Charge Your Phone Before 2024...

This is The Startup Breakdown, the newsletter where we breakDOWN startUPs (just had to make sure you appreciated the word play). By joining this growing community of hundreds of curious individuals, you're getting firsthand access to my observations and opinions on the current state of the startups and venture scene. If you'd like to receive these newsletters directly in your inbox once a week, go ahead and subscribe to never miss an email!

Happy Monday, folks.

Soooo you want the good news or the bad first?

I guess it doesn’t really matter what you want, because 1) I clearly can’t hear you (unless you hmu in the comments 👀 ), and 2) I already wrote this, so the order is kinda fixed. It’s the thought that counts?

Rippin’ the band-aid off. You’re getting the bad.

As mentioned previously, watching venture funding through Q1 was about as bad as if you were a Grizzlies fan watching the Lakers take a 35-9 lead in Game 3 last week. Through a month, it’s not looking like Q2 is going to be much better.

The pressure to exit this poke-it-and-tell-it-to-do-something state is certainly starting to make for some bloated investors, sitting on record levels of dry powder strapped up and waiting to be put in the game. However, this means investors have all of the leverage, and companies that took advantage of the fundraising environment of 2021 are reluctant to reconsider whether their dollar and a dream pitch is still worthy of a $100M valuation.

It seems likely that founders will be forced to compromise as the end of their runways quickly approach, and they still haven’t even had flight attendants check if everyone’s seatbelts are fastened and tray tables returned to their upright positions.

Been on a real Space kick lately. First the Argo post and then hopelessly following ispace’s failed lunar landing. Feel like I should be eating astronaut ice cream and growing crops in Martian soil at this point.

Sticking with the topic, though, fundraising even for this high-growth industry is feeling the burn like its watching a Jane Fonda workout video. The $2.2 billion raised last quarter was the lowest for a single period since 2015.

Of the 89 deals (for an average size of $25M), 30% went to Seed, 25% went to Series As, and all the way up the ladder by count, but it was the mid-stage, Series C startups that were the hungriest of hippos for value, drawing $800M in outside capital.

The biggest deal was the massive C round for Isar Aerospace worth $166M, dwarfing the second place Voyager’s $80M Series B. It was an even distribution of money across applications and infrastructure, a changeup from the typical app-dominant split.

As a whole, investments for the quarter were down 53% from Q4 of 2022. To be fair, that might have just been caused by high December deal flow because investors had watched The Santa Clause one too many times and figured Elon would soon get bored of social and move onto flying sleighs.

I promised good news, so I scoured the most remote corners of the startup globe to come through. My expedition has taken us to the savannahs that are the African web3 space. In case it isn’t clear, I had to look reaaaally hard to find a sliver of good news lol

For the entirety of last year, the continent saw a 5x increase in deals for web3 startups. Much of this was concentrated in the shadows beneath Table Mountain as South Africa was responsible for 81% of this sum.

The total value of deals in the sector came out to $474M, representing a significant portion of the total fundraising in the region which came out to $π (3.14… duh) billion.

Not only was the 34% YoY growth far better than the -35% global trend, but the continent also birthed its first two blockchain unicorns in KuCoin (raised $160M for 33.8% of the total) and Scroll (raised $30M). Look how cute they are!

Most of the money flowed to the big dawgs with 90% of funding going to startups in later stage rounds. Fingers crossed they can continue to be a beacon of light in a dark, dark world. I also look forward to seeing them featured prominently once again on Shark Week.

TBH, I feel like IOU a recommendation that will help you to master the art of online business for sticking with me through the highs and the very, very lows of my puns. SEO is all about driving relevant eyes to your site organically, and RankAccelerate will tell you exactly how to master this as you look to grow your own online moneymaker. TTYL 🤪 

It’s only fitting that President Biden announced his reelection bid this past week. The news felt right at home amidst the other headlines reverberating from the last election.

First, a certain ATN Fox News settled for a massive $787.5 million in its lawsuit with Dominion Voting Systems, a producer of voting machines, for the “news” network’s claims that the 2020 Presidential Election was stolen, a claim first spewed by Home Alone star, adult entertainment aficionado, and indicted purveyor of 34 felonies Donald Trump. Oh, and he used to be President.

Dominion alleged that the false claims spread by the network were an act of defamation, citing internal Fox texts and documents showing that even the kool-aid drinkin’ stars on air didn’t believe the narrative.

Though the settled amount was less than the $1.6 billion that Dominion was going after (and the actual amount that Fox will pay is likely to be far less even than that), it’s still a significant chunk of change, and it turns out that there is even ANOTHER voting company suing Murdoch and the fam, the other being Smartmatic who is seeking $2.7 billion in damages.

The company is going to be fine. It has plenty of cash in the non-SVB banks, and there are few cults more devoted than BTS fans, but the Fox crowd might be one of them.

However, that doesn’t mean things are all peachy in the studio, and additional lawsuits for sexist work environments and internal strife over Republican party leaders painted a pretty strained picture for the company’s team chemistry. No Spurs ball movement here.

Though it might not be directly related (also not saying it’s not not directly related…) to the vote rigging lawsuits, the company also parted ways with controversial talker boy Tucker Carlson, one of the network’s brightest stars. The network had massive payrolls, including Carlson’s Jalen Hurts-sized contract worth $20 million.

To tie it all back together, politics = messy, and much of the recent slop ties back to the American tradition of (not showing out for) voting.

So what can be done?

Well, if you listen to some of the more obscure corners of 4chan, the answer might be to tear it all down and watch the country burn. #Anarchy, baby.

More constructively, we might take a lesson from pfp Twitter. You mean web3 might have a use case? 🤨 

One of the use cases for Blockchain that I am most excited about is in voting. Frankly, I think most government institutions could use a lil transparency like that provided by publicly visible ledgers, but picking eenie meenie miney moe between a few old white guys is an area which has actually had some traction with a few elections already held with this innovation.

At least one of you is reading this, mouth hangin’ open, asking how I could suggest the very pillars of American democracy could be wrapped up with fake internet money and curly haired (it’s not his fault) fraudsters.

Well, unlike our completely phony, totally 100% rigged elections that purposely miscounted (checks notes) 5 million votes, blockchain votes are actually tamper-proof and immutable.

In fact, the level of security baked in even makes them safer and more secure than in-person voting (no Putin ballot stuffing), and they offer superior privacy protections to ensure that you can be the only DeSantis voter in SF and not have your gluten free bagel spit on.

It’s also more efficient, instantly tallying votes rather than forcing America to lose sleep as vote counters across the country work their way though like a million AR points worth of ballots.

This improved efficiency would remain even with a higher number of ballots submitted, something which would result from voting being more convenient for the lazy among us and accessible for those with legitimate reasons for not being able to vote like those deployed abroad.

Finally, as with all blockchain projects, voting would be decentralized, meaning there’s no central party through which the entire system runs. Maybe if Fox had spent $800 million on making these systems a reality…

There are certainly downsides, among them lack of technological familiarity, lack of trust (thx Sam…), and legal challenges. More obvious than even these concerns is the challenge of identification.

There must be verification to ensure that people are who they say they are to ensure only registered voters can cast a ballot, and you can’t vote for your entire block.

Each company that has attempted to build these systems has gone about it in their own way, but the team with the most traction so far is Voatz, a provider of convenient, secure voting at your fingertips.

Their process involves the following:

• Download the app and request a mobile ballot

• Verify your identity with a unique PIN and some biometric marker like a fingerprint

• Cast a vote and get the receipt to verify your selection

• Watch Twitter melt down over the results in real time

It’s easy, and even better, your information is immediately deleted once you’ve verified that your selection on the receipt is correct.

Users’ data is protected throughout the entire process, only registered voters get to cast, and it’s just so much more convenient for all of us.

Though their site doesn’t explicitly state how they make money, it’s likely that their $850K in estimated revenue comes from payments from whatever body is holding the election, whether a government or company.

Since its founding in 2016, the Boston (#represent) startup has had numerous successful pilots, including with the City of Denver in its 2019 Municipal elections and West Virginia in the 2018 Midterms, both of which were limited tests for active military members and their families only. In the corporate world, Voatz was also used in a shareholder vote for Medici Land Governance.

In total, more than 115 elections had been completed with the tech through 2022, supporting more than 2.1 million voters.

Investors hate having to physically go out to vote, too. The company has raised $10.6 M from the likes of Medici, Techstars, and Oakhouse. Medici in particular seems sold on the idea, having also invested in one of the biggest competitors in the space, Votem.

Other companies that have emerged in the space include Votem, Democracy Live, and Follow My Vote. It’s far too early for any to claim victory, largely because most cities are a bit hesitant to tell their citizens to “so yeah we’re gonna do this with Blockchain from now on.”

It does seem that Voatz and Votem are the two leaders of the pack. Despite some security concerns with the underlying tech, the early track record that Voatz has built up makes me lean towards them to be 1a.

Despite what the lawsuits might suggest, the electronic voting technology industry is prolly not $2B+… yet. However, many estimates do point towards it already being worth $800M and growing quickly, on pace for $1.6B by 2025.

As for why governments might come around on the idea, not only do they benefit from saving some of the money spent on staff to count the Presidential votes on their fingers, but it might even allow local governments to hold more elections on specific policy issues like public spending or whether to adopt the goose at the park who attacks unsuspecting walkers as the new official mascot.

It could also be valuable for companies looking to run elections, such as for shareholder votes. In fact, given the infrequent nature of election cycles, it might be this use case that catches more steam and leads to more revenue.

As mentioned, there are concerns with Voatz. In fact, the company has been criticized for lackluster security measures in the past with auditors pointing out that there is potential for vote changing or deleting.

Voatz claims that these critiques are overblown, and they have been continually audited as they build and have a bounty program to reward anyone for pointing out bugs or flaws, a very big green flag for any project in the web3 space.

Plus, did we really expect for a real online election to be conducted flawlessly using Blockchain on the first go around?

The team has a strong technical background, and even better, much of this has been in the web3 and mobile payment spaces, areas which should lend some comprehension of the need and challenge of security.

CEO Nimit Sawhney has a long history in R&D, and more importantly, has held numerous positions of leadership the field. The rest of the team brings backgrounds on the development, compliance, and business sides, too, meaning they cover all the bases when it comes to understanding such a politically complicated area.

This is a truly disruptive system, and kudos to the governments that have allowed for these experiments to even be tried. If only you’d give a few words of encouragement to a certain SEC Commissioner…

Seriously, though, this has the potential to change the face of democracy forever. Ready to vote from my couch.

TLDR: Voatz is creating a convenient, secure mobile voting system reliant on Blockchain technology. The immutable, tamper-proof technology could prove to strengthen democracy by providing expanded access, decentralization, and transparency, and the company’s early traction in multiple US and corporate elections makes Voatz the team to beat in the market.

Cheers to another day,

Trey