The changing face of investor relations
The acquisition of a podcast network by venture capitalist A16Z is the latest example of the important role content plays in empowering founders, executives, and companies to raise capital.
Dear Readers,
A lot is happening in the world of tech and business. So before we get to our main story for this week, let’s take a look at the major headlines you don’t want to miss.
OpenAI shopping spree
The AI space just continues to move at neck breaking speed. OpenAI is apparently experimenting with building a social network that leverages its image generation capabilities at the core to create shareable content. The company also bought Windsurf. The ChatGPT maker paid $3 billion to acquire an AI startup focused on catering to software developers and enhancing ChatGPT‘s capabilities around writing code. The striking part? Windsurf‘s revenue is estimated to be in the region of $40-100 million - a 30-75x multiple. Talk about arms race in the AI space.
When sucking up to power doesn’t work
In Washington, Meta CEO Mark Zuckerberg and his company are on trial for a landmark antitrust case that could reshape the entire tech landscape. In short: the trial accuses Meta of monopolistic anticompetitive behavior by outright buying competitors - Instagram and WhatsApp - and stifling competition. The evidence is startling.
Smoking gun, anyone?
It’s worth pointing out that this trial started during the first Trump administration and Zuckerberg first offered the FTC $450 million and then $1 billion to make this trial go away - without success. What’s at stake? A potential breakup of Meta and a spin out of Instagram, or WhatsApp, or both as independent companies. This matters. A lot. Instagram accounts for just over 50% of Meta’s entire advertising revenue and as a separate company, it would become a viable competitor and alternative platform for advertisers immediately. WhatsApp right now is pretty much limited to a role of data broker for Meta’s algorithms rather than living up to its potential of becoming the largest telco in the world with 3 billion users.
Looks like the $1 million donation to Trump’s inauguration fund wasn’t enough to buy the president's shielding hand.
Another company currently on the chopping block is Alphabet and more specifically Google. The search giant got slapped backhand, then forehand, with two antitrust cases. The allegations: monopolistic behavior around search and its advertising business with Google Chrome and the Ad Manager.
Here’s my prediction: we will see a spin-off of Google Chrome and/or YouTube as well as Instagram and/or WhatsApp in the next 24 months. It’d be the single greatest oxygenation of the economy in decades and create a lot of value for both shareholders and consumers.
On to this week’s story.
A VC fund buys a podcast
Venture capitalist A16Z announced that it acquired a podcast network called Turpentine. Led by Erik Torenberg, who became a partner at the firm in the process, the podcast focuses on founders. The goal is to facilitate access to capital for founders more easily by providing a content platform and means of distribution. Anyone that has ever raised venture capital knows how challenging it is to even get a first meeting, let alone distill novel and sometimes complex ideas down to a few nuggets that an outsider can grasp the idea’s magnitude and potential in 30 minutes or less.
Good fucking luck.
On A16Z‘s side, this is a great move that gives them another tool to shape the stories told about them and their portfolio companies. In an ideal world, founders are able to raise new capital from other investors faster, develop relationships with strategic partners more effectively, and lay the foundation towards an eventual exit - all while controlling the narrative. If this works, it’s another big incentive for startups to raise capital from A16Z as opposed to other venture firms that don’t offer similar platforms.
Other funds will likely follow suit, but it’s a development that benefits the bigger with funds with more scale (more portfolio companies = more fresh content) and more resources (money to pay for the content production and distribution).
The personification of investor relations
Zooming out, we can see that this deal is just the latest example of a significant shift that’s been going on since the pandemic- the personification of investor relations.
Coinciding with the rise of zero-commission trading platforms, retail investors have gained significant influence over the moves of stock prices and the capital markets. We’re all too familiar with the meme stock stories of GameStop and the like. But the shift towards retail investors is more profound - because companies and executives have understood that they can tap into a source of capital in the public markets that plays by different rules than professional investors, and that they have different means - through content - to control the narrative themselves rather than relying on stock analysts publishing their conclusions.
Elon Musk is arguably the most prominent example of this. Despite Tesla‘s disastrous Q1, their stock still trades at a PE ratio of 142. If their stock traded at Toyota‘s level - the largest automaker in the world - Tesla‘s stock price would be - wait for it - $11.80 a share. It’s currently at $250 a share.
Alex Karp, CEO of Palantir, is another example. Daniel Ek of Spotify. Tobias Lüttke of Shopify. They all lean into podcasting and social media channels to create their own content, own their narrative, and connect directly with retail investors.
This approach is a big paradigm shift from the traditional ways of doing investor relations, where CEO and executives would primarily cater to the financial community, specifically analysts. Not only does the direct-to-consumer approach allow these executives to actively shape their personal brand, it offers them a way to manage their stock price by tapping into the minds of retail investors. With 23% of the entire stock market trading volume in 2023 driven by retail investors, and still 15% in Q1 this year, this is a great strategy that with the podcast move from A16Z is now making its way into the private markets, specifically venture capital.
In a world where attention is the most valuable resource and social channels are the proverbial megaphone anyone can leverage, content is king.
Gartner CMO Summit in London. Digital Age Tech Summit in Istanbul. We’ve got quite the lineup of events coming up. I’ll be sharing updates and insights from top-level executive conversations of some of the world’s leading companies. Share Technically Entertaining so your co-workers and friends don’t miss a beat.