8 multi-billion IPOs that cemented Andreessen Horowitz’s power

Marc Andreessen Ben Horowtiz Andreessen Horowitz
Marc Andreessen and Ben Horowitz have had several blockbuster exits in the past couple of years.

  • Andreessen Horowitz earned its Silicon Valley power broker status by backing Facebook and Twitter.
  • It’s turned those wins into a decade of multi-billion exits.
  • Here are the firm’s eight biggest IPO exits since 2011.
  • See more stories on Insider’s business page.

A decade after Marc Andreessen declared that software was “eating the world,” his VC firm has notched a succession of multibillion-dollar exits.

Andreessen Horowitz, founded in 2009, hit the ground running early with a few IPOs among its portfolio companies in its first few years: Groupon and Zynga in 2011, and Facebook in 2012. The firm, known as a16z, reportedly bought a stake in Twitter, which went public in 2013, through secondary markets.

But as Crunchbase noted in a recent analysis of Andreessen Horowitz’s performance, the VC firm didn’t have large enough stakes in those companies to merit a mention in SEC filings.

That’s also the case for a couple of more recent public debuts within its portfolio: Airbnb and Roblox. Andreessen Horowitz backed Roblox in 2020 as part of its later-stage portfolio.

But several of its more substantial investments have borne fruit recently. According to Crunchbase, the firm has had stakes of 5% or more in eight companies that have gone public since 2011. All but one have gone public in the last two years.

The VC firm was the largest institutional investor in Coinbase prior to the company’s direct listing in April. Andreessen Horowitz’s stake, based on the company’s recent share performance, is worth around $6 billion.

Here are all the public companies since 2011 in which a16z held at least a 5% stake. For most of the companies, the VC firm got in early.

Company Public debut First a16z investment
Okta April 2017 2010, Series A
Lyft March 2019 2013, Series C
PagerDuty April 2019 2013, Series A
Pinterest April 2019 2011, Series B
Slack June 2019 2010, Series A
Accolade July 2020 2016, Series E
DigitalOcean March 2021 2014, Series A
Coinbase April 2021 2013, Series B

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ProPublica’s billionaire tax data shows the importance of closing 2 key tax loopholes. Here’s how.

taxes
  • Too much of billionaires’ true economic income is not getting counted on their tax returns.
  • We can count more capital gains as income, to make them report more income and pay more tax.
  • To do this, eliminate “stepped-up basis” rules and prevent double deduction of charitable giving.
  • See more stories on Insider’s business page.

ProPublica has obtained years of federal income tax information for the 25 wealthiest Americans, and has released an analysis comparing their federal income tax bills to the rise of their net worth over the period from 2014 to 2018, showing their federal income tax bills added up to just 3.4% of their wealth gains.

ProPublica calls this their “true tax rate.” While I have some quibbles with their analysis, the investigation does demonstrate a real problem: The wealthiest Americans are paying less income tax than our tax policies are supposed to collect from them, and less than is fair.

But I also have a hopeful message. There are solutions available to this problem, and they don’t need to involve a wealth tax, which is appealing as a political soundbite but faces enormous political, constitutional and administrative challenges.

Our income tax is not defining “income” correctly. Adopting a more comprehensive definition of income would make it possible to collect more tax from the likes of Jeff Bezos and Elon Musk. In fact, closing just two major loopholes would get us a long way toward that goal.

What is income?

If you ask an economist what “income” is, they’re likely to point to a concept called “Haig-Simons income,” which says your income for a given period is equal to your expenses plus the change in your net worth. This makes intuitive sense: your income either gets spent or saved, so if you add up your spending and your savings, that’s your income. But unrealized gains create issues for this definition in relation both to the tax code and to popular conceptions of income.

Suppose your house was worth $300,000 a year ago, but is worth $350,000 today. Did your house produce $50,000 of income to you over the last year? Haig-Simons would say so, but few people think about things that way. Your home’s appreciation doesn’t actually feel like income until you sell it. And this is also how the tax code works: Asset appreciation isn’t counted as income until the asset is sold.

This is the main tax “avoidance” strategy demonstrated in the ProPublica article. The wealthiest Americans owned interests in major companies whose stocks rose. They didn’t sell their shares, and therefore didn’t report any income related to that appreciation.

Of course, that’s not cheating – it’s just how the law works. And it would be fine so long as the gains got taxed eventually: if the tax liability is building up and sure to be paid in a future year when the gain actually gets realized, that’s fine. The problem is that our tax code too often allows rich people to never pay taxes on those gains.

Joe Biden wants to close the “step-up in basis” loophole

One of the biggest problems with the way our tax code treats unrealized gains is that you get a big bonus for holding on to your assets until you die.

If you buy an asset for $200,000 and it’s worth $800,000 when you die, the IRS then readjusts the value and your heirs only pay taxes on realized gains above the new $800,000 value. The $600,000 in gains accrued during your lifetime never get treated as taxable income. This creates a huge incentive for wealthy people to hold assets instead of selling them, and is a major way their true economic income gets excluded from tax.

Joe Biden
US President Joe Biden speaks on the economy at Cuyahoga Community College Manufacturing Technology Center, on May 27, 2021, in Cleveland, Ohio.

But the tax code doesn’t have to work this way. In fact, President Biden has proposed to change the law so that death is a “realization event.” If a person has more than $1 million of unrealized gains when they die, those gains over $1 million would be subject to capital gains tax as though they sold them on their death bed. Not only would this generate more tax, it would eliminate much of the incentive for rich people to cling to specific assets, so it would encourage more capital gain realizations (and more tax payments) even before they die.

Of course, there is political resistance to this idea, partly because it would also raise taxes on people who are rich but much less rich than Jeff Bezos.

Still, if the goal is to get these ultra-wealthy to pay more, you could offer an exemption much larger than $1 million per decedent, reducing collections from the merely rich while still capturing much more of billionaires’ true income as taxable income.

Defining income better makes higher tax rates possible

Capital-gain income, income made from selling investments like stocks, bonds, etc., has almost always been taxed at a lower rate than wage income. There are several policy justifications for this, but a major reason capital gains tax rates need to be lower than wage tax rates is that capital gains taxes are relatively easy to avoid.

You can jack taxes on high earners’ wages and salaries up very high – likely 70% or higher – before you have to worry that the higher rate is going to cause them to report so much less income that they pay less tax overall. But economists typically estimate that the “revenue-maximizing” tax rate on capital gains is much lower, closer to 30%, mostly because there are better strategies to avoid capital gain taxes.

But if you eliminate the stepped-up basis loophole, the government can collect more tax in three ways. First, taxes will be imposed directly on appreciated assets at death. Second, the impossibility of avoiding tax entirely through delay will encourage more wealthy people to go ahead and realize taxable gains before they die. Third, with a key avoidance avenue eliminated, the government can impose a higher capital gains tax rate and still expect that high earners will grimace and pay it.

This is why Biden has paired his plan to raise capital gains tax rates to as much as 43.4% on the highest earners with his plan to abolish stepped-up basis at death. The former policy does not work well without the latter one.

Charitable deductions are calculated in a way that is too favorable to the rich

Besides unrealized gains, one of the obvious ways the wealthy people discussed in the ProPublica investigation avoid tax is by giving their wealth to charity.

I am not one of those people who is grumpy about billionaire philanthropy. I think the tax code should reward charitable donations. But the way we hand out tax benefits for charitable giving now is excessively generous to the wealthy, while ordinary people get little or no tax benefit for their own charitable donations. The rules need to change.

Felipe Castro holds a sign advertising a tax-preparation office for people who still need help completing their taxes before the IRS deadline on April 14, 2010, in Miami.
Felipe Castro holds a sign advertising a tax-preparation office for people who still need help completing their taxes before the IRS deadline on April 14, 2010, in Miami.

Suppose you are an affluent person and you donate $10,000 to charity. Your marginal federal income tax rate is 24% and you itemize deductions, so this donation reduces your tax bill by $2,400, or 24% of the amount you donated.

Now suppose you’re rich and you donate $100,000 worth of appreciated stock to charity. You bought this stock many years ago for just $20,000. Donating an appreciated asset is not a gain realization event, so not only do you get to reduce your taxable income by $100,000 – the value of the donation – you also never have to pay the capital gains tax on the $80,000 in value the stock gained. Plus, your income tax rate is higher – 40.8% on ordinary income, though just 23.8% on capital gains – which means your $100,000 deduction reduces your federal income tax liability by $59,840, or 59.8% of the amount donated, compared to if you had simply sold the appreciated stock.

Now suppose you donate $1,000 to charity. Your income is more towards the median for an American family, and you take the standard deduction instead of itemizing. In most years, a charitable donation doesn’t reduce your income tax liability at all. But for 2020 and 2021, there’s a special provision allowing people who take the standard deduction to additionally deduct $300 in charitable contributions. Your marginal income tax rate is 12%, so this deduction reduces your tax bill by $36, or 3.6% of the amount donated.

That all doesn’t seem fair, does it?

We can make charitable deductions more fair while still encouraging charity

There are ways to improve how we use the tax code to reward charity.

One is to close the loophole about appreciated assets – when you donate an appreciated asset, you should be able to deduct only what you paid for it. That still provides extensive tax savings, but does not allow the rise in asset value to be deducted twice. Essentially, it would mean any donation of $100,000 would shield only $100,000 of income from tax, not more.

Additionally, you could cap the value of charitable deductions, as the Biden administration has proposed to do. Regardless of the actual tax rate paid, Biden has proposed that taxpayers should only be able to reduce their tax liability by 28% of the amount of a donation. This rule would reduce the incentive to give to charity among the wealthiest. But it would also generate revenue that could be used to enhance the charitable deduction for a broader swath of the public, for example by converting the deduction into a more generous and more widely available tax credit.

A more democratized approach to tax incentives for charity could ideally maintain the overall level of charitable giving in society while tilting tax liabilities toward the wealthiest Americans and reducing the influence of billionaires on the priorities of charitable institutions.

If we do these two things, we don’t need to do other, harder things

There are other ideas about how to get the wealthiest Americans’ reported income for tax purposes closer to their true economic income about which I am much less eager.

One, discussed briefly in ProPublica’s story, is to switch from taxing capital gains only upon realization to taxing them every year. If your stock portfolio appreciates by $100,000, you’re taxed on that $100,000 this year. If it declines by $50,000, you get a $50,000 tax deduction.

Just because your assets went up in value doesn’t mean you have lots of cash to pay new taxes, but because this system would eliminate the tax implications associated with selling appreciated stock, there would be an easy way for taxpayers to finance their tax bills: by selling stock.

But there are problems.

One is that other assets, like real estate, art, and interests in private firms, are not so liquid as stocks. It’s also harder to figure out what these assets are worth in years when they don’t get sold. So some taxpayers would have good reason to contend their asset appreciation hasn’t made them liquid enough to pay more tax today, and they’d also have more ability to argue with the IRS about what their true “income” really was.

The IRS is already strapped for enforcement resources, and while I favor increasing the agency’s budget, I am wary of new tax rules that would make enforcement much more complicated and therefore spread even expanded enforcement resources thinly.

IRS
The IRS.

Abolition of stepped-up basis would only require tedious arguments about the true value of illiquid assets when a taxpayer dies – a time when we already have to have those tedious arguments in order to calculate estate tax. Taxing unrealized gains would require having these tedious arguments every year, with the IRS facing off against expensive lawyers retained by wealthy people fighting to keep their tax bills down. It would just be much more costly and difficult to implement.

Other proposals to better capture the income of the very wealthy involve taxing unrealized gains only on easy-to-value liquid assets like stocks. We would keep the old method for assets like private companies and art.

This approach would be relatively easy to administer. But it would also create economic distortions. Wealthy taxpayers would prefer illiquid assets to liquid ones, and might make economically inefficient choices, like taking companies private to avoid the new rules. This could have negative effects on the economy.

There is hope for taxing the rich

Back in 2015, when I was at The New York Times, the paper ran an exposé on how the top 400 taxpayers in the country were paying lower tax rates than they had been two decades earlier. Their effective federal income tax rate had fallen from the 26.4% in the mid-1990s to 16.7% in 2012. The story attributed this to increased use of creative strategies to shield their income from tax.

Hours after the article was published, the Obama Administration responded by publishing data from 2013, showing that in just one year, these taxpayers’ effective tax rate had zoomed back up to 22.9%, closing more than half the gap.

What happened here? Well, tax rates for high earners were cut in 1997, 2001, and 2003. And then, in 2013, parts of the Bush Tax Cuts expired and tax increases on high earners included in the Affordable Care Act came into effect. So the story seems pretty straightforward: cut rich people’s taxes and they pay less in taxes; raise their taxes and they pay more in taxes.

Much of the typical response to stories like the one from ProPublica is unproductive: conservatives pointing out that this is just how and liberals dreaming up extremely complex approaches like wealth taxes that will never be imposed. The experience in 2013 suggests these approaches are both wrong.

Look to 2025

The experience from 2012 to 2013 shows that very rich people’s income tax bills are responsive to changes in income tax policy. We don’t need entirely new taxes to get them to pay their fair share. We just need to define income more comprehensively, make deductions more rational and equitable, raise rates where economically appropriate, and properly fund enforcement at the IRS.

There is a reason the Biden administration is focusing its tax policy efforts in the areas I am describing: These reforms work within our existing tax system and are administrable. And while I do not see major tax increases passing in the current congress, many provisions of the Trump tax cuts are set to expire in 2025. If Democrats control the presidency or either house of Congress then, Republicans will be forced to work with them on a bipartisan deal to set new tax policy terms.

That’s a reason Democrats need to focus on getting Joe Biden reelected in 2024. Just as Barack Obama’s reelection in 2012 paved the way for the tax increases on the wealthy that became effective in 2013, a Biden win in 2024 should set the stage for a tax bill in 2025 that makes billionaires pay their fair share – within the existing income tax system.

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A Lightspeed VC is bullish on retail investment apps like Robinhood and says they’ll continue to climb in popularity

Robinhood on cellphone
Robinhood app.

  • Mercedes Bent is a Partner at Lightspeed Venture Partners and focuses on consumer, fintech, edtech investments.
  • The window for retail investing is not over, and we’re just now entering a new generation of retail investment products.
  • Apps like Robinhood help democratize the acquisition of wealth.
  • See more stories on Insider’s business page.

Retail investing apps have been getting a bad rap lately. As the market leader, Robinhood has been a magnet for much of that criticism.

The company got a black eye when it restricted trading during the height of the GameStop trading frenzy in January, and it has stumbled a few times since then.

But all that negative publicity may have actually helped Robinhood. Downloads of its trading app topped 2.1 million in February.

That’s significantly lower than at the height of GameStop mania, but still 55% higher than in February 2020.

Of course, retail investing is about a lot more than Robinhood.

There’s now a rich ecosystem of apps fulfilling a wide spectrum of niches. There are other mobile-first trading apps like Stash and WeBull, investment social networks like Public and Alinea, women-centric services like Ellevest, and so on.

Investment graphic by Mercedes Bent

The consumerization of investing has only just gotten started. And that’s a good thing.

The fact remains that retail investing is an immensely powerful tool for individuals to take control over their wealth. Millennials in particular are still woefully under-invested, relative to previous generations – just 3% of equities are owned by people born between 1981 and 1996.

People who choose to use Robinhood and apps like it are challenging the status quo and writing their own rules of what investing is all about.

Hype is not always irrational

Traditional investors like Warren Buffet warn against acquiring assets based on speculation and hype; they preach the gospel of “fundamentals.”

But hype is not always irrational; you can make a strong argument that it’s another indicator of perceived value. Do you know what other assets are based on perceived value? The money in your wallet.

As we watch our government lift our economy out of a recession simply by printing more money, it’s reasonable to ask, how much will fundamentals drive our economy moving forward?

At this point, we really have no idea.

Retail investors are saying, ‘We get to have a voice in determining what is and isn’t valuable.’ And as the recent surge of interest in non-fungible tokens (NFTs) has shown, investing is about a lot more than just stocks and bonds.

Buying fractional shares in trading cards (Mythic Markets), fine wine (Vinovest), collectibles (Rally, Otis), and other lifestyle assets are all reasonable options for investment.

Investing is not always about retirement

Millennials invest for different reasons than their parents did. They’re not necessarily looking to earn enough money to retire to an island in the Bahamas. Many invest in order to live more fully now. For this generation, retail investment is just as much about experience, entertainment, and education.

Research has shown us that millennials value experiences over material goods. They’d rather backpack across the Andes than buy a yacht. Playing the market in a gamified way fits into this desire for new experiences. Like it or not, investing has become another form of entertainment.

More important, most people in my generation have very little practical experience in investing. As of 2019, only 37% of affluent millennials said they felt knowledgeable about investing; more than 40% owned no stock at all.

I certainly wouldn’t recommend anyone bet their life savings on Tesla stock or convert their 401K to Dogecoin. Stock prices fluctuate over time; cryptocurrency is notoriously volatile.

But if people have the discretionary income to experiment and educate themselves about equities and cryptocurrencies, now is as good a time to start as any.

Investment apps are a solid investment

Robinhood changed how people invest and, as a result, how financial institutions respond to their customers. Some of the innovations it introduced – like commission-free trading, the ability to buy fractional shares, and its mobile-first mentality – are now table stakes for any new investment app that comes along.

Now the company is trying to change the rules again. Since the GameStop controversy, the company has been lobbying folks on Capitol Hill to advocate for real-time settlement. This would alter regulations about how much cash trading apps like Robinhood must keep on hand during settlement – the rules that led the company to suspend trading back in January.

I’m confident Robinhood will continue to challenge the norms of traditional investment, and that the company’s IPO later this year won’t be impacted negatively by the bad press it has received.

At Lightspeed Venture Partners, we’re bullish on the potential of retail investment apps. Just as apps like G-Suite, Rippling, and Gusto have made it much easier to start a small business and onboard employees, technology platforms like Alpaca and Galileo are making it easier for entrepreneurs to launch new investment startups.

Investing is going to become a much greater part of everyone’s consumer and entertainment experiences. People who’ve been reluctant or unable to invest in the past, such as women and people of color, will continue to participate in much greater numbers.

You can bet on it.

Mercedes Bent is a Partner at Lightspeed Venture Partners and focuses on consumer, fintech, edtech investments.

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My day job was hairdresser to stars like Paul McCartney. But I worked in my spare time to build a company I set up with my friend. It made $2.5 million last year.

Joel Silverman Kids Know Best
Joel Silverman.

  • Joel Silverman, 33, was a high-end hairdresser when he saw a business opportunity.
  • He and a childhood friend set up KidsKnowBest, which researches what kids really think for brands.
  • He tells freelance journalist Chris Stokel-Walker for Insider.
  • See more stories on Insider’s business page.

I’m an Essex boy, so I’m obsessed with my hair. I used to have it cut every two or three weeks. When I was 16 or 17, the woman who cut my hair said: “You should be a hairdresser. You’d love it. You’d be creative.”

I ended up getting a job in a salon called Daniel Galvin, one of the three top salons in London, sweeping hair, trimming hair, washing everything, still as an apprentice, and I loved it. I couldn’t even hold a comb. I had no idea what I was doing.

I picked it up pretty quickly. I kind of fell into it because I didn’t know what to do, but ended up carving out a very successful career and loved it.

I ended up working on [iconic British TV talent competitions] “The X-Factor” and “Britain’s Got Talent.” I worked on catwalks and music videos. I realized that the best thing about hairdressing is it’s a skill you can take anywhere in the world. I lived and worked in Sydney, Australia.

By 21, I was probably earning more than most 25-year-olds doing hairdressing in London. I had a very good wage and then got a little bit homesick.

When I got home to Britain, I went to another salon, cutting the hair of celebrities and high net-worth individuals including Paul McCartney, Pamela Anderson and Elizabeth Hurley.

I spent 18 months working [at that salon], then at another salon for a further eight years, travelling the world.

I’ve always had this entrepreneurial way about me. I always felt I wanted to do more, but it wasn’t necessarily to do with hairdressing. As great as it was, I thought it would be tough to run your own salon.

I always had ideas for new businesses. I’ll always adapt to the market in things that I could earn money from. I used to sell sweets at school. I was going to open a sushi restaurant in Essex. I ended up finding a chef, I just couldn’t find a location. Another idea I had was for a concierge service, trying to find a gap in the market.

But I ended up setting up KidsKnowBest with a mate, Rob. We’ve been friends since we’re seven or eight. Every time he spent time with his daughters, he wanted to make the most of it.

He used to take them to films. The films would get terrible reviews, but his kids were gripped. He wondered why he’s reading reviews by 40-year-old men for kids’ films.

Why don’t we ask kids whether they actually think these films are good? And that was kind of where it started. “Is there a platform that lets kids have a voice, that lets kids show what they really think of things that are made for them?”

We were formed in 2016, started as a publisher, and turned into an agency in 2018. I spent the first 18 months working six days a week between hairdressing and KidsKnowBest. We were creating video reviews of all things made for kids, including books, films and toys, then publishing those reviews on our original website.

This helped show the gap in the world of research. Now we ask kids’ opinions on behalf of brands. When we raised our second amount of finance [for $405,000], I knew it was time to give up hairdressing. I went full-time.

All Rob and I have ever done is look at things that are missing and see if we can build a solution, and look at things that are working and think if we can accelerate.

The second round of funding was to build our app. On the first version of our website, we’d noticed that every time we put a quiz up, engagement would be really high.

We felt quizzes were a good way of getting an understanding of an audience.

We built this quiz app called YakYak, and what it is now is a polling tool. We put any question about anything – food, animals, films, video games – and our users, who are a mix of kids we specifically recruit, and those who register via our app with permission from a parent or guardian, keep answering them in exchange for points that convert into charitable donations.

That was the start of KidsKnowBest 2.0: all this understanding of an audience that is under-served.

We can collect information in a compliant way that can help us go back to our clients and say “this is what kids like and what they don’t like. This is how you should be talking to them and marketing to them.”

That’s where it grew from.

I went to America in 2018 and 2019 to a couple of conferences and we got commissioned to do a huge global survey on Spongebob Squarepants.

Last year we had, pre-COVID, 11 of us full-time. In 2020 we had 1.8 million pounds ($2.5 million) in revenue, and this year we’re projecting 6 million pounds ($8.5 million). We were not a typical startup – we were an overnight success that took us three years to get there. Suddenly we had a couple of big wins.

Suddenly it was like a snowball effect: we started hiring great people. We expanded the team to 35. We’re playing with the big boys.

Next is expansion into the US. We’re already serving clients over there from the UK, but I believe the market over there is 10 times what the UK is, and having feet on the ground there will help us.

We’re now going through a fundraising round to expand our data platform to help us navigate that kids space and understand the audience better.

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Why the ‘trillion-dollar’ markets touted by SPAC startups don’t always add up

chamath palihapitiya richard branson virgin galactic ipo
Richard Branson’s Virgin Galactic went public via a SPAC merger.

  • The booming SPAC market has been spooked by the acting SEC director’s recent hints that new rules could be on the way.
  • The financial forecasts used by companies going public through SPACs could come under scrutiny.
  • A close look at the so-called Total Addressable Market estimates used by companies involved in SPACs shows why caution is advised.
  • See more stories on Insider’s business page.

Last week John Coates, the Harvard academic who is acting director of the Securities and Exchange Commission’s division of corporate finance, caused a kerfuffle in the world of SPACs.

In a highly readable (really!) treatise on blank-check companies, as special-purpose acquisition companies are also known, Coates issued a warning to the investment bankers, lawyers, entrepreneurs, part-time board members, and other charlatans exploiting the trend. Plenty could go wrong, he said, when those who raise SPAC funds then buy a company. He ticked off a list of concerns from conflicts of interest to celebrity involvement to the potential ordinary investors being lured by “baseless hype.”

Coates focused on the use of financial projections in SPAC deals. Because a SPAC buying a target technically is a merger, not an IPO, most have assumed it’s okay to ignore IPO rules, which prohibit financial projections that could be used to bamboozle investors. Coates cautioned SPAC sponsors against becoming too comfortable with this loophole-and suggested the SEC might make rules to clarify matters.

The SEC official didn’t give specific examples of “baseless hype,” but he might have mentioned the way companies describe the market opportunity in front of them. SPAC after SPAC, in presentations to investors, describe the “total addressable market” they are attacking. The implication is that even if they have little or no business today their potential is huge.

Like the financial projections that worry the SEC, these market-size estimates – nearly always rosy and often far out into the future – ought to give pause to investors. SPACs tend to buy unproven companies, like flying car manufacturers and space “infrastructure” companies. (If they were proven, the companies likely would go the more respectable IPO route.) Because investors can’t possibly know what these startups might become, the potential market size estimates are important for making an investment decision.

Flying car companies are particularly good at this cheerful prognostication. Three have announced plans to become SPACs so far. Two, Archer Aviation and Lilium, say their market could be as big as $3 trillion by 2040. Both based their guesstimate on the same 2018 Morgan Stanley research report by analyst Adam Jonas. The far-into-the-future estimate applies a kitchen-sink approach to market sizing by including revenue projections for several industries, including airlines, cargo, ride-hailing, and “key accelerants” like batteries, communications equipment, and software.

I asked Morgan Stanley for a copy of the Dec., 2018, Jonas report, “Flying Cars: Investment Implications of Autonomous Urban Air Mobility,” so I could dig into the assumptions Archer and Lilium are relying on. A Morgan Stanley spokeswoman said “we decline at this time, due to this report being outdated.” Good point, though one wonders why it’s good enough for companies about to include average investors as their shareholders.

Joby Aviation, another flying car company has a more modest, but also aggressive estimate of its potential market. It told investors it saw a $500 billion addressable market in the US alone and a global market of “north of $1 trillion.” Joby didn’t cite a date by which this market will appear. But it did source its estimate to another 2018 study, this one by tech consultant Booz, Allen, Hamilton.

That study, prepared for NASA, is available online. A summary notes that the US prognostication is “for a fully unconstrained scenario” and that factors like weather, certification, regulatory hurdles, and public perception could reduce its near-term estimate to 0.5% of the total, or $2.5 billion. As it happens, the BoozAllen consultant who wrote the report, Rohit Goyal, now works in “product intelligence” for Joby, according to his LinkedIn profile. Investors might do well to ask him about the report’s assumptions.

Let’s be clear about something: Making a guess at the total size of a potential market is a valuable exercise for investors. The late Don Valentine, a founder of Sequoia Capital, was famous for paying attention to the size of the market opportunity to the exclusion of all else. But he was making risky venture-capital bets. Lise Buyer, an advisor to companies that go public, and a fund manager, research analyst and VC at various stages of her career, told me it’s “totally legit for investors to ask what’s the biggest the market could be if everything goes right. But I think they will roll their eyes when the numbers get too big.”

Or at least they ought to.

***

In other news:

While I have you, I’d like to recommend a fine book that reflects badly on big business. It’s called “Death in Mud Lick: A Coal Country Fight against the Drug Companies that Delivered Opioid Epidemic”, by the Pulitzer-prize winning West Virginia investigative journalist Eric Eyre.

There are plenty of good books about the opioid scourge, including Beth Macy’s “Dopesick” and the just-out and rapturously reviewed Sackler family takedown “Empires of Pain” by Patrick Radden Keefe. Eyre’s book focuses on the role of the big drug distributors – Cardinal Health, McKesson, and AmerisourceBergen – in pushing pills for years that led to an overdose epidemic. Each of these companies is locked in multi-state litigation to resolve the type of allegations Eyre details. CEOs of each, for what it’s worth, signed the Business Roundtable’s 2019 statement of purpose, which, among other things, promises to “respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.” After reading this book you’ll be hard pressed to judge their actions respectful or sustainable.

I planned to write an entire column on hollow corporate statements and how they relate to the current climate of corporate activism and political awareness. But the lead editorial in the current issue of The Economist published a perfect distillation of what I wanted to say. So instead, I’ll link to it here.

Adam Lashinsky is a Business Insider contributor and former executive editor at Fortune magazine, where he spent 19 years. He is the author of two books: “Inside Apple” (about Apple) and “Wild Ride” (about Uber).

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A landmark study shows the main compound in magic mushrooms could rival a leading depression drug

Psilocybin in pill form
Psilocybin in pill form

  • Imperial College London scientists just published a report on how psychedelics could treat depression.
  • The study pits psilocybin, the active compound in magic mushrooms, against the depression drug escitalopram.
  • Reduction in depression occurred more quickly with psilocybin, but the differences were not significant.
  • See more stories on Insider’s business page.

In recent years, research into the use of psychedelics for the treatment of mental-health illnesses has begun to thrive.

Private companies focused on developing psychedelics-based medications for approval by the US Food and Drug Administration have raised hundreds of millions of dollars over the past year and several have gone public, garnering valuations of more than $1 billion.

Meanwhile, half a dozen prestigious universities in the US and Europe have established centers dedicated to research on psychedelics, a trend fueled by wealthy donors interested in the potential medical benefits of the substances.

But medical research into these mind-altering compounds is still nascent. Psychedelic research was virtually barred for decades and most academic institutions have only recently restarted studies testing psychedelic compounds in people.

That research is beginning to deliver results. On Wednesday, scientists published a milestone report that directly compares psilocybin, the active compound found in magic mushrooms, with the depression drug Lexapro, or escitalopram.

A compound found in magic mushrooms works as well as a major depression pill

The study, in the prestigious New England Journal of Medicine, shows that psilocybin works about as well as escitalopram to treat patients with moderate or severe major depressive disorder.

Dr. Robin Carhart-Harris, head of the Centre for Psychedelic Research at Imperial College London, led the research team.

He told Insider that while he believes the findings support the potential of psilocybin to be an improvement on current antidepressants, they are also a reality check on what he called “a kind of unbridled optimism about psychedelic therapy” driven by for-profit psychedelics companies and investors.

He added that the findings in the report are consistent with previous studies on the effectiveness of psilocybin as a depression treatment.

Dr. Robin Cahart Harris, head of the Centre for Psychedelic Research at Imperial College London
Dr. Robin Carhart-Harris, head of the Centre for Psychedelic Research at Imperial College London

The mid-stage trial was small, with just 59 participants, limiting scientists’ ability to draw strong conclusions. About half the volunteers were treated with psilocybin and the other half received escitalopram. All patients received psychological support throughout the trial.

Researchers found that although the reduction in depression occurred more quickly and in “greater magnitude” with psilocybin, the differences between the two treatments was not significant.

“Larger and longer trials are needed to compare psilocybin with established treatments for depression,” the article said.

Companies like Compass Pathways, which is the furthest along in testing psilocybin in clinical trials in the for-profit world, have focused on psilocybin as a treatment for treatment-resistant depression (TRD), or depression that hasn’t improved with at least two forms of treatment.

Psilodep psychedelic research at Imperial College London
Psychedelic research at Imperial College London

Psilocybin could take a slice of a $100 billion market

Imperial’s study works to provide the academic foundation to show psilocybin’s effects on more moderate forms of depression.

“What’s on the table now is the prospect that psilocybin therapy could be an alternative to SSRIs, if it’s at least as good,” Carhart-Harris said. “What we’re showing is that people could consider psilocybin therapy earlier on in the course of a depression.”

Psilocybin has in recent years been seen as a potential disruptor to the market for depression treatments. Current treatment options don’t work for some patients and can take a long time to fully work. Canaccord Genuity has estimated that psychedelic-based medicines focused on mental health could take part in what could soon become a $100 billion market.

Psilocybe cyanescens, a species of psychedelic mushrooms
Psilocybe cyanescens, a species of psychedelic mushrooms

Carhart-Harris said that the results of the study are framed in a conservative way in the journal, but he emphasized that they’re impressive. He pointed to some of the study’s secondary findings, such as the fact that about 57% of patients who received psilocybin saw their depression go into remission, while that occurred in about a quarter of patients who received escitalopram.

“To say it in a conservative way, psilocybin therapy looks at least as good as the leading treatments for depression,” Carhart-Harris said. “What you see in the paper is a very conservative framing but when you look a little bit closer under the hood, you realize it’s pretty impressive findings.”

If the trial were longer, researchers say patients who received escitalopram may have seen better efficacy

Escitalopram takes several weeks to show its full effect and the researcher note in the article that if the trial had been longer than six weeks, patients who received escitalopram may have done better.

Carhart-Harris said the fact that psilocybin seems to work faster than existing depression drugs could be a noteworthy benefit of the psychedelic.

“We’ve become so accustomed to this principle that you have to wait a couple of months for your SSRI to work and that’s not good enough,” he said. “Many people with depression are seriously considering taking their own lives and you tell them you have to wait two months to see any improvements. It’s not a great message yet we’re just accepting that.”

Magic mushrooms psychedelic psilocybin
Psilocybin mushrooms

Scientists say that more and bigger trials are needed

The next logical step for psilocybin for depression research is a late-stage trial involving more people. Carhart-Harris says that this is where for-profit and nonprofit entities step up to the plate.

Compass Pathways and the Usona Institute, a non-profit focused on psychedelic research, are furthest along in clinical trials of the compound. Both are in phase II trials, which involves testing the treatment in up to several hundred patients.

A smattering of other psychedelics companies are also in pre-clinical or early stage research around psilocybin

Different political initiatives – like Measure 109 in Oregon, which created a regulated therapeutic psilocybin program – also provide a route to providing psilocybin therapy to patients with depression. This offers an alternative to seeking approval from the FDA.

Read the original article on Business Insider

David Dobrik’s troubled startup Dispo didn’t get the full $20 million from its Series A round – and now $8 million of that is ‘on pause’

David Dobrik
Dispo cofounder David Dobrik.

  • Some $8 million of Dispo’s recent Series A round is now “on pause,” a source tells Insider.
  • Last week, Insider reported that a former member of cofounder David Dobrik’s Vlog Squad was accused of rape.
  • In response, Spark Capital and several other investors cut ties with the company.
  • See more stories on Insider’s business page.

Dispo has lost favor with investors, and now some of its funding may be at stake.

Just last month the camera-app startup cofounded by YouTube star David Dobrik had one of the hottest funding rounds in Silicon Valley, a $20 million Series A round led by Spark Capital that valued the company at $200 million. But Spark severed ties with the startup after a former member of Dobrik’s YouTube Vlog Squad was accused of rape, as reported in an investigation last week by Insider’s Kat Tenbarge.

And then other investors began distancing themselves.

As it turns out, $8 million of that funding hasn’t yet landed in the bank, and that amount is now “on pause,” a source familiar with the situation tells Business Insider.

An SEC filing from Tuesday shows that Dispo has received about $16.1 million in funding. That amount includes $4.1 million in converted SAFEs, a type of funding structure that gives investors shares after the company has raised additional funds from, for instance, a seed round.

The remaining $8 million, which accounts for the rest of Dispo’s Series A round, is listed as “remaining to be sold.” The source told Insider that investors have not abandoned the deal and that Dispo doesn’t expect its $200 million valuation to change.

Spark’s portion of the funding was about $12 million, Axios’ Dan Primack reported, and it had closed, but other investors, who have not yet cut their checks, could still seek to renegotiate Dispo’s valuation. It’s not clear which investors may be seeking to do this, but Dispo has a handful of prominent investors, many of whom have not yet publicly commented on the controversy.

Spark declined to comment, while Seven Seven Six and Unshackled did not respond to inquiries from Insider.

Since Spark cut ties with Dispo, the company has announced that Dobrik has stepped down from its board. Two of the company’s investors, Seven Seven Six and Unshackled Ventures, have said they would donate any returns from their investment in the startup to organizations working with survivors of sexual assault. Another investor, Lime CEO Wayne Ting, said he would not invest in any of the company’s future funding rounds.

Read the original article on Business Insider