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Evan Xie
Don’t Drive Off the Cliff: Use Your Cash to Your Advantage
Spencer Rascoff
andSpencer Rascoff serves as executive chairman of dot.LA. He is an entrepreneur and company leader who co-founded Zillow, Hotwire, dot.LA, Pacaso and Supernova, and who served as Zillow's CEO for a decade. During Spencer's time as CEO, Zillow won dozens of "best places to work" awards as it grew to over 4,500 employees, $3 billion in revenue, and $10 billion in market capitalization. Prior to Zillow, Spencer co-founded and was VP Corporate Development of Hotwire, which was sold to Expedia for $685 million in 2003. Through his startup studio and venture capital firm, 75 & Sunny, Spencer is an active angel investor in over 100 companies and is incubating several more.
Wil Chockley
WIl Chockley is a partner at 75 & Sunny, where he evaluates potential investment opportunities across sectors and works with founders to build their strategy and execute on their vision.
What’s the best way to land a plane on a short runway? Maintain control of your descent. The same logic holds for early- to mid-stage startups that are facing harsh financial conditions in 2023. Research from the end of last year found that 81% of early stage start-ups have less than 12 months of runway left. Yikes. Pair that with the current post-SVB venture investment freeze, and it paints a stark picture of what’s ahead.
A huge number of companies are going to be scrambling to find the emergency exit this year, as macro conditions make growth more challenging, and a dearth of venture capital means you need to move more quickly than ever.
If you’ve been grinding on your startup for years and haven’t found product/market fit, you have a critical decision to make now that capital is hard to come by.
You can keep doing what you’ve been doing, pivoting and hoping to find product/market fit. Eventually you’ll need a new source of capital to keep the lights on or a strategic acquirer when you’re at the end of your runway. You could also shut down the company and return cash to your shareholders. There is another option, though. You can flip your mindset and think like an investor to give yourself a more graceful landing.
Imagine, for example, a Series B stage startup with $20 million of cash, but burning $2 million a month. The company has 10 months of runway, is not likely to be able to raise a Series C, and does not yet have a path to profitability with its current business model. Instead of continuing with the current path and driving off the cliff when the 10 months are up, the company might consider cutting burn to almost zero, and sitting with its $20 million of cash.
In this hypothetical scenario, the startup could then try to find another company to merge with, providing its intellectual property, its user base, whatever team members remain, and most importantly its cash, as consideration (and leverage) in the merger. The $20 million of cash is something other companies want desperately in today’s market. Rather than driving off a cliff into a complete winddown or a small acquihire, this company could end up owning 25% of some other company, providing a clear path forward and a real chance at redefined success.
If you find resonance in this cautionary tale, remember: there are a lot of great potential acquirers out there who have found product/market fit and are scaling rapidly, but still can’t raise a venture round in today’s economic climate. These companies are looking for cash wherever they can find it. Said another way, they might have product/market fit but not enough cash, and you have cash but no product/market fit. Seems like a decent marriage, right?
If you’re a founder with cash on your balance sheet but no path forward, you have a unique opportunity to think of yourself as a venture capitalist and “invest” your company’s cash and equity into a new business.
So how do you do this? The key is to move fast and preserve your cash.
- Bring in the board. Have a frank discussion with your board and lead investors to decide if it’s time to call it quits. Most investors have seen a number of companies wind down or go through M&A exits, so they can be a great sounding board as you chart a path forward. They can also be great leads for potential acquirers and facilitate introductions.
- Slim down. In order to preserve your greatest asset—your cash—you unfortunately need to reduce burn everywhere you can including marketing, software spend, and headcount. Ideally, your ongoing costs should be minimal.
- Make a list. Think of all the companies in your space who could see acquiring your company as a good strategic move. Who do you respect most in your industry? Are they in a position to grow, and could this move turbocharge that growth? Who might benefit from the expertise on your team?
- Start the conversation. Once you’ve brainstormed, mine your contacts for warm intros and begin talking about your collective options. The M&A process can take a long time, so the sooner you get moving, the better.
- Negotiate terms and make your decision. Once you nail down the options, it’s up to you to decide whether or not a deal is the right move. Hopefully you can work with your acquirer and your investor base to find a good outcome for everyone involved.
If your startup is one of the many with cash in the bank but without a clear path to a next financing round, don’t panic. Now could be the chance to reimagine your best case scenario—invest your cash to find a new home for your company.
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Spencer Rascoff
Spencer Rascoff serves as executive chairman of dot.LA. He is an entrepreneur and company leader who co-founded Zillow, Hotwire, dot.LA, Pacaso and Supernova, and who served as Zillow's CEO for a decade. During Spencer's time as CEO, Zillow won dozens of "best places to work" awards as it grew to over 4,500 employees, $3 billion in revenue, and $10 billion in market capitalization. Prior to Zillow, Spencer co-founded and was VP Corporate Development of Hotwire, which was sold to Expedia for $685 million in 2003. Through his startup studio and venture capital firm, 75 & Sunny, Spencer is an active angel investor in over 100 companies and is incubating several more.
Wil Chockley
WIl Chockley is a partner at 75 & Sunny, where he evaluates potential investment opportunities across sectors and works with founders to build their strategy and execute on their vision.
https://twitter.com/spencerrascoff
https://www.linkedin.com/in/spencerrascoff/
admin@dot.la
Here's How To Get a Digital License Plate In California
03:49 PM | October 14, 2022
Photo by Clayton Cardinalli on Unsplash
Thanks to a new bill passed on October 5, California drivers now have the choice to chuck their traditional metal license plates and replace them with digital ones.
The plates are referred to as “Rplate” and were developed by Sacramento-based Reviver. A news release on Reviver’s website that accompanied the bill’s passage states that there are “two device options enabling vehicle owners to connect their vehicle with a suite of services including in-app registration renewal, visual personalization, vehicle location services and security features such as easily reporting a vehicle as stolen.”
Reviver Auto Current and Future CapabilitiesFrom Youtube
There are wired (connected to and powered by a vehicle’s electrical system) and battery-powered options, and drivers can choose to pay for their plates monthly or annually. Four-year agreements for battery-powered plates begin at $19.95 a month or $215.40 yearly. Commercial vehicles will pay $275.40 each year for wired plates. A two-year agreement for wired plates costs $24.95 per month. Drivers can choose to install their plates, but on its website, Reviver offers professional installation for $150.
A pilot digital plate program was launched in 2018, and according to the Los Angeles Times, there were 175,000 participants. The new bill ensures all 27 million California drivers can elect to get a digital plate of their own.
California is the third state after Arizona and Michigan to offer digital plates to all drivers, while Texas currently only provides the digital option for commercial vehicles. In July 2022, Deseret News reported that Colorado might also offer the option. They have several advantages over the classic metal plates as well—as the L.A. Times notes, digital plates will streamline registration renewals and reduce time spent at the DMV. They also have light and dark modes, according to Reviver’s website. Thanks to an accompanying app, they act as additional vehicle security, alerting drivers to unexpected vehicle movements and providing a method to report stolen vehicles.
As part of the new digital plate program, Reviver touts its products’ connectivity, stating that in addition to Bluetooth capabilities, digital plates have “national 5G network connectivity and stability.” But don’t worry—the same plates purportedly protect owner privacy with cloud support and encrypted software updates.
5 Reasons to avoid the digital license plate | Ride TechFrom Youtube
After the Rplate pilot program was announced four years ago, some raised questions about just how good an idea digital plates might be. Reviver and others who support switching to digital emphasize personalization, efficient DMV operations and connectivity. However, a 2018 post published by Sophos’s Naked Security blog pointed out that “the plates could be as susceptible to hacking as other wireless and IoT technologies,” noting that everyday “objects – things like kettles, TVs, and baby monitors – are getting connected to the internet with elementary security flaws still in place.”
To that end, a May 2018 syndicated New York Times news service article about digital plates quoted the Electronic Frontier Foundation (EFF), which warned that such a device could be a “‘honeypot of data,’ recording the drivers’ trips to the grocery store, or to a protest, or to an abortion clinic.”
For now, Rplates are another option in addition to old-fashioned metal, and many are likely to opt out due to cost alone. If you decide to go the digital route, however, it helps if you know what you could be getting yourself into.
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Steve Huff
Steve Huff is an Editor and Reporter at dot.LA. Steve was previously managing editor for The Metaverse Post and before that deputy digital editor for Maxim magazine. He has written for Inside Hook, Observer and New York Mag. Steve is the author of two official tie-ins books for AMC’s hit “Breaking Bad” prequel, “Better Call Saul.” He’s also a classically-trained tenor and has performed with opera companies and orchestras all over the Eastern U.S. He lives in the greater Boston metro area with his wife, educator Dr. Dana Huff.
steve@dot.la
What Does a TikTok Ban Mean for the Company’s LA Workforce?
05:00 AM | March 22, 2023
Evan Xie
From mass layoffs to the rocky economic climate, tech workers have had a rough few months. TikTok hasn’t been immune to these issues. In July, the company laid off about 100 employees across the globe, and then cut at least 20 advertising employees one month later. In January, TikTok cut a handful of people from its HR department over the team’s “limited practical value” to the company.
But TikTok also faces a problem different from any of its competitors—the US government is assessing whether or not its platform should be banned from the country. Leaving TikTok’s current 32,000 headcount in jeopardy of mass layoffs.
Though the company’s Chinese ownership is at the root of its political dispute, TikTok’s US headquarters are in Culver City. First opened in January 2020 with 400 employees, the location brought employees back to the office twice a week in July 2022. TikTok has not released information about how many employees work out of LA, but its Mountain View office houses roughly 1,000 employees. LinkedIn lists around 1,000 LA-based employees, but that number is slightly muddled by influencers listing TikTok as their employer. Offices in New York City, Austin and Nashville round out its US footprint.
Of course, TikTok could still be bought out by another company. But it's unclear what company would pay TikTok’s fee, which ranges from $40 billion to $100 billion. Experts have noted that major tech companies like Google and Meta already run their own social media platforms, so buying a competitor would open them up to antitrust scrutiny.
Others point to Microsoft and Oracle as potential buyers. But both companies have undergone recent layoffs this year, which brings into question how many TikTok employees would be kept aboard. Microsoft has also funneled $10 billion into OpenAI, which means the company might not be interested in diverting funds to a social media platform. Whoever the new owner is, the company could potentially scrap TikTok’s Culver City office, leaving a gaping hole in LA’s tech scene.
Still, any TikTok employee who survives a potential sale may benefit from a change in ownership. Even before the company was under political fire, TikTok faced scrutiny for cultural differences between its Chinese owner and its US offices. Last year, multiple employees across the country spoke out about being pressured to adhere to China’s “996 policy,” which has employees work 9 a.m. to 9 p.m., six days a week. Its content moderates have revealed taxing work environments that exposed them to graphic content. And even high-level executives have struggled as TikTok’s parent company, ByteDance, maintained decision-making authority.
If Congress does vote to ban TikTok, that could leave thousands of employees across the country in search of new jobs. And it couldn’t come at a more difficult time. Meta, Snapchat and Twitch, among other social media companies, have all had mass layoffs in the past few months. Which means there’s already a pool of unemployed tech workers in search of work, a number of whom have decidedly turned to other fields.
It’s unclear what the long-term timeline of the TikTok ban looks like and when the government’s ultimate decision will hit employees. But LA’s tech scene might need to brace itself for a mass wave of employees seeking a new home. And this time, they won’t have TikTok to document their employment woes.
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Kristin Snyder
Kristin Snyder is dot.LA's 2022/23 Editorial Fellow. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.
https://twitter.com/ksnyder_db
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