Reddit & Shein Strut to IPO Spotlight 🚀

This is The Startup Breakdown, the newsletter where we learn, laugh, and love startups. By joining this growing community of hundreds of future startup aficionados (think i spelled that right?), you're getting a beachside view of the ocean that is the startup and VC scene. This ain’t your grandpa’s newsletter, so prepare yourself for an inbox full of 4/20 jokes and Succession references.

Happy Tuesday, folks.

Now that we have all had a sec to digest our Spotify Wrapped, I have two requests:

1. What is the most chaotic combination of songs/artists/podcasts that you can imagine showing up on a single Wrapped summary? Bonus points if it’s on yours.

2. I need a better excuse for why I can’t show people my own horrendous Wrapped… Not proud of how many hours I listened to “Harry Potter ambience” for hours on repeat.

Market Moves

It takes a while for the pigeons to get from Wall Street to Main Street, Cupertino, so it often takes a while for the trends we see in the public markets to ripple through the startup markets. So while it might take a sec for some of this news to truly take effect, much like the Fed’s “Forward Guidance” mantra, there are some stories that might subtly creep their way into the mindsets of early investors.

Reddit & Shein Strut to IPO Spotlight 🚀

First off, the platform enabling Meme Stock Mania might soon be getting a ticker of its very own.

Tech enthusiasts were doing their best college football flight tracking impression when rumors began to swirl that Reddit might be preparing for an IPO, and the noise only amplified when the social platform launched its rebrand, complete with a new Snoo, which is anything but coo’

Assuming the rumors are true, it will be interesting to see where the company looks to debut. The platform made headlines for a far less positive story this summer when Fidelity cut the valuation of its stake in Reddit by 41%, implying a valuation of $8.85 billion. Fidelity invested in Reddit’s $1 billion raise in 2021 at a $15 billion valuation…

Meanwhile, every aspiring influencer’s favorite source for cheap, “stylish” clothes is also considering going public. Shein, the fast-fashion mogul (think Spirit Airlines for the clothing space), is also strutting on $12 heels towards an IPO. Valued at a whopping $66 billion, Shein's U.S. debut is likely to be the center of much attention. Investors are going to get all 🤤 over the company’s low costs, something which becomes particularly considering the company is the largest employer of children in all of China.

Feel free to skip this paragraph if you’ve heard it before, but IPOs actually play a major role in the startup ecosystem. Investors provide capital with the expectation that they will get a nice return, something which can only be realized through some sort of exit (think acquisition or IPO, etc).

Not only does a healthy IPO ecosystem signal to investors that there will be opportunities for them to actually cash out, but more importantly, it also frees up billions in capital which can go back into investing in companies in their earliest stages.

Finally, IPOs play the role of pace-setters, providing signals on how the market is valuing certain types of companies, assumptions and perspectives which get passed down and applied to same-industry startups. Given the drama around X and the various Twitter alts that have popped up, Reddit’s public reception will be telling on how big money investors view social media as a business.

The Name’s Bond… US Fixed Income Bond

If you’re reading a newsletter about companies that have a 90% chance of failure, then you prolly don’t pay much attention to the bond market.

However, in case your grandpa tried to bring them up at Thanksgiving and you didn’t know what to say and you want to be better prepared when the time comes later this month, here’s what you need to know, spun to kinda sorta relate to startups.

Much like the Dow, the US fixed income market is on a hot streak, with the Bloomberg US Aggregate Bond Index up 4.3% in November. Quick refresher, bond prices and yields are inversely correlated, so the rise in price signals that investors are accepting lower yields and anticipating lower interest rates in the future, something Jerome Powell hasn’t exactly ruled out.

For startups, lower interest rates make it cheaper to borrow money, in some cases directly but more often from investors who have access to much cheaper capital and might be a bit more risk-on as the pool of safe assets with remotely attractive returns dries up.

All of this to say, this might actually be a positive for founders? Don’t mean to jinx it, but things are kinda sorta looking up a tiny bit?

You know. If AI doesn’t take over first by then.

Are you tired of trying to sift through the noise to determine what really matters each week?

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Cheers to another day,

Trey