love disagreeing. We don't do it enough.
13:35 Speaker 00 Well, it's because we all hang out too much.
13:38 Speaker 02 I mean, you know, look, you know me, I'm, I'm a very optimistic person. I would love to see how this turns out. It could be very successful. I'm not saying that it doesn't have that potential. I'm just saying that I don't think comparing it to Twitter is a super great analogy, in my opinion.
13:52 Speaker 01 Yeah.
13:53 Speaker 00 We need to move on, but what if we put Twitter in the virtual HQ?
13:56 Speaker 01 Done.
13:58 Speaker 00 Now, we're going to move on and talk a little bit about healthcare and we're going to talk about this from the perspective of a company called M Pharma. Natasha, this is an African company that is working on some, I think, a pretty neat innovation in the healthcare space.
14:10 Speaker 01 Yeah, okay, I'm going to do my best. I'm trying to explain their new efforts, but this may take a second. So like Alex said, they're a Ghana-based health tech startup. They have been working a lot on telehealth, but it's realizing that not everything can be done through a video call. You do need some in-person interactions. So we're seeing them start to get into the physical location game. So I would say the new effort for M Pharma has really been taking pre-existing pharmacies, staffing physicians there, and then those physicians performing remote. Checkups and routines on people who are at the same time doing a virtual consultation with a doctor. Hopefully, I didn't butcher that, but it's kind of a snapshot into how
14:51 Speaker 01 hybrid healthcare could look. Partial, remote kind of expertise being augmented by in-person people, maybe don't have as intense skills as the doctor, but can perform some of those like, basic level operations.
15:05 Speaker 00 And one thing I would throw in there is that when we think about markets around the world, not everyone has the same level of internet penetration. And so when we think about telehealth, we think about usually video calls. And video calls imply persistent electricity. They imply regular internet access that doesn't go down. If you open virtual healthcare centers that people can go to to access telehealth services, you're probably widening the net dramatically and bringing more healthcare, and better healthcare, to more people. And so I, really, almost weird way, I hope this works, like, from a capitalist perspective. I hope they crush it, because I think it can help lots of folks.
15:37 Speaker 02 There are just some things that need to be done in person. A doctor can see you over video, but it's not the same.
15:44 Speaker 00 I will say that this is in the broader mix of us paying not just more attention to startups in Africa, but I would also say startups in Africa raising more money and doing more things. Investment on the continent there has dramatically risen this year. It's going to set what I believe are going to be all-time records. Envarma has raised its 50 million since inception, 17 million's last round. Wouldn't be shocked if we hear about them putting together even more capital, but they're looking to open 100 virtual centers across seven markets in Africa in the next six months. So, that's a lot of footprint.
16:13 Speaker 01 Through the rest of the week, we also saw more startups trying to do what this company is doing in different ways by going the holistic health route. With telehealth, for example, the next move, and the one that's made a lot of sense, is go the mental health route. Mental health is something that worked really well with telehealth, simply because it's overdue that we are viewing mental health as a spectrum of different issues. And as a result, a spectrum of different ways we serve it. So, it can be through text, it can be through in-person therapy sessions, or it can be through small group therapy.
16:42 Speaker 00 And we've seen a couple of these companies pop up recently. One that really got me excited was Mental Happy. And here in America, and I presume around the world as well, there's a shortage of therapists. It's hard to get one. They're expensive. Your insurance is going to dicker with you about how to pay for it, if they will pay for it, and how frequently you can go. But I will say that Mental Happy has a twist on the on the model. And they're a YC-backed startup, just as a data point. They're building targeted small groups. You pay some small dollar amount per month to the service, and you have access to small groups of people that have maybe a similar background, maybe a similar issue. Just some context, because, Mary Ann, one thing that I think that you and I both appreciate is that shared context in a mental health conversation is super key. And empathy is not really just enough. You need to have some almost shared grit.
17:24 Speaker 02 Yeah, I mean, we've all been gone through a lot over the past year and a half, and different things impacting different people. And you can vent to your friends, and they can sympathize, but it's not the same as talking to someone who's who's been through a similar situation as you, or is going through similar thing as you.
17:40 Speaker 00 And not to beat this particular joke, I'd bring it up too often, but as a recovering alcoholic, I have been to some AA meetings. Not really my jam, but it works for a bajillion people. And so there's an example of how that works in the world. And one of my best things in my life is a text group I have with some friends. That's kind of the sad kid club. And we can all just be kind of sad kids together. And that's been super creative. But Mary Ann, run us through a couple more names. Who else is in the mental health space that we should have an eye on?
18:04 Speaker 02 There's a company in Southeast Asia called Thoughtful that just raised $1.1 million, covered another company called Maru Health. They stood out a lot to me because the founder, he started the company based on his own experience of his brother committing suicide. And he felt like if he'd had more options and more access to good mental health care, he might not have resorted to such a tragic decision. So he started Maru Health to to help people get the mental health they need online. And it's pitching itself as a holistic platform. So it's taking into account sleep, diet, whole body, and how they're all interconnected.
18:40 Speaker 00 I lost one of my absolute best friends to suicide, actually. We drifted apart after high school. But that that still sits that still sits on me. So anything we can do to help keep more of our friends around would be lovely.
18:56 Speaker 01 And kind of like the silver lining here of all the innovation we're seeing is that the bar just keeps getting higher for new startups in the space. So it's been really cool to see the innovation not be like a race to the bottom, but like a race to like, how do we help people at different stages of the journey? And how do we help people from text to in person? And I'm like, okay, that to me is like the great, this is great when a lot of competition just makes the bar higher instead of makes it cheaper.
19:22 Speaker 02 Exactly. I like that. That's a great point.
19:25 Speaker 00 Well, what's the opposite of a race to the top? Well, it's when your two portfolio companies decide to scrap it out and fight their way to the bottom. And that's what we're seeing with Coinbase. So the news is that Coinbase is launching its own NFT platform. They've opened up pre-registrations, if you will. There are over a million now, which is quite a number of folks looking for this. But the spicy thing is that Coinbase, famously backed by Andreessen Horowitz, they made tons of money off the company during its private and now public life, is also a backer of OpenSea, the current leading NFT platform, which has something crazy like 95% market share, according to a Quartz article that I read. And so we're kind of seeing like an Andreessen portfolio graduate, if you will, take on a present day Andreessen portfolio company. And I'm very curious how awkward that's making it kind of inside the broader Andreessen offices?
20:08 Speaker 00 And if there's like water balloons and Nerf gun fights breaking out over the snack bar? Because surely someone's going to be pissed off about this.
20:15 Speaker 02 There's a couple of things. Some people say that Coinbase will help make NFTs more mainstream because it's got such a huge user base.
20:22 Speaker 01 I think that Coinbase getting into the NFT game in such a meaningful way will help people that were maybe setting aside 1% of their paychecks every few weeks, putting it in their Coinbase portfolios, start to think and make an easier jump into the world of NFTs. Like, I feel like it requires less intention for consumers with like my founder hat on to get into NFTs if you're already on Coinbase.
20:44 Speaker 02 It's one less hurdle for them, for you to invest in them if you want.
20:48 Speaker 01 Like, the parallel I made when I first saw this was kind of how like when Twitter built Spaces, people were using Clubhouse, and it was great. I was. But then Twitter made it. And it's like, I'm already there. Might as well use what they have and like, support this new technology that's interesting, but maybe on a platform that I'm already there for. So I felt like it's gonna, so yeah, to circle back to your question, Alex, I definitely feel like it's out for OpenSea's fish of the day.
21:15 Speaker 00 Fish of the day. I thought you were gonna say head. Oh, catch of the day, OpenSea, fish. I get it now. Okay, I was like, why are you talking about fish? That has no connection at all to Coinbase.
21:26 Speaker 01 Fair.
21:27 Speaker 00 OpenSea. Okay, right.
21:28 Speaker 01 It wasn't that good.
21:30 Speaker 00 So I'll just go ahead and talk about some personal experience here because a couple of weeks ago, I went ahead and bought or tried to buy an NFT. And so I bought $50 in Bitcoin, oh no, Ethereum on Coinbase. I opened an account and I moved it over to MetaMask, which was my wallet that I had attached to OpenSea. And then I tried to buy an NFT, but it turns out that one, fees had eaten up like eight of my dollars of Ethereum. Anyways, my $42 that I left in Ethereum when I got it over to OpenSea wasn't enough to pay the fees on buying something. I couldn't buy something that was free because it costs too much. And anything to reduce those barriers, if it's a blockchain that has a lower fee structure, that'd be cool. Easier to get your money in place, that would be cool. So to me, I wonder if we're gonna see Coinbase kind of squash
22:16 Speaker 00 a very promising, cool company that's coming up. But I'll say that Coinbase is an incredibly active investor. Do not forget. Also, Andreessen is an incredibly active investor in the crypto space. These are essentially the two leading venture shops. And I think Coinbase is gonna run into some issues when people are like, "Look, if I take your money, what are you gonna do to my company?" It's not really an idle point.
22:37 Speaker 00 I will say though, I don't understand the value prop of NFTs. I think they're cool, but I just saw a bored ape sell for $1.6 million and I'm just thinking about all the art I could buy for my walls. All right, guys, we have to stop there. We're over time. Don't forget, we are gonna be back tomorrow with a look into the world of LinkedIn and China and regulations and Microsoft and all other good things. GitLab's IPO as well, if we can squeeze that in. It was such a busy week, we had to leave a lot of stuff on the floor. But Natasha, Mary Anne, as always, a complete delight. Equity is back tomorrow and also back Monday because we can't shut up. And with that, goodbye.
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