Heads I Win, Tails You Lose

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.

Apparently, the troll guarding the bridge is more welcoming than the bandits on the lettered round highway.

Bridge rounds are living their best lives with more startups looking at these extensions as an alternative to the more common full round. With fundraising more constrained than a middle seat on a Spirit flight to Tampa, founders are doing everything they can to move around and reach the ginger ale eying them from their tray table.

The number of bridge rounds, a form of financing that, well, bridges to the next big fundraise, has spiked over the first few months of the year. The popularity was especially pronounced among later stage companies, though even those at the earlier A and B rounds saw a 40% share of total investment through this method, the highest proportion in the 2020s.

While many companies taking on these deals are doing so with less favorable financial situations, raising less at a lower valuation and keeping the lights on is better than taking on some bigger, fatter dilution, particularly when 20% of full raises this year have been at lower valuations than the previous raise. This is the highest share of down rounds since 2018.

The full report from Carta also touched on the lack of IPOs recently, something we’ve been mentioning for months now. Companies like Stripe have delayed their own public offerings by taking in massive raises, including the $6.5 billion it raised just a few months ago. If there’s a pro to this stale environment, it might be that the number of unicorns has increased 500% over the last few years. Lord Farquaad would be fuming rn.

We’ve all had a few experiences with purchases we regret. Some people have a bad tattoo. Others get stuck with a house they end up not liking. I have so many worthless NFTs right now that I think if anybody tried to rob me, they’d feel bad and give me THEIR wallet.

Tiger Global’s purchase guilt comes from its $40 billion in equity in mid- to late-stage private companies. In case your personal balance sheet looks a bit different, these shares are a bit hard to move considering there is a limited pool of potential buyers and an illiquid market.

With a lack of exits among its portfolio companies, partly because of a just-mentioned IPO crunch, the investor is looking at ways to free up some of its cash and return it to its investors.

If you were a reader back in March, you might see that $40 billion number and think “yo, didn’t they just take a massive loss???” And you’d be right! Thanks for paying attention to the both of you who have been willing to put up with me for that long 🙂 

The company DID write down the value of its total startups holdings by $23 billion a few months ago, reflective of the harsh times. This stark difference actually reflects another of the challenges that the asset manager is facing as there is no clear valuation on many of these companies.

It remains TBD whether or not they manage to set up this pNASDAQ, but it’s worth noting that the problem is one that many startups have tried to address with pretty meh results.

The company has solicited the help of Evercore to help it find buyers. If any company can manage to figure the liquidity issue out and add a lil grease to the wheels, though, it’s Tiger. Rawr.

Do you really wanna live forever?

Well, Sam Altman and Brian Armstrong do.

While 2022 was the year of Pete Davidson and Elon Musk, this year seems to belong to Pedro Pascal and Sam Altman. Pledge your allegiance and declare it in the comments now. #TeamPedroAndSam btw.

In addition to the whole ChatGPT taking over the internet thing and the massive investment Altman made in nuclear fusion company Helion back in 2021, the OpenAI CEO has invested a whopping $180 million in startup Retro Biosciences, a company looking to prolong life and make dying … retro 😎 

The company is looking to extend the life of humans by ~10 years, a feat which it is confident it can achieve given its early success in rejuvenating mice using the blood of younger mice and prolly a Four Loko.

He’s not the only billionaire tech bro with an interest in going to EDM concerts for another few decades, either, as Coinbase founder and CEO Brian Armstrong has announced that his newest venture, NewLimit, has raised $40 million for a similar objective.

Armstrong and investor Blake Byers have each also committed an additional $110 million over the lifetime of the company. Though it has no CEO (???), the team is full of experienced scientists and execs, and the roster of investors is enough to give VCs the dirtiest of thoughts.

Is immortality this year’s trip to space? Is running a gazillion companies en vogue? How many children will have to be sacrificed to make this possible?

So many questions. Find out on next week’s episode of Billionaires in Midlife Crisis!

Don’t be a loaner. Actually, depending on your financial goals, maybe do?

Get the latest and interest-gratest news on the fintech industry every week and check out Fintech Friday:

I recently came across arguably the most squirm-inducing, cringy, absolutely hysterical TikTok video I have seen in my life the other day. For you to experience the same joy I found:

@fleetwood_cats

Unfortunately, I later learned that this video was a skit, but besides making me laugh way hard too wake up my neighbors at 3am, it also touches on a dark, dark time in many of our lives: fan fic.

Fan fiction has always been a popular medium for uhh… self expression?

Most underestimate just how popular the genre is, though. In fact, the success of some stories with the Wattpad crowd even allowed them to transcend rando blog post to reach the broader smutty fiction genre and eventually even the big screen. It was the fans out there to blame for 50 Shades of Grey (a Twilight knockoff) and After. Some even say that Spielberg got inspiration for Jaws from an obscure Nemo forum 🤷 

In an age where content is more valuable than ever, the success of these grassroots stories might be the market’s future, for fanfic for certain but potentially even for other mediums of storytelling including games and audio.

Enter Tales, a startup building the future of storytelling with a cutting-edge story-driven content creation and publishing platform that is democratizing access to all of the distribution and tools used by the pros.

Tales offers more than just a platform for publishing content. With rumored upcoming generative AI tools and tons of no-code visuals and customization models, the content and delivery itself is only limited to the imagination of the creators. And with this community? That means virtually limitless.

The formats themselves are also super unique, allowing for unparalleled immersion for the reader. Everything from notes jotted down in the Notes app to fully-fledged scripts to even game ideas and audiobooks can be built out and personalized to allow the reader to become an active member of the experience.

The ownership model is also far more favorable to the creators than is the traditional self-publish model. With an agent and publisher, when an author publishes a book, they only receive a dollar for every $10 in sales that the book brings in. Even the most successful of writers only earns about as much as an average hike-lovin’ tech worker.

Tales is on a mission to tear down the gates between creators and distribution, allowing fans to be the ones deciding who “makes it” on the platform unlike the traditional publishers who read, rejected, and nearly prevented even Harry Potter from ever being green-lit.

Tales only takes 20% of the profit on its platform, and it offers three flexible options for monetizing content for creators, whether through charging for chapters, offering full series discounts, or even gating exclusive content on top of free stories. The choice is completely up to the author.

To help creators make the best choice, the platform also offers an in-depth dashboard which allows users to gain every insight available for their content, such as seeing the conversion rate for using more/fewer choices (clicks) for users or for certain lengths and types of content. It offers all of the tools needed to optimize conversions for creators and therefore make the most money, all the way down to the paragraph.

Already, the company has more than 25,000 creators, many of whom come from more well-known, established companies like Marvel and Netflix. In case the content wasn’t enough, though, there are also social features which allow for a gamification element which keeps the platform sticky for readers.

In addition to comments and profile following for fan-writer engagement, there is also a friends feature which allows users to compare their in-story choices with those of their peers and be inspired by others’ libraries. If you see me reading an unhealthy amount of “WeWork Craziest Stories”, mind your business.

The company participated in 500 Global, a renowned accelerator which tends to be one of the first checks for its members. Since, the team has attracted the interest (and funding) of prominent names from SV like Anti Fund and Hustle Fund. However, even creators have recognized the potential which exists here and are betting on the company making it big. Jake Paul, Baron Davis, and even David Frankel count themselves among the company’s backers.

The team’s founder-friendly approach has allowed for its already-rapid growth. However, there are reasons to believe that its potential is just being scratched.

For one, the level of democratization which the platform provides creators is encouraging far greater diversity, tapping into a massive underrepresented market. Characters created on the platform show far more representation for women, POC, and LGBTQ characters than do published works. Various studies have found that increased representation in content is a rapidly growing sector, with some other story platforms finding a 191% increase in downloads for such pieces over the last few years.

There are also trends supporting digital as a natural next step for books. People’s lives are increasingly lived on their devices, and reading levels across the country are plummeting across all demographics. But yeah, let’s go and ban a book about fighting racism. That’ll save the problem.

A quick look at lists of best sellers shows how few books are hitting the same widespread acclaim of those in decades past. However, immersive games and mobile apps are seeing record levels of growth.

It’s not the demand for stories that is declining, though. Just look at how many people are paying for streaming subscriptions and spending hours on TikTok. I’m really @ing myself on both of those, but people are always craving more entertainment.

In fact, with the rise of antiwork movements and layoffs, you could argue that the demand for content has never been higher. It’s about time that mainstream reading adapts to the behavior of consumers, catching up to the 100 million people reading online fan fic.

I’m a big, big believer in mobile games. With the increasing penetration and access in more global markets than ever, the TAM is in the billions of users. Already, mobile games are a $116 billion industry growing at 15%. Advances in the technology (both graphics and in AI making development easier) will eventually help the quality of the content narrow the gap with console and PC games.

Though it eventually wants to become the future of publishing for all forms of written content, from novels to early scripts for future films and television, Tales’ most immediate competitors are the already-popular platforms in the fanfic and choose your own adventure games industries.

Kindle, Wattpad, and Radish have already become staples in the industry. However, Tales clearly offers more features and ownership for creators. And where theses creators go, the readers will follow. The importance of attracting these communities to platforms has never been more apparent.

There is also competition in games already popularizing the “choose your story” model, such as Episode, Chapter, and Lifeline. While these have a multiyear head start, they lack the star power and content creation abilities of Tales because of its massive base of creators. In the same way that Roblox has managed to grow without creating its own games, the power of community and user-generated content has the capacity to drive Tales past its predecessors.

The brains behind Tales are a formidable trio with a wealth of experience in the creative and tech industries. Co-founder and CEO Thomas Wu is a former investor turned multi-time game studio founder who brings his entrepreneurial acumen and gaming expertise to the table.

Editorial lead Erin McFarlane is a seasoned creative director and operations and strategy director in the creator economy space, lending her experience from the likes of Stitch Fix to help steer Tales' creative vision.

Finally, co-founder and CTO Shawn Chiao is an accomplished engineer with a track record in gaming and tech companies. He helms the technical side of things, ensuring the platform's AI and tech capabilities are nothing short of cutting-edge.

Tales is doing to fanfic what Beehiiv did to newsletters, building a content publishing platform that's set to take the world of storytelling by storm. With its unique blend of diverse formats, creator-friendly monetization, and a top-notch team at the helm, the company is poised to redefine the creative landscape and propel creators into a brave new world of boundless possibilities.

It’s only a matter of time before the shows we watch are ones which we first came across as screenplays though mediums like this.

Excited to read how Justin Lin follows up driving a car into space in Chapter 11 of Fast X Part 3, only on Tales 🙏 

TLDR: Tales is a content creation and distribution platform allowing creators to easily publish and monetize their stories, screenplays, games, and audiobooks and be rewarded for their work. The platform’s tools allow authors to quickly build a visual component, and they’re able to add “choose your story” features to further drive a compelling story. As the demand for digital story-driven content continues to bloom, platforms like this may very well be the future of books as we know them.

Cheers to another day,

Trey