Circle’s IPO Soars, The Future of VC and Cursor’s Crazy Growth | E2135
By This Week in Startups
Key Concepts
Jeremy, Crypto Regulation, Public Markets, Stablecoins, IPOs, Direct Listing, Venture Capital Tokenization, Platform Risk, Multi-Model Approach, Rippling vs. Deal, Board Responsibilities, Cursor, Growth Metrics, Poly Market, Interest Rates, GDP.
Circle's IPO and Crypto Regulation
- Main Topic: Circle's successful IPO and its implications for crypto regulation and public markets.
- Key Points:
- Circle, an American stablecoin company, went public after previously considering a SPAC merger.
- The IPO was initially priced at $31 per share, opened at $69, and closed at $107.70, indicating significant demand.
- Jason believes Circle left money on the table by not pricing the IPO higher, given the 25x oversubscription.
- He suggests a direct listing or an auction for shares could have yielded a higher price.
- Three key takeaways:
- Jeremy is an exceptional entrepreneur.
- The crypto regulatory environment is becoming clearer, encouraging companies to go public. David Saxs is the ZAR of crypto. The SEC and this administration want to make clear rules.
- There's pent-up demand in public markets for companies like Circle.
- Alex introduces a new metric: Circle's market cap as a percentage of USDC circulating stablecoins AUM (Assets Under Management). Circle has about 61 billion in circulating USDC stable coins and their market cap is now about 20 billion which means that they're valued at about .3 stable coin AUM as a ratio.
- Jason notes that stablecoins are dependent on the return rate of treasuries.
- Examples:
- Spotify's direct listing is mentioned as an alternative approach to raising capital.
- Coreweave and eToro are cited as other technology IPOs that have performed well.
- Notable Quotes:
- Jason: "This is like a moment in time."
- Technical Terms:
- SPAC: Special Purpose Acquisition Company.
- Direct Listing: Listing shares on an exchange without an underwriter or raising new capital.
- AUM: Assets Under Management.
Gemini's IPO and Robinhood vs. Coinbase
- Main Topic: Gemini's plans to go public and a comparison between Robinhood and Coinbase.
- Key Points:
- Gemini, a crypto exchange founded by the Winklevoss twins, has filed privately to go public.
- Robinhood and Coinbase have similar market caps (around $64 billion).
- Robinhood started with zero-cost consumer trading of equities and expanded into crypto, while Coinbase started with crypto and moved into other products.
- Jason expresses a preference for Robinhood due to Vlad's product innovation.
- Jason has never sold a share of Robinhood.
- Examples:
- Uber and DoorDash are mentioned as companies that might use stablecoins for currency fluctuations.
- Notable Quotes:
- Jason: "I wouldn't sell a share of Robinhood ever."
Venture Capital Tokenization
- Main Topic: The potential for tokenizing venture capital funds.
- Key Points:
- The discussion explores the possibility of creating tokens representing ownership in venture capital funds.
- This would allow for more liquidity and easier trading of fund interests.
- Challenges include regulatory uncertainty, KYC (Know Your Customer) requirements, and smart contract complexities.
- Jason suggests that tokenization could be restricted until a certain year of the fund's life.
- Alex mentions Molten Ventures, a publicly traded venture capital fund in the UK, as an existing model.
- Step-by-Step Processes:
- The process of tokenizing a fund, including capital calls and smart contract rules, is discussed.
- Technical Terms:
- Tokenization: Representing an asset or right with a digital token on a blockchain.
- KYC: Know Your Customer, a regulatory requirement for verifying the identity of clients.
- Examples:
- Destiny publicly trading fund that has SpaceX in it.
- A hypothetical scenario is presented where an LP wants to sell their interest in a fund with unrealized capital calls.
Anthropic, Windsurf, and Platform Risk
- Main Topic: Anthropic's decision to cut off Windsurf and the implications for platform risk.
- Key Points:
- Anthropic, an AI model company, cut off Windsurf, a coding service, because OpenAI is expected to acquire Windsurf.
- This highlights the risk of building on top of proprietary AI models.
- Jason speculates that Anthropic may have been outbid in an acquisition attempt of Windsurf.
- The speakers suggest that founders should adopt a multi-model approach to avoid platform lock-in.
- Examples:
- Cursor is mentioned as a long-term Anthropic customer that raised early capital from OpenAI.
- Notable Quotes:
- Alex: "Don't want to have platform lock in effectively."
Rippling vs. Deal and Board Responsibilities
- Main Topic: The ongoing legal battle between Rippling and Deal, and the responsibilities of a board in such situations.
- Key Points:
- Rippling and Deal are engaged in a legal dispute involving allegations of corporate espionage and unethical behavior.
- Rippling alleges that Deal bragged about hiring employees with secrets from other companies and maintained "spies" at competitors.
- There are allegations that a tier 1 investor in Deal tried to dissuade a Rippling investor from closing a funding round.
- Rippling also alleges that Deal stole a CRM from a startup accelerator.
- The board's responsibility is to investigate any allegations of wrongdoing and take appropriate action.
- Step-by-Step Processes:
- The process of conducting an internal investigation, involving outside counsel, is described.
- Notable Quotes:
- Jason: "All feels a little dirty and backhanded and back room."
Cursor's Growth and Market Valuations
- Main Topic: Cursor's rapid growth and its implications for market valuations of AI companies.
- Key Points:
- Cursor, an AI-powered coding tool, raised $900 million at a $9.9 billion valuation.
- The company's ARR has grown from $100 million to $500 million in six months, representing exceptional growth.
- This growth is attributed to the virality of the product and the willingness of companies to pay for AI-driven tools.
- The speakers compare Cursor's growth to that of Google in its early years.
- There's a discussion about whether Cursor and Anthropic have negative gross or operating margins.
- Data and Statistics:
- Cursor's ARR growth from $100 million to $500 million in six months.
- Google's revenue growth from $199 million in 2000 to $350 million in 2002.
- Notable Quotes:
- Alex: "This is bonkers."
Poly Market and Economic Indicators
- Main Topic: Using Poly Market to gauge market sentiment on interest rate decisions and economic indicators.
- Key Points:
- Poly Market is a prediction market where users can bet on the likelihood of future events.
- The discussion focuses on a Poly Market chart related to the Fed's decision on interest rates in September.
- The market is responsive to economic news, such as ADP and BLS reports.
- The majority of participants believe the Fed will not change interest rates in September.
- Strong GDP growth suggests that interest rates are unlikely to be cut.
- Data and Statistics:
- Poly Market data on the probability of different interest rate decisions.
- Projections for GDP growth in the second quarter.
Synthesis/Conclusion
The conversation covers a range of topics, from successful IPOs in the crypto space to the potential for tokenizing venture capital funds. It highlights the importance of regulatory clarity, the risks of platform lock-in, and the need for ethical behavior in the startup world. The rapid growth of companies like Cursor demonstrates the potential of AI-powered tools, while Poly Market provides insights into market sentiment on economic indicators. The overall tone is optimistic about the future of venture capital and the potential for innovation in various sectors.
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