Is TikTok in regulatory trouble? | Equity Podcast

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this episode is sponsored by Morgan Stanley atwork visit morganstanley.com assessment to get your free transaction Readiness assessment [Music] today hello and welcome back to equity The Tech runch podcast about the business of startups where we unpack the numbers and the Nuance behind the headlines this is our show looking back at the weekend and looking at the week ahead but today is Tuesday because yesterday was a holiday in the US so good morning this is Alex today is February 20th 2024 and we have a banging show for you today on the Pod we have stocks and crypto a very cool series C Tik Tok in trouble Walmart buying Vio a massive ransomware win the future of Maria DB and then AI talent in San Francisco let's go let's start in the world of money and that means stocks Shares are mixed in Asia but up in China where a key loan rate was cut more than anticipated as the country looks to bolster its economy this could be the starting gun of a global change in interest rates heading down stocks are largely higher in Europe today and they are set to open lower here in the US to kick off this short week's trading on the earnings front fewer names than last week you're very welcome today we're going to hear from paloalto networks work Eva and Sprout social Wednesday will bring us numbers from Nvidia and Etsy Wix 59 digital ocean Olo and Vimeo and then Thursday we'll hear from into it block AKA Square new bank grab carvana and Fiverr I have my eyes on Sprout social for SAS Nvidia for AI chips digital ocean for cloud storage and then of course new bank for fintech next up crypto where there is once again good news to report second week in a row this time Bitcoin is up nearly 5% in the last week to just over $52,000 and ethereum's token is up nearly 10% in the last week to just under 3,000 or 2900 if you want to be specific spot trading volume is trending back up after a material dip to start the year and just returning the clock a little bit coinbase earnings last week were a banger and some are saying that the crypto win is over to kick off my favorite part of the show aka Big news that matters I want to talk about a French startup called planety it just put together a $48 million series Z so a very Hefty round and it was led by infraa Capital Partners while existing investors credit Mutual Innovation ravia and BPI France's digital Venture fund also participated what does the company do well well it's building vertical sass for hair salons Barbers and similar personal grooming businesses I love a vertical sass deal because it just feels so start upy find an industry that's using old technology build them a bunch of software and bring them out of the stoneage and it turns out that planet really was on to something because today more than 40,000 businesses use its software that adds up to a lot of tasty recurring Revenue but planet has something else up its sleeve namely payments now stripe which is the vendor that planet uses for payments has a bit of a white paper on the company so we got some more stats stripe claimed that planet had 8 million monthly users across its service back when it had 35,000 business customers so now with more than 40 that figure has likely risen and that many monthly users means lots of payments which means lots of revenue for the startup toast which has a somewhat similar model albeit more restaurant focused than hair of course is worth about $12 billion today for an example essentially vertical SAS plus payments is just a good business model and if you want even more data to make that point just ask Shopify turning the page let's talk about Tik Tok the company is once again in trouble and this time the European Union is formally investigating the company's compliance with the Block's Digital Services act or DSA the investigation of Tik Tok is looking at the protection of miners advertising transparency data access for researchers and riskmanagement of addictive design and potentially harmful content that's what tech runch says now what is the DSA it's the eu's online governance and content moderation rulebook which since Saturday has applied broadly to thousands of platforms and services but scale here matters because since last summer larger platforms like Tik Tok have faced an extra set of requirements in areas like transparency and risk and it's those rules that the video sharing platform is now being investigated under why do we care about this Tik Tok is in trouble everywhere well penalties for confirmed breaches of the DSA can reach up to 6% of global Revenue so if Tik Tok does get into trouble here it's going to be very very expensive Tik Tok of course does face regulatory pressure around the world including concerns about its parent company and possible government influence add the new DSA matter to that list next up Walmart is buying Vio and I know you're thinking to yourself why is this on Equity but don't worry I'll explain to kick things off American retail giant Walmart is going to drop about $2.3 billion for Vio the well-known maker of televisions however this deal is not designed so that Walmart can juice more margin from selling consumer Hardware no instead it's all about ads and yes you can sign now I pulled data from Walmart's latest earnings report that it dropped this morning and I can put this all into perspective for you the company grew 5.7% in its last quarter not bad not great it's kind of okay given where the global economy is however Walmart's Global advertising business grew by 33% in the quarter even faster than its reported 23% e-commerce growth so why does that matter well not only are ads driving key growth for Walmart they're actually higher margin than it's Trad business and are making the overall company's gross margins improve so it makes sense to invest more in advertising work but why do we care about a TV deal on Equity simple one thing we've noticed in recent years is how important Advertising based incomes and profits are for Tech Giants regardless of where they start in that sector so long as they interact with consumers they kind of become ad companies in time Microsoft is putting ads into Windows Amazon makes a ton of money on Advertising instacart makes a lot of money off ads Uber makes a lot of money off ads the list just goes on and Walmart it seems is no different it's just coming to the same conclusion from a different sector starting point maybe we should update our thinking to the point that any company that offers a screen of sorts is going to eventually make its user experience more cluttered by stuffing it with ads and the reason is simple who doesn't want more profit is your company planning to go public or conduct a shareholder liquidity program within the next 18 to 24 months did you know that proactively planning for your next private company liquidity event or IPO can help you maintain greater control over timelines and outcomes Morgan Stanley at work believes that when you have the right technology and systems in place working in harmony leading up to a transaction you can prepare and execute with more accuracy and ease visit morganstanley.com assessment to connect with their issuer strategy and Excellence team for a free assessment to find out if your company is transaction ready again that's morganstanley.com assessment to get your free assessment today and then how about some good news I have good news from the ransomware front which is probably a sentence you've never heard before but hear me out a coalition of international law enforcement agencies this includes the US's FBI and the UK's National Crime agency have disrupted the prolific ransomware game called lock bit woo good news in an announcement on Tuesday EUR poll confirmed that the months-long operation has quote resulted in the compromise of lock bit's primary platform and other critical infra that enabled their criminal Enterprise in practice that worked out to a couple dozen servers across Europe UK and the US and critically I think the seizure of more than 200 cryptocurrency wallets why do we care about this well since it first emerged as a ransomware as a service operation back in late 2019 techwrench writes that lock bit has become one of the world's most prolific cyber crime gangs and according to the US's Department of Justice lock bit has been used in approximately 2,000 ransomware attacks against victim systems in the US and worldwide which earned it and this kind of shocked me more than $120 million in Ransom payments that's a lot of money a lot of incentive to behave poorly now I think that lock bit and other forms of ransomware are one of the reasons why we have seen cyber security software companies grow so much in recent years and up until the Venture bus raised so much Capital I'm always just kind of curious about the cause and effect here like let's say lock bit gets taken down and fully destroyed does that mean that we have less of a market for cyber security products or more given the long-term threat Horizon but enough about regulation and cyber crime let's get back to Deals Maria DB this is a company that built its business as a fork of MySQL it raised $230 million while private it eventually went public via a spa in late 2022 and since then well as with many Spa launched companies Maria DB has seen its value evaporate why well its earnings reports have left quite a lot to be desired and it's currently worth too little to remain a public company on the New York Stock Exchange you have to have a $50 million market cap for that and Maria DB does not but there is a potential buyer on the horizon California based K1 investment management has submitted and I quote an unsolicited non-binding indicative proposal that would value the company at about 37 million dollar so this is a mess and not the way we thought this company's public life was going to go and sure spacks have been bad but oh my God poor Maria DB you feel bad for it but I do think there's something else here that really matters this deal I believe could indicate that we are going to see more investors looking to pick off cheap assets before they potentially get more expensive ensive later in the year when interest rates come down so kind of a sad note for Maria DB and its backers and employees that is struggling this much but maybe good news for deal volume in the back half of the Year closing out I want to talk about a Wall Street joural report that came out over the weekend and drove a good amount of chatter over on Twitter essentially it said that AI is bringing talent and investors back to San Francisco the gist here is pretty simple the pandemic Shook Up where Tech folks lived and worked but now Founders and their backers are heading back to the city by the bay why well customers talent and I would say simple proximity to the epicenter of AI work in the US and perhaps the world just those handful of reasons now I lived in San Francisco through much of the last tech cycle and I have to admit that I have a huge soft spot for the city and the Bay Area more generally but something I learned while I was there and something that people forget is that San Francisco is a Boom Town it booms and then it busts people flock there and then they leave and it happens in waves that happen again and again and again and again for now however today as the Venture Market itself contracts around the world it's getting back to its own concentrated roots and that means Northern California in 2024 is kind of once again the NorCal of years past this time we're just focused on AI and that is our show for this lovely start to the week but if you need even more Equity before we are back in your ears you can check out Equity Pond over on X and threads and if you want even more of me well I am Alex over on X this show has two sister shows found all about founder stories and Chain Reaction digging into the future of the crypto economy we'll talk to you soon equity's back on Wednesday we're back on Friday bye Equity is hosted by my myself Alex Wilhelm and Tech rench senior reporter Mary an aeto we are produced by Teresa loans solo with editing by Kell Bryce Durban is our illustrator and a big thank you to the audience development team and Henry pette who manages Tech rench audio products thank you so much for listening and we'll talk to you next time