Pod Insights Equity Podcast The regulatory clock is ticking for TikTok About this episode This is our weekly kick-off show, coming to you Tuesday morning as yesterday was a holiday here in the States. Here’s the rundown:
Crypto prices are up, and we’re looking at another busy earnings week. Palo Alto Networks, Sprout Social, Nvidia and Block will report this week.
Planity has put together a $48 million Series C, which is a super neat vertical SaaS deal. Software and payments make for a tasty combo, and Planity wants to bring those benefits to salons in Europe.
The EU is after TikTok under the DSA, which could have major implications for social media regulation.
And Walmart is buying Vizio; LockBit got smashed; and MariaDB has a buyer on the horizon.
In closing, this WSJ piece on San Francisco is worth your time.
For episode transcripts and more, head to Equity’s Simplecast website.
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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, the Tech Runch Podcast about the business of startups where we unpack the numbers and the nuance behind the headlines. This is our Monday show, looking back at the weekend and looking at the week ahead. But today is Tuesday because yesterday was a holiday in the US. So, good morning. This is Alex. Today is February 20th, 2024, and we have a banging show for you today. On the pod, we have stocks and crypto, a very cool series C, TikTok in trouble, Walmart buying Vizio, a massive ransomware win, the future of Maria DB, and then AI talent in San Francisco. Let's go.
0:50 Speaker 00 Let's start in the world of money, and that means stocks. Shares are mixed in Asia, but up in China, where a key loan rate was cut more than anticipated as the country looks to bolster its economy. This could be the starting gun of a global change in interest rates heading down. Stocks are largely higher in Europe today, and they are set to open lower here in the US to kick off this short week's trading. On the earnings front, fewer names than last week, you're very welcome. Today, we're going to hear from Palo Alto Networks, Workiva, and Sprout Social. Wednesday will bring us numbers from Nvidia and Etsy, Wix, Five9, Digital Ocean, Olo, and Vimeo. And then Thursday, we'll
1:34 Speaker 00 hear from Intuit, Block, aka Square, NewBank, Grab, Carvana, and Fiverr. I have my eyes on Sprout Social for SaaS, Nvidia for AI chips, Digital Ocean for cloud storage, and then, of course, NewBank for fintech. Next up, crypto, where there is once again good news to report. It's like a week in a row. This time Bitcoin is up nearly 5% in the last week to just over $52,000, and Ethereum's token is up nearly 10% in the last week to just under 3,000, or 2,900, if you want to be specific. Spot trading volume is trending back up after a material dip to start the year. And just returning the clock a little bit, Coinbase earnings
2:16 Speaker 00 last week were a banger, and some are saying that the crypto winter is over.
2:24 Speaker 00 To kick off my favorite part of the show, AKA big news that matters, I want to talk about a French startup called Planety. It just put together a $48 million Series C, so a very hefty round, and it was led by InfraVia Capital Partners, while existing investors Credit Mutual Innovation, Rivia, and BPI France's Digital Venture Fund also participated. What does the company do? Well, it's building vertical SaaS for hair salons, barbers, and similar personal grooming businesses. I love a vertical SaaS deal because it just feels so startup-y. Find an industry that's using old technology, build them a bunch of software, and bring them out of the Stone Age. And it turns out that Planety really was on to something
3:09 Speaker 00 because today, more than 40,000 businesses use its software. That adds up to a lot of tasty recurring revenue, but Planety has something else up its sleeve, namely, payments. Now Stripe, which is the vendor that Planety uses for payments, has a bit of a white paper on the company, so we got some more stats. Stripe claimed that Planety had 8 million monthly users across its service back when it had 35,000 business customers. So now with more than 40, that figure has likely risen. And that many monthly users means lots of payments, which means lots of revenue for the startup. Toast, which has a somewhat similar model, albeit more restaurant-focused than hair, of course, is worth about $12 billion today, for an example.
3:53 Speaker 00 Essentially, vertical SaaS plus payments is just a good business model. And if you want even more data to make that point, just ask Shopify.
4:03 Speaker 00 Turning the page, let's talk about TikTok. The company is once again in trouble, and this time, the European Union is formally investigating the company's compliance with the Block's Digital Services Act, or DSA. The investigation of TikTok is looking at the protection of minors, advertising transparency, data access for researchers, and risk management of addictive design and potentially harmful content. That's what TechRum says. Now, what is the DSA? It's the EU's online governance And Content Moderation Rulebook, which since Saturday has applied broadly to thousands of platforms and services. But scale here matters because since last summer, larger platforms like TikTok have faced an extra set of requirements
4:47 Speaker 00 in areas like transparency and risk, and it's those rules that the video sharing platform is now being investigated under. Why do we care about this? TikTok is in trouble everywhere. Well, penalties for confirmed breaches of the DSA can reach up to 6% of global revenue. So if TikTok does get into trouble here, it's going to be very, very expensive. TikTok, of course, does face regulatory pressure around the world, including concerns about its parent company and possible government influence. Add the new DSA matter to that list. Next up, Walmart is buying Vizio, and I know you're thinking to yourself, why is this on equity? But don't worry, I'll explain.
5:27 Speaker 00 To kick things off, American retail giant Walmart is going to drop about $2.3 billion for Vizio, the well-known maker of televisions. However, this deal is not designed so that Walmart can juice more margin from selling consumer hardware. No, instead, it's all about ads. And yes, you can sign now. I pulled data from Walmart's latest earnings report that had dropped this morning, and I can put this all into perspective for you. The company grew 5.7% in its last quarter. Not bad, not great. It's kind of okay, given where the global economy is. However, Walmart's global advertising business grew by 33% in the quarter, even faster than its reported 23% e-commerce growth.
6:11 Speaker 00 So why does that matter? Well, not only are ads driving key growth for Walmart, they're actually higher margin than its trad business and are making the overall company's gross margins improve. So it makes sense to invest more in advertising work. But why do we care about a TV deal on equity? Simple. One thing we've noticed in recent years is how important advertising-based incomes and profits are for tech giants, regardless of where they start in that sector. So long as they interact with consumers, they kind of become ad companies in Time. Microsoft is putting ads into Windows. Amazon makes a ton of money on advertising. Instacart makes a lot of money off ads. Uber makes a lot of money off ads. The list just goes on. And Walmart, it seems, is no different.
6:55 Speaker 00 It's just coming to the same conclusion from a different sector starting point. Maybe we should update our thinking to the point that any company that offers a screen of sorts is going to eventually make its user experience more cluttered by stuffing it with ads. And the reason is simple. Who doesn't want more profit? And then how about some good news? I have good news from the ransomware front, which is probably a sentence you've never heard before. But hear me out. A coalition of international law enforcement agencies, this includes the US's FBI and the UK's National Crime Agency, have disrupted the prolific ransomware game called Lockbit. Woo, good news. In an announcement on Tuesday, Europol confirmed that the months-long operation has,
7:39 Speaker 00 quote, "resulted in the compromise of Lockbit's primary platform and other critical infra that enabled their criminal enterprise." In practice, that worked out to a couple dozen servers across Europe, UK, and the US, and critically, I think, the seizure of more than 200 cryptocurrency wallets. Why do we care about this? Well, since it first emerged as a ransomware-as-a-service operation back in late 2019, TechCrunch writes that Lockbit has become "one of the world's most prolific cybercrime gangs." And according to the US's Department of Justice, Lockbit has been used in approximately 2,000 ransomware attacks against victim systems in the US and worldwide, which earned it, and this kind of shocked me,
8:23 Speaker 00 more than $120 million in ransom payments. That's a lot of money, a lot of incentive to behave poorly. Now, I think that Lockbit and other forms of ransomware are one of the reasons why we have seen cybersecurity software companies grow so much in recent years, and up until the venture bust raised so much capital. I'm always just kind of curious about the cause and effect here. Like, let's say Lockbit gets taken down and fully destroyed. Does that mean that we have less of a market for cybersecurity products or more, given the long-term threat horizon?
8:54 Speaker 00 But enough about regulation and cybercrime. Let's get back to deals. Maria DB, this is a company that built its business as a fork of MySQL. It raised $230 million while private. It eventually went public via a SPAC in late 2022. And since then, well, as with many SPAC-launched companies, Maria DB has seen its value evaporate. Why? Well, its earnings reports have left quite a lot to be desired, and it's currently worth too little to remain a public company on the New York Stock Exchange. You have to have a $50 million market cap for that, and Maria DB does not. But there is a potential buyer on the horizon. California-based K1 Investment Management has submitted, and I quote, "an unsolicited,
9:39 Speaker 00 non-binding, indicative proposal that would value the company at about $37 million." So this is a mess, and not the way we thought this company's public life was going to go. And sure, SPACs have been bad, but oh my God, poor Maria DB. You feel bad for it. But I do think there's something else here that really matters. This deal, I believe, could indicate that we are going to see more investors looking to pick off cheap assets before they potentially get more expensive later in the year when interest rates come down. So kind of a sad note from Maria DB and its backers and employees that is struggling this much, but maybe good news for deal volume in the back half of the year. Closing out, I want to talk about a Wall Street Journal report that came out over
10:24 Speaker 00 the weekend and drove a good amount of chatter over on Twitter. Essentially, it said that AI is bringing talent and investors back to San Francisco. The gist here is pretty simple. The pandemic shook up where tech folks lived and worked, but now founders and their backers are heading back to the city by the bay. Why? Well, customers, talent, and I would say simple proximity to the epicenter of AI work in the US and perhaps the world. Just those handful of reasons. Now, I lived in San Francisco through much of the last tech cycle, and I have to admit that I have a huge soft spot for the city and the Bay Area. More generally, but something I learned while I was there and something that people
11:07 Speaker 00 forget is that San Francisco is a boom town. It booms and then it busts. People flock there and then they leave and it happens in waves that happen again and again and again and again. For now, however, today, as the venture market itself contracts around the world, it's getting back to its own concentrated roots. And that means Northern California in 2024 is kind of once again the NorCal of years past. This time, we're just focused on AI.
11:38 Speaker 00 And that is our show for this lovely start to the week. But if you need even more equity before we are back in your ears, you can check out EquityPod over on X and Threads. And if you want even more of me, well, I am Alex over on X. This show has two sister shows, Found, all about founder stories and Chain Reaction, digging into the future of the crypto economy. We'll talk to you soon. Equity is back on Wednesday. We're back on Friday. Bye.
12:05 Speaker 00 Equity is hosted by myself, Alex Wilhelm, and TechCrunch Senior Reporter, Mary Ann Azvedo. We are produced by Teresa Loconsolo with editing by Kell. Bryce Durbin is our illustrator, and a big thank you to the audience development team and Henry Pickavet, who manages TechCrunch Audio Products. Thank you so much for listening and we'll talk to you next time.
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