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Sizzle/Fizzle: Blockchain Babies And Bird VC

Snapchat’s Sizzly Fizzle, or Fizzly Sizzle 

Usually in this column the sizzles and the fizzles are pretty distinct. But every so often there’s a player that managed to do a little of both at the same time, and this was one of those weeks. The player: Snap Inc.

The news out of Snap for the last seven or so days has been a mixed bag.

In short: Snap is beloved, often imitated but also kind of broke. How big a deal that last one is — and what’s next for Snap Inc. — are both unknowns that make its Sizzle/Fizzle status hard to assign.

In fairness to Snapchat, they’re doing a bit better than broke — though not as good as they would like to be doing. According to reports in The Information, Snap Inc. is going to need an infusion of dollars, and probably soon. The firm torched through $1.1 billion in five quarters, not counting acquisitions — just good, old-fashioned operational costs.

Given that burn rate, it seems likely that Snap will need an infusion of funds fairly soon; a securities filing in early May strongly indicates that Snap might soon be trying to raise those funds with a sale of shares or debt. Selling shares could be a challenge, given that Snap’s share price has not exactly been a growing concern. The firm is currently trading at 32 percent below its initial public offering (IPO) price.

Equity sales post-IPO are not uncommon — equity sales when the stock price is tanking, on the other hand, don’t happen all that often. And Snap’s performance is against trend for internet firms — Facebook, Twitter and Google have all gained ground in the market in the last year.

Borrowing is an option, but it’s an expensive one as interest rates are climbing.

Snap’s best bet might be an investor or even possibly a buyer.

That has tons of fizzle.

However, when one starts to look at the investor buyer list, the sound of sizzle can be heard in the distance.

Tencent, The Information opines, might be the best choice, as it is already an investor and is already preliminarily interested. They are also likely the best possible investor in Snap — as the owner-operator of WeChat and WeChatPay, Tencent is the world’s leading experts at monetizing a chat platform.

Apple was also pinned as a possible investor buyer, given its massive cash reserves and vested interest in its own chat platform. But The Information noted, Snap could actually be a good fit for any of the world’s growing tech behemoths — particularly any firm with a vested interest in holding off Facebook.

As a second sizzly point in Snap’s favor, the firm continues to come up with good ideas that other players continue to borrow. Facebook-owned Instagram has managed to grow much more quickly than Snap of late, and some of that strength comes from features it has borrowed from Snap over the last two years. As of this week, Facebook is launching another Snap-inspired idea: a video hub for Instagram that sounds an awful lot like Snap Discover. And while Facebook shopping the Snapchat catalog for good ideas is not exactly uncommon, they weren’t the only ones being highlighted this week. Google has rolled out a new confidential mode for Gmail that allows users to set a date by which their email message will simply disappear.

Just like a Snap message.

And while the Snap leadership team has been incredibly quiet about the firm, particularly regarding its long-term cash needs, they have, according to reports, kept their focus on new product offerings as they maintain that’s the best way to get Snapchat back on the right track.

Snap’s user base remains loyal, particularly dominant among teenagers. Some analysts, despite the fact that Snapchat is desirable for an acquisition, are relatively unconcerned about the firm’s cash needs.

Snap has moved toward cost-cutting and consolidation in the last year, and increasing revenue generation could push off some of the cash pressures, so long as the revenue growth did not cause an explosion in costs.

So, what’s next: big sizzle or crashing fizzle?

It’s hard to call from the outside. It is notable that CEO Evan Spiegel, known for turning down a multibillion-dollar offer from Facebook a few years ago, has been noncommittal of late about whether he’d be open to selling the company, saying only that he had a fiduciary duty consider it.

Whether he has to consider it more seriously — now or in the not too distant future — remains to be seen, and the outcome there could determine whether Snap is going to be a social media star that sizzles or an almost-was that ultimately fizzled.

For this week, it seems, they have mostly split the difference.

 

Sizzle

Last mile: The last mile is evolving, bit by bit, or bit by byte beyond paper, invoices and email back and forth. And one way technology can help wring costs out of the system? Mastercard is linking up with Stargo, helping to automate freight forwarding from the initial request for quotes to settled payments. Faster payments, sure, and guaranteed payments, even better. The last mile may seem a bit shorter.

Blockchain babies: Immutable ledger. Immutable cuteness and a bit of goo-goo-ga-ga to (baby) boot. The linkup between AID:Tech and PharmAccess Foundation means that digital identities and blockchain technology come together to track new entrants into the world and ensure they get aid and government services to which they are entitled.

Scooters: To paraphrase an old maxim, to the swiftest goes the (VC) race? News came this week that electric scooter startup Bird has raised $200 million, which, in turn, brings its implied valuation to around $1 billion. Download an app, unlock a scooter and Bird’s the word. Who said unicorns don’t have wings?

 

Fizzle

Alphabet: A red letter day for Alphabet in the legal realm. Many observers are looking at the $11 billon fine that is the maximum penalty that the EU can levy over findings of antitrust behavior tied to Android. But beyond that monetary penalty are issues tied to the firm’s very business model. The possibilities of a breakup of the company’s disparate business units are very much out there too.

CFPB’s advisory board: Talk about decimating the ranks. Acting director Mick Mulvaney has effectively dismissed all 25 members of the financial watchdog’s advisory panel, with a notice by conference call that the board would not meet again until new members are appointed.

BanksAnd you thought it was just Wells Fargo: The Office of the Comptroller of the Currency looked at 40 banks, of the large and mid-sized variety, and found systemic problems (some of which the FIs scrambled to address and the OCC said those actions were sufficient redress) – such as opening accounts without consumer permission.

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