MetaMask? More like MetaMess.
By Alan Soclof
3 BIG STORIES
1. MetaMask? More like MetaMess.
ConsenSys, the parent company of leading ETH wallet MetaMask (30M MAUs), raised a $450M Series D at a $7B valuation.
This raise was announced in the middle of a massive lawsuit between ConsenSys AG shareholders and management. The shareholders claim that CEO Joseph Lubin moved assets from ConsenSys AG into a new entity called ConsenSys Software Incorporated, and in the process gave 10% of the company to J.P. Morgan in return for a $39M loan forgiveness.
The crux of the case revolves around the fact that MetaMask was transferred over to the new entity at just a $4.4M valuation—likely less than 1% of what the asset is worth now. Lubin & Co. claim this was a fair valuation due to the fact that this was before the crypto boom and no one knew that the explosion was coming.
What are my thoughts on the case?
First—there’s a reason I did not choose law as a profession. This stuff is really complicated. At the same time, I do think there is something fishy going on here.
In August of 2020, when the assets were transferred, Metamask had ~545K users. When you take into account the fact that it had been in development for 5 years and in the market for 4 years, $4.4M seems like pennies on the dollar.
At the same time, it’s important to realize that ETH was around 1/10th of its current price in August of 2020. This is incredibly complex, and I look forward to keeping you all updated!
Second—it looks like the valuation here is absolutely wild. The company told TechCrunch that they did “nine figures” in revenue in 2021, so anywhere between 10M and $99M.
Assuming it’s around $50M (even though I would bet it’s much less), that means that the company is valued at 140x sales—quite the valuation at a time when companies trading at significant multiples are getting slashed significantly.
If crypto prices prove to be in the first inning, this investment could look smart, however, if crypto, like growth stocks, get cut in half, watch out—and not in a good way.
Wrapping It up: Taking questionable fiduciary moves and the risk in valuation into account, I am confident that I would have not put my money here.
Instacart, the grocery delivery company, announced a lowering of its valuation from $39B to $24B. This move comes as the company is seeing slower revenue growth in a competitive space, as I discussed in depth in Newsletter #20 regarding Getir.
The decrease in valuation comes from the 409A, a process where a third party identifies the fair market value of a company for employee options purposes.
So why share this internal, not legally enforced move with the public?
The main logic behind this move was to not only increase the likelihood of employee retention but also serve as a recruitment vehicle for outside talent. Simply put, employee options will now be given @ $24B vs. $39B, nearly a 63% discount.
This is a smart long term move by the company and continues to reinforce my beliefs of how good new Instacart CEO Fidji Simo is. Simo is constantly thinking about the big picture and has focused on creating additional revenue streams leveraging the company’s network effects.
My favorite Simo move? The companies’ massive push into ads, where the market is on fire and not enough companies are moving toward this.
Prediction: In the long run, Instacart will be just fine and Fidji Simo is a big reason why.
3. Glia’s a Unicorn
Glia announced a $45M Series D at a $1B+ valuation last week. Glia is an AI customer service company that enables agents to engage with customers over various mediums including video, voice, chat bot, and others.
My favorite feature of theirs is allowing agents to screen share and interact with clients as if they were on the same screen.
Customer service has gone from an afterthought to a major customer lifetime value creator.
There’s evidence of this trend in the attempted $14.7B acquisition of Five9, a cloud-based contact center, by Zoom a few months back; Five9 shareholders ultimately felt this price tag was too cheap!
For a while, I thought that Glia would be a great target for Zoom to try and pursue after the collapse of the Five9 deal. This would be another way to move closer to the customer service sector and leverage being the #1 video conferencing platform.
However, I don’t think this is likely after RingCentral was an investor in Glia’s Series D. Oftentimes, when a bigger company like Ringcentral invests in a smaller company in the same or similar field, they have the ability to acquire the company if another company makes an offer—something that I could definitely see being the situation here.
Prediction: RingCentral acquires Glia for $3B in early 2023.
CHART OF THE DAY
- This chart breaks down the number of deals and amount of money that Big Tech (Facebook, Amazon, Microsoft, Google, Apple) deployed in the venture space.
- 2021 saw total investment in 32 deals @ $9B, representing a 3 deal- and $3.5B-decrease year over year.
- The decrease in 2021 is likely due to COVID-induced volatility in VC markets.
What They Do: Exchange rental properties for ownership in a portfolio of homes
Amount Raised: $26M Series A
Lead Investors: a16z
The Rundown: Imagine you own four homes that you rent out. You no longer want to manage these homes, but still want the $$$. Flock is a platform that will buy your home, and you’ll receive shares in a portfolio of rental homes, as well as dividends and capital upside.
Here is yet another example of the rise of PropTech. Flock, now with the endorsement of Andreeseen, looks to be a big winner.
What They Do: Developing autonomous EVs for public transportation
Amount Raised: $25M Series A-1
Lead Investors: ABS Capital
The Rundown: Beep wants to become the autonomous EV public transportation company. The company has already made significant progress as their EVs have been tested over 20 routes in several states over the past couple years.
My one complaint: The EVs need to get a little bigger to be considered public transportation.
What They Do: Smart meters for electrical grids to optimize performance and electrical output
Amount Raised: $10M funding round
The Rundown: SparkMeter has seen success by deploying smart meters in emerging countries in Africa and Asia. The company is now looking to grow stateside by targeting smaller electrical providers with less than 500K customers.
About 70% of electricity connections have a smart meter domestically. The remaining 30% is where SparkMeter looks to leave their mark.
What They Do: Create robotic arms to clean skyscrapers
Amount Raised: $6.5M pre-Series A
Lead Investors: Skyline Standard Holdings
The Rundown: Skyline is a company looking to automate the dangerous and time-consuming practice of skyscraper window cleaning. The product named “Ozmo” uses ML to ensure the right amount of pressure is applied, taking into account the surface it is cleaning, the weather, etc.
Ozmo already has customers and now they have significant backing of investors to fuel their growth. If only I had a robot like this to help with chores growing up…
What They Do: Pet nutrition company
Amount Raised: $6M Series A
Lead Investors: Cavu Venture Partners
The Rundown: Just like we (are supposed to) take our vitamins and minerals, Native Pet is looking to bring supplements for pets into the mainstream.
The pet supplement industry is actually a lot bigger than you might think, and growing:
- 2019: $600M
- E2027: $825M
I expect this space to actually be closer to $1B by 2027 due to the massive uptick in adoption of pets, specifically dogs, over the pandemic.