VBT Newsletter

September 27th

Good morning!

This edition features:

  • A South Florida company armed with new tech is taking on Hollywood

  • The Elizabeth Holmes trial sparks a new Silicon Valley debate

  • China bans crypto …. again

  • As investors pivot to Seed and Growth, who is left leading Series As?

  • And U.S. cargo delays are getting worse

It’s Monday, September 27, 2021.

1. South Florida Tech

BrandStar spends millions on tech to rival California production studios (Miami Inno)

BrandStar Studios is creating a next-generation film and television production facility in South Florida. The company, a division of the marketing agency BrandStar, announced it made a "multimillion-dollar" investment in new tech to bring XR, AR, and MR capabilities to its 43,000-square-foot production studio in Pompano Beach.

The upgrade includes the implementation of Unreal Engine software, a 3D creation platform developed for video games that is now being adopted by the film and television industry. The software enables BrandStar Studios to create all-encompassing virtual settings for its productions.

BrandStar Studios hired a team of Unreal Engine CGI artists to develop photo-realistic virtual environments that can be used for movie and film sets, music videos, and commercials. The studio currently produces shows that air on Lifetime Television, Bloomberg, Fox Business, and more.

2. U.S. v. Holmes

The Elizabeth Holmes trial sparks a Silicon Valley debate: Why not other tech CEOS? (NPR)

Selling an idea in Silicon Valley takes not only a grand vision but also swagger and bluster, says Margaret O'Mara, a historian of the tech industry. "Being able to tell a good story is part of being a successful founder, being able to persuade investors to put money into your company," she said. And Elizabeth Holmes, the former CEO of Theranos, did just that.

Now in Silicon Valley, her trial has launched a debate: Since Holmes followed a playbook used by dozens of tech CEOs, why is she the only one to face prosecution when a company collapses in scandal? To Ellen Pao, former CEO of Reddit, sexism is partially to blame. "When you see which CEOs get to continue to wreak havoc on consumers and the market, it's people who look like the venture capitalists, who are mostly white men."

She points to Adam Neumann, who drove WeWork into the ground; former Uber CEO Travis Kalanick, who resigned after a sexual harassment scandal; and Juul's Kevin Burns, who stepped down amid questions over the company's role in stoking the youth vaping epidemic. There were lawsuits, settlements, and more fallout — but as Pao points out, no prosecutions.

Pao was not defending Holmes' actions. She said prosecutors should have charged Holmes, but Pao wants a broader discussion in Silicon Valley about why other CEOs accused of wrongdoing have not faced criminal consequences. "Why aren't we holding other people accountable so we can avoid all the harm that is happening in the tech industry?" she asked.

3. Crypto

China’s central bank says all cryptocurrency-related activities are illegal, vows harsh crackdown (CNBC)

China’s central bank renewed its tough talk on bitcoin Friday, calling all digital currency activities illegal and vowing to crack down on the market. The People’s Bank of China said services offering trading, order matching, token issuance, and derivatives are strictly prohibited. Overseas crypto exchanges providing services in mainland China are also illegal.

The PBOC said it has also improved its systems to step up monitoring of crypto-related transactions and root out speculative investing. The price of bitcoin sank over 6.5% in 24 hours, last trading at around $44,147 as of 08:30 in Tel Aviv today. Ethereum, the second-largest digital asset, fell 9% to around $2,867 over the weekend.

It’s not the first time China has gotten tough on cryptocurrencies. Earlier this year, Beijing announced a crackdown on crypto mining. That led to a sharp slump in bitcoin’s processing power, as multiple miners took their equipment offline. The PBOC also ordered banks and nonbank payment institutions like Ant Group not to provide services related to crypto.

China’s crypto crackdown comes as Beijing is looking to fulfill its climate targets. The country is the world’s biggest carbon emitter and has set out to become carbon neutral by 2060. The PBOC is also working on its own digital currency. China is seen as a leading contender in the race toward central bank-issued digital currencies, having tried out a virtual version of the yuan in several regions.

4. VC

As investors pivot to Seed and Growth, who is let leading Series A? (Crunchbase)

Over the past decade, the average global Series A round increased from less than $6 million to more than $18 million. The median has grown from $3 million to $10 million over the same time period.

Raising a Series A funding round has become a high bar for startups to clear. Over the last decade, we have seen an expansion in fund managers at seed, alongside the early-stage funds that used to focus at Series A, repositioning to seed. Given these changes in the venture landscape, who is investing at Series A?

Crunchbase looked at leading investors at Series A in both 2021 and 2020 to get a sense of how the venture climate has shifted in just over a year. What we found: Insight Partners, Andreessen Horowitz, and Tiger Global have invested the most dollars at Series A in 2021 to date. 

The most active firms at Series A today are multistage venture firms with deep pockets, along with some newer entrants from growth equity firms. But when reviewing year-over-year deals for leading firms, not every firm saw an increase in average or median size in 2021. This confirms that at Series A, there are still a wide range of deal sizes to be done — and opportunities. 

5. Supply Chain

Cargo delays are getting worse, but California ports still rest on weekends (The Wall Street Journal)

Nike doesn’t have enough sneakers to sell for the holidays. Costco is reimposing limits on paper towel purchases. Prices for artificial Christmas trees have jumped 25% this season. Despite mounting shipping delays and cargo backlogs, the busiest U.S. port complex shuts its gates for hours on most days and remains closed on Sundays.

Nike executives said Thursday that the amount of time it takes to move a cargo container from Asian factories to North America is now about 80 days, or twice as long as it was before the pandemic. Moving items such as paper towels or furniture within the U.S. is also a challenge, with Costco executives saying it can be difficult to find trucks or drivers on short notice.

The American supply chain has so far failed to adapt to the crush of imports as businesses rush to restock pandemic-depleted inventories. Tens of thousands of containers are stuck at the ports of Los Angeles and Long Beach, Calif., the two West Coast gateways that move more than a quarter of all American imports. More than 60 ships are lined up to dock, with waiting times stretching to three weeks.

Participants in each link in the U.S. chain—shipping lines, port workers, truckers, warehouse operators, railways, and retailers—blame others for the imbalances and disagree on whether 24/7 operations will help them catch up. All of them are also struggling with a shortage of workers.

6. Funding, IPOs, M&As

As always, please feel free to share questions, feedback, or requests for future newsletters.