Turns Out Private Companies Like Being Private

Destiny gets some news coverage. Apple ad outrage. TikTok sues.

We learned this the medium way. I wouldn’t say the “easy” way, because we started to try and there was some pain and we stopped. This was the medium way. We didn’t push all the way to learning the “hard” way. Seems like Destiny, the now publicly traded private startup fund (the problem is in the sentence), will learn the hard way. Retail probably ends up holding the bag. As is tradition.

Also, the Apple ad sparks “outrage” and TikTok sues the United States (called it).

Make sure to RSVP to our Supernova Demo Day tomorrow at 3pm EST if you haven’t already! Midas List panelist + 3 exciting founders among other fun things.

Tensions Rise in Silicon Valley Over Sales of Start-Up Stocks

“The market for private company stocks, also known as the secondary market, is on track to hit a record $64 billion this year, up 40 percent from last year, according to Sacra, a research firm focused on private investments.”

Apple's 'Crush' iPad Pro ad sparks intense backlash from creatives

“Since that debut during the event, Apple's Tim Cook tweeted a link to it — and started a backlash. At time of writing, there are over 2,500 comments to his tweet and while many are about iPad details, most are expressing abhorrence at the ad.”

TikTok sues U.S. government, saying potential ban violates First Amendment

“TikTok is suing the U.S. government to stop enforcement of a bill passed last month that seeks to force the app’s Chinese owner to sell the app or have it banned.”

Hot Links

TOMORROW: Supernova x Sandhill Demo Day

​Demo Day is back (again) and we're partnering with Supernova to make it happen!

Supernova helps founders game startup success by stacking their advisory board with successfully exited founders.

​​Tune in live on Thursday, May 9th to watch several of top startups and scaleups from their portfolio present what they're building to a panel of experienced investors and timely opportunities for you to join forces with superstars!

​Our featured panelists include:

Christopher Staley, Co-founder at Supernova (150+ Exited Founders Mentoring Startups/Scaleups as All-Star Advisory Boards). Founding Partner of Opopop w/ Jonas Temple (co-founder of Beats by Dre acquired by Apple). Former Head of Investments at Fuel VC ($250mm+ fund).

Tim Chang, Founding Partner at Mayfield. Top 100 VCs in the World (2x named on Midas List). Led Mayfield's investments in MOAT (acquired by Oracle), Basis (acquired by Intel), Fitmob (acquired by Classpass), Tonal Fitness, Grove Collaborative (NYSE: GROV).

Daniel Dubois, 2x Exited Founder. Started EO & YPO Angels (now Entreprenuers Capital). Partner at Side Door Ventures ($100mm fund), and Series A Fund in partnership with Gaingels ($800mm+ deployed).

New Diligence Checklist Item: Make sure this group isn’t laughing at you.

Letters From The Editor

Misc. (short for miscellaneous)

Learning the hard way

The best thing you can say about Destiny is that they’re pushing the limits of what’s possible in private markets. The worst thing you could say is that they’re taking advantage of retail investors. The answer is probably somewhere in between.

Some things we learned along the way (stonks, sandhill, etc.):

To launch something like Destiny you have to actively say “fuck you” to the leadership of private companies. Typically, it’s hard to build positive business relationships with people that you say “fuck you” to. (we decided not to say "fuck you” btw)

Private companies - in the case of the big ones everyone talks about / cares about - are private on purpose. You’re not “helping them” by giving retail investors access. If they need help, they will ask for it. If they want to give access to retail investors (go public), they will.

Liquidity in private markets isn’t as “unsolved” as the internet/media make it out to be. It’s as much of a feature as it is a bug in most cases. The best companies have plenty of liquidity because everyone wants to own shares in the best companies. People typically don’t want to sell shares in the best companies, which can be the main bottleneck.

Some things the Destiny drama / the NYT article brings up in my brain:

The current retail premium looks like it’s 3x NAV. Meaning, the markup you can get by taking a basket of private companies and selling it to unaccredited investors is 3x. You can take $1 of name brand startup stock and sell it for $3. I wonder if this applies more broadly. You could think about this as a “wholesale margin” - you buy in bulk and cut it up into little pieces to sell at a profit - but that’s an overly nice way to look at it.

Either way, it’s interesting. It’s also a hilarious example of what everyone already knew about public markets: The current price probably doesn’t have much to do (if anything at all) with fundamentals. In the long-term it does, but not on a day to day basis.

Speaking of the long term, I don’t see this ending well for Destiny or any long-term holders of the shares. As noted previously, saying “fuck you” is a hard way to start an enduring partnership. In this case, Stripe/Plaid said “hey don’t do that” and Destiny effectively said “fuck you” and did it anyway - so yeah, not a great start.

The last thing I’ll get off my chest here is that the fight to serve the “retail investor” for honorable reasons is increasingly sketchy. The honest truth of it is that if you don’t make more than $200k per year (accredited investor threshold) you don’t need to own incredibly risky startup stock.

Is it wrong for the government to tell people what they should or shouldn’t own? Is the guise of consumer protection mostly a joke? Totally separate convo (you can probably sense my tone there, which is my personal opinion).

In that same vein of telling people what to do - I think it’s wrong to tell a private company that they need to sell there shares to people they don’t want to sell them to. I also think it’s fair for private companies to do what they can to control who does or doesn’t own their shares. Because, you know, they’re private.

End of rant. Probably worth a panel.

Talk soon,

PS - Do you want to sponsor this newsletter or an upcoming live event? Reply to this email and/or shoot a note to [email protected] to learn more.