Could Twitter become a WeChat style super app?; Luna collapse highlights crypto exchanges’ role as gatekeepers; Klarna plans to lay off about 10% of i

In this edition:

  1. Robinhood is buying Ziglu UK crypto startup
  2. A framework for navigating down markets: Control Your Burn [Multiples]
  3. Could Twitter become a WeChat style super app?
  4. Crypto cards are rebooting dying credit cards
  5. Y Combinator says ‘plan for the worst’
  6. Shift from sales goals to profit goals
  7. Europe’s loftiest 2021 IPOs have fallen far
  8. Luna collapse highlights crypto exchanges’ role as gatekeepers
  9. Klarna plans to lay off about 10% of its global workforce
  10. 5 key takeaways from Andreessen Horowitz’s 2022 state of the crypto report

Robinhood is buying Ziglu UK crypto startup

Robinhood has agreed to buy UK crypto company Ziglu, as the US retail brokerage steps up its expansion beyond share trading and makes a second attempt to push into Britain. The Californian company said on Tuesday that London-based Ziglu’s “impressive team of deeply experienced financial services and crypto experts [will help] accelerate our global expansion efforts”.

Ziglu, founded in 2014 by entrepreneur Mark Hipperson who helped establish UK digital lender Starling Bank, allows retail investors to buy cryptocurrencies. Robinhood did not say how much it was paying for Ziglu.

The group, which was valued at £85mn last November when it raised £7mn, said its customer base grew fourfold last year as investor enthusiasm for crypto exploded and the sector attracted more investment from mainstream financial companies.

The acquisition by Robinhood comes just over two months after the brokerage warned that the pandemic-driven retail trading boom was cooling. Shares in Robinhood have fallen more than 30 per cent this year.

The Ziglu purchase also hands Robinhood one of the few crypto groups to have won approval from the UK’s financial regulator. The Financial Conduct Authority’s registration regime, which focuses on an applicant’s money laundering controls and has been plagued by delays, has given the green light to just 33 of the more than 100 crypto companies that have applied since early last year. The regulator has put new applications on hold while it deals with the backlog.

Ziglu is the third UK crypto company with FCA approval to draw the interest of a potential buyer this year. In February, Austrian exchange Bitpanda bought Trustology. The following month, Binance announced a partnership with exchange EQONEX, which owns an FCA-registered unit, in a deal the companies said could lead to a tie-up.

The UK regulator has said that while it does not have the authority to investigate any change in ownership of registered crypto businesses before a deal is completed, it can “take steps to suspend or cancel the registration of a cryptoasset business if it is not satisfied the firm or its beneficial owner is fit and proper” following a transaction.

Robinhood said it eventually planned to integrate Ziglu and expand its operations into Europe. The deal is the first time the US brokerage has targeted the UK since it abandoned a plan to expand into the market in July 2020. The UK government earlier this month laid out plans to become a “global hub” for crypto as competition among countries to grab a share of the fast-growing but controversial industry intensifies.


A framework for navigating down markets: Control Your Burn [Multiples]

Now that you have a target ARR, how do you evaluate if your business is growing efficiently to reach it? Here we shift our focus to burn multiples, which we define as cash burned divided by net ARR added. For example, if a company burns $40M to add $10M of ARR, it would have a burn multiple of $40M/$10M, or 4.0x. Burn multiples are a metric you can evaluate every quarter, and tracking it closely can ensure you stay on plan.

Unlike other efficiency scores (e.g., LTV/CAC) that focus just on sales and marketing, actions you take across every business function will impact your burn multiple. Because it’s all encompassing, good looks different at different stages — a company at $5M of ARR will have far less operating leverage than a company with $100M of ARR. You should see a decrease over time with the objective of crossing zero as a company becomes cash flow positive.

These metrics are a helpful starting point for companies at different stages, but you should never look past the constraints of your business. If you need to add $100M of ARR with $50M of burn, you should build a plan to make sure your burn multiple is less than 0.5x.

If your burn multiple isn’t where you need it to be, there are many ways to improve your burn multiple to grow more efficiently, including right sizing different functions, improving margins, or lowering CAC. In this piece, we’re going to stay focused on our diagnostic framework, but we’ve previously covered how to use your financials to navigate market turbulence.


Could Twitter become a WeChat style super app?

Tesla CEO Elon Musk didn’t rule out that should he proceed with his Twitter acquisition, the social media platform could become sort of a super app similar to the Chinese WeChat that would also support payments.

Musk spoke during a panel hosted by Chamath Palihapitiya, Jason Calacanis, David Sacks, and David Friedberg for their “All-In” podcast.

“One of the interesting things that came up in your product roadmap was the possibility of Twitter becoming kind of a super app with payments included, maybe perhaps even dogecoin,” said All-In podcast host and panelist Jason Calacanis.

Musk agreed that WeChat is “actually a good model” to follow and is something that has to be available beyond China as well.

“If you’re in China, you kind of live on WeChat, it does everything. It’s sort of like Twitter, plus PayPal, plus a whole bunch of other things. And all rolled into one […] great interface. It’s really an excellent app.” said Musk.

According to the Tesla boss, “we don’t have anything like that outside of China,” and having such an app “would be really useful” as it would also give content creators a revenue stream, allowing them to post videos, while users will be able to leave spam-free comments.

Payments, whether it’s cryptocurrency or fiat, can make “a lot of sense” from that perspective, said Musk.

Such a super app doesn’t necessarily have to be built on Twitter, though, he stressed, as it could also be “something created from scratch.”

“It could be something new, but I think this thing needs to exist,” said the billionaire, adding that this should be a “maximally trusted and inclusive” platform where people can perform various digital tasks and important ideas are debated.

According to Musk, “we just want something that’s incredibly useful and that people love using. It does need to happen somehow.”


Crypto cards are rebooting dying credit cards

Every so often, one financial services observer or another proclaims the death of card cards. Back in April 2013, The Motley Fool, in an article titled The Slow Death of Credit Cards declared:

“Great news: Americans are giving up on one of the most ruthless destroyers of wealth the numerically challenged have ever known: credit cards. We’re more interested in debit cards these days. Old style American consumerism, one built on debt, may be coming to an end. Good riddance, credit cards.”

In December 2017, CNBC trumpeted “the age of credit cards may be coming to an end — and that’s a good thing” and added:

“You have to admit there are some problems inherent to credit cards. The most glaring of these is that credit cards often aren’t 100 percent secure. Users face issues ranging from hackers and fraud to lost and stolen cards.”

Fast forward to 2022, and large credit card issuers like Chase, Citi, and Wells Fargo are seeing strong credit card volume growth. In the first quarter of 2022, the three issuers’ volume grew 29%, 24%, and 33% year-over-year, respectively.

According to a recent consumer study from Cornerstone Advisors, 65% of Gen Zers (21 to 26 years old) and 67% of Millennials (27 to 41) have at least one credit card. Not surprising or out of line with other studies.

Is crypto boosting the credit card market?

Crypto debit cards have been in the market for a few years, but now crypto credit cards are beginning to emerge.

According to FXC Intelligence:

“Crypto cards primarily come in two types: cards that convert cryptocurrency into fiat so that it can be used to make a payment, often with additional crypto rewards, and fiat-based cards that provide crypto as a cashback reward.”

BlockFi was the first in the US market with a crypto credit card in July 2021, offering 15% cash back after a 3.5% rewards for the first three months. Gemini and Nexo launched their offerings in April 2022.

Many of the cards (both credit and debit) require cardholders to maintain a crypto balance with the issuer. With the Nexo Card, for example, cardholders use their crypto assets to open a line of credit and make purchases in fiat currencies while using their crypto holdings as collateral, according to FXC Intelligence.

Neither the Gemini or BlockFI cards charge transaction fees, but with the Nexo card, FX fees kick in after a certain amount of transactions.

The use of physical cards may decline, but there is simply too much supply and demand for credit in the market. In fact, the Nilson Report projects that credit card purchase volume in the US will grow 39% between 2021 and 2026, with outstandings increasing by 35% over the same period.


Y Combinator says ‘plan for the worst’

Here are some thoughts to consider when making your plans:

1. No one can predict how bad the economy will get, but things don’t look good.

2. The safe move is to plan for the worst. If the current situation is as bad as the last two economic downturns, the best way to prepare is to cut costs and extend your runway within the next 30 days. Your goal should be to get to Default Alive.

3. If you don’t have the runway to reach default alive and your existing investors or new investors are willing to give you more money right now (even on the same terms as your last round) you should strongly consider taking it.

4. Regardless of your ability to fundraise, it’s your responsibility to ensure your company will survive if you cannot raise money for the next 24 months.

5. Understand that the poor public market performance of tech companies significantly impacts VC investing. VCs will have a much harder time raising money and their LPs will expect more investment discipline.

As a result, during economic downturns even the top tier VC funds with a lot of money slow down their deployment of capital (lesser funds often stop investing or die). This causes less competition between funds for deals which results in lower valuations, lower round sizes, and many fewer deals completed. In these situations, investors also reserve more capital to backstop their best performing companies, which further reduces the number of new financings. This slow down will have a disproportionate impact on international companies, asset heavy companies, low margin companies, hardtech, and other companies with high burn and long time to revenue.

Note that the numbers of meetings investors take don’t decrease in proportion to the reduction in total investment. It’s easy to be fooled into thinking a fund is actively investing when it is not.

6. For those of you who have started your company within the last 5 years, question what you believe to be the normal fundraising environment. Your fundraising experience was most likely not normal and future fundraises will be much more difficult.

7. If you are post Series A and pre-product market fit, don’t expect another round to happen at all until you have obviously hit product market fit. If you are pre-series A, the Series A Milestones we publish here might even turn out to be a bit too low.

8. If your plan is to raise money in the next 6–12 months, you might be raising at the peak of the downturn. Remember that your chances of success are extremely low even if your company is doing well. We recommend you change your plan.

9. Remember that many of your competitors will not plan well, maintain high burn, and only figure out they are screwed when they try to raise their next round. You can often pick up significant market share in an economic downturn by just staying alive.

10. For more thoughts watch this video we’ve created: Save Your Startup during an Economic Downturn

Shift from sales goals to profit goals

Product profitability is an equation of cost, price and demand — and, crucially, where the product is in its life cycle.

Sell low, sell more. Enticing as that thought might seem, sales expansion often occurs at the expense of profits. Managers of direct-sale products are thus faced with the dilemma of leaving money on the table by pricing too low or risking market rejection by pricing too high.

Challenges for product teams

Outside of the cost/price equation, product managers face a range of environmental challenges as they seek to price products profitably.

These include:

Balancing cost and price models in light of perceived product value and competitive offerings; as customer loyalty builds over time, there are opportunities to increase the price, but timing is critical.

Expanding product offerings to capture higher price points while maintaining revenue growth.

Finding the price for optimal profitability without losing customers to the (cheaper) competition.

Getting adequate say in pricing decisions (many product teams are involved in pricing but don’t cast the deciding vote).

The first imperative, then, is to shift the focus of the product marketing organization to profit improvement, especially since a disconnect has long existed between pricing strategy and financial objectives. In the 2019 Gartner Annual Product Management Survey, for example, respondents cited sales, profit and loss as the most-used metrics for measuring the performance of a business unit in the product management organization. And yet a minority ranked “achieving financial objectives of the product and service” in their top three metrics.

As a product manager, you have two main options when prioritizing profits: One, set a target return objective; two, set a profit maximization objective.

In setting a target return, set a specific profit margin — for example, 15% on sales or capital investment. The target return depends on several internal and external factors, such as industry, organization size, competitive situation and corporate culture. Ultimately, however, profitability is determined by a robust pricing strategy and tight cost control.

Setting a goal to maximize profit can be a little less fixed. Even so, express it in a time-specific manner, such as “charge the highest possible price to maximize profits during the first two phases of the product life cycle” or “generate a return on investment in the shortest possible time frame.” That doesn’t mean it’s synonymous with exorbitantly high prices, especially in highly competitive or alternative markets.

There are distinct pricing strategies at each stage, reflecting the decision-making process of “maintain, refresh or retire” as a product matures toward the end of its life.

By using this approach, you can optimize your tactics dynamically to maximize profitability at each stage.


Europe’s loftiest 2021 IPOs have fallen far

When the IPO window was wide open last year, venture-backed companies in Europe and the U.K. used the opportunity to launch a spree of big public offerings. At least 15 made market debuts with initial public valuations of over $1 billion and as much as $11 billion.

Now, the overwhelming majority of these deals are trading far below their initial offer prices. A sample of the largest have collectively seen market capitalizations fall by over 55 percent.

Some of the worst performers are prominent names. This includes food delivery service Deliveroo (down 75 percent from initial offer price), used car marketplace Cazoo (down 87 percent) and digital health provider Babylon (down 88 percent).

However, established brands aren’t the only ones who’ve seen sharp declines. The chart below compares valuations for 15 companies with 2021 IPOs at the initial offer price and current levels. As you can see, all but one — cybersecurity provider Darktrace — are flat or down.

Companies that took the SPAC route to market are some of the worst performers. This is by no means a European or U.K. phenomenon, as venture-backed companies that went public via mergers with special-purpose acquisition companies have broadly posted big drops.

But U.K. and European companies haven’t been immune. SPAC merger companies that have posted poor post-debut performance include Cazoo, Babylon, and electric aircraft maker Lilium.

Dismal aftermarket performance of 2021 IPOs has contributed to a paucity of companies in the region hitting the market this year. The pace of new IPO filings, SPAC deals and market debuts has slowed to a crawl in recent months.

This year’s slowdown follows a period of record venture funding to U.K. and European startups. Funding to European startups showed unprecedented growth in 2021, Crunchbase numbers show, with $116 billion invested, up 159 percent from 2020.


Luna collapse highlights crypto exchanges’ role as gatekeepers

The $40bn collapse last week of popular crypto token Luna underscores the crucial role exchanges play as gatekeepers that rule on which digital assets are readily available to mainstream traders.

Major exchanges, including Coinbase, Binance, OKX and, which previously let their customers buy Terra or linked tokens, halted trading during the crisis.

The first port of call for many novice crypto investors are mainstream exchanges such as Binance and Coinbase that say they vet tokens before they are made available to their millions of users.

“It’s true that we are listing more and more assets than we ever have before,” said Paul Grewal, chief legal officer of Coinbase, during an interview in April.

Grewal said Coinbase rejected “many, many more assets” than it approved. In March, it added 24 new assets for trading out of 160 that applied for consideration, he said.

Traders’ enthusiasm to access the latest popular token places pressure on exchanges to list more assets. Exchanges’ decisions also wield huge influence over which tokens gain traction. New listings on Coinbase often spike in price as more traders gain access to the tokens, a pattern that some analysts have called the “Coinbase effect”.

Most jurisdictions have little if any legal standards on what crypto tokens can be publicly listed for regular people to trade, so exchanges serve a key role in scrutinising coins.

James Kaufmann, partner at law firm Howard Kennedy, said regulation provides stock exchanges with a clear set of listing criteria to enforce, whereas crypto markets operate on the basis of “buyer beware”.

Binance chief executive Changpeng Zhao has said he would like to see regulators provide guidelines on token listings. But so far the world’s largest exchange has relied on “crowd intelligence” to decide which coins to list, he said in an interview in March.

The scrutiny on what standards exchanges apply when they decide to list a coin comes as the strategy of adding more coins to drive growth shows signs of faltering. Buying and selling in smaller tokens helped fuel a sevenfold increase in trading volume on Coinbase last year.

However, trading in what the exchange calls “other crypto” fell by more than half in the first quarter, down from greater than $370bn in the last three months of last year, according to Financial Times calculations. The category includes tokens other than bitcoin and ether, which did not suffer similarly large declines in trading.

Coinbase CEO Brian Armstrong said last month the platform planned to create a system for users to rate and review new digital assets, similar to product reviews on Airbnb or Amazon. Coinbase thinks the system can “help create additional consumer protections in crypto”, he said.


Klarna plans to lay off about 10% of its global workforce

Sebastian Siemiatkowski, Klarna’s CEO and co-founder, made the announcement to his employees in a pre-recorded video message Monday. The “vast majority” of Klarna employees won’t be affected by the measures, he said, however some “will be informed that we cannot offer you a role in the new organization.”

“When we set our business plans for 2022 in the autumn of last year, it was a very different world than the one we are in today,” Siemiatkowski said.

The Swedish payments giant currently has more than 6,500 employees globally.

Buy now, pay later companies like Klarna’s, which allow shoppers to spread the cost of purchases over a series of interest-free installments, became wildly popular as online shopping accelerated during the Covid pandemic.

But investors are getting worried about the sustainability of the sector’s growth as consumers tighten their purse strings amid rising inflation and an increase in borrowing costs. Affirm, the biggest BNPL provider in the U.S., has lost nearly three quarters of its stock market value since the start of the year.

The layoff announcement comes after media reports last week said Klarna is set to lose a third of its market value in a new round of funding. The privately held company was last valued at $46 billion in an investment led by SoftBank.

A Klarna spokesperson said the company doesn’t comment on market speculation.

Siemiatkowski said Klarna’s decision to reduce staffing numbers was one of the “hardest” decisions in the company’s history, but that it was necessary to stay “laser-focused on what really will make us successful going forward.”

“While crucial to stay calm in stormy weather, it’s also crucial not to turn a blind eye to reality,” he said.

“What we are seeing now in the world is not temporary or short-lived, and hence we need to act.”

Many tech companies that flourished during the Covid pandemic are now taking steps to cut down on costs as investors sour on the sector due to concerns over rising interest rates and declining market liquidity. Facebook parent Meta and Uber are among the companies slowing hiring, while Netflix and @Robinhood have announced job cuts.


5 key takeaways from Andreessen Horowitz’s 2022 state of the crypto report

#1 We’re in the middle of the fourth ‘price-innovation’ cycle

Markets are seasonal; crypto is no exception. Although crypto can be volatile and its cycles seem chaotic, there is an underlying logic at work, as Chris and Eddy first pointed out in 2020. (See slides 9 through 12) Whereas prices are often a lagging indicator of performance in some industries, in crypto they are a leading indicator. Prices are a hook. The numbers drive interest, which drives ideas and activity, which in turn drives innovation. We call this feedback loop “the price-innovation cycle”, and it has been the engine that has propelled the industry through multiple distinct waves since Bitcoin’s inception in 2009.

#2 web3 is much, much better for creators than web2

The take-rates of web2 giants are extortionate; web3 platforms offer fairer economic terms. (See slide 39 in the deck.) Compare Meta’s nearly 100% take-rates across Facebook and Instagram to NFT marketplace OpenSea’s 2.5%. The numbers are telling even though it’s still early. In 2021, primary sales of Ethereum-based NFTs (ERC-721 and ERC-1155), plus the royalties paid to creators from secondary sales on OpenSea, yielded a total of $3.9 billion. That’s quadruple the $1 billion — less than 1% of revenues — that Meta has earmarked for creators through 2022.

#3 Crypto is having a real-world impact

Creator payouts are just one example of crypto’s benefits; there are many others.

Consider the financial system. The status quo has failed many people: More than 1.7 billion people don’t have bank accounts, per The World Bank Bank. Demand for decentralized finance or DeFi, and digital dollars, has increased dramatically in the past few years, even after accounting for the recent downturn, as the accompanying slides show. (See slides 26, 28, and 33.) For underserved and unbanked populations — 1 billion of whom have mobile phones — crypto offers a shot at financial inclusion. Projects like Goldfinch are expanding access to capital that would otherwise be unavailable in emerging markets.

4. Ethereum is the clear leader, but faces competition

Ethereum dominates the web3 conversation, but there are plenty of other blockchains now too. Developers of blockchains like Solana, Polygon, BNB Chain, Avalanche, and Fantom are angling for similar success. (See slides 15 and 27)

5. Yes, it’s still early

While it’s hard to know the exact number of web3 users, we can reason about the scale of the movement. We estimate there are somewhere between seven million and 50 million active Ethereum users today, based on various on-chain metrics. (See slide 54.)

Analogizing to the early commercial internet, that puts us somewhere circa 1995 in terms of development. The internet reached 1 billion users by 2005 — incidentally, right around the time web2 started taking shape amid the founding of future giants such as Facebook and YouTube.



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