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From The Editor’s Desk: What A Biden Presidency Means For The Startup World

Democrat Joe Biden’s election as the United States’ 46th president bodes well for a tech industry that has faced onslaughts on all sides by the Trump administration for the past four years….



Democrat Joe Biden’s election as the United States’ 46th president bodes well for a tech industry that has faced onslaughts on all sides by the Trump administration for the past four years.

The strong favorite of Silicon Valley, Biden is likely to reverse many of President Trump’s key policies affecting the innovation economy. He’s also likely to bring a measure of much-welcomed stability to the country’s leadership.

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The startup community was likely relieved, too, to see that one of their own will be in the White House come 2021: Ron Klain, an attorney and longtime Democratic operative who now serves as EVP at venture investment firm Revolution, will serve as Biden’s chief of staff.

Here are six key issues where the startup community is most likely to see Biden’s impact:

• COVID-19: As of this writing, the COVID-19 pandemic has claimed more than 242,000 American lives, the U.S. has broken a new daily record of 160,000 new cases, and infection rates are surging alarmingly in 46 states, making new economic lockdowns all but inevitable. Biden and Vice President-elect Kamala Harris have made getting a handle on the virus their No. 1 priority because, as the president-elect has said repeatedly, we cannot truly begin to rebuild our battered economy until we’ve brought the pandemic to heal. Positive news about the chances of getting an effective COVID-19 vaccine to market in 2021 also means the Biden administration will be tasked with distribution of that vaccine next year.

• Immigration: Perhaps no Trump administration policy has more aggravated Silicon Valley than its hard-line approach to immigration. President Trump has moved to curb immigration of all sorts, including the influx of highly skilled workers who come to the U.S. on H-1B visas every year. Under Biden, expect to see a long list of policy changes and reversals, including removing country-based caps for employment-based visas and supporting the Stopping Trained in America Ph.D.s From Leaving the Economy (STAPLE) Act, which would provide fast-tracked green cards for foreign students who receive a doctorate-level degree in a STEM field and a job offer in the U.S. upon graduation.

Immigration matters not only for companies hiring skilled foreign employees. Immigrants also account for an outsized portion of the startup founders in this country. A 2013 study by the National Venture Capital Association found that one-third of U.S. venture-backed companies that went public between 2006 and 2012 had at least one immigrant founder. Another more recent study by the group found that immigrants helped found more than half of U.S. unicorn startups.

• Clean tech and transportation: We don’t yet have a clear view of what, exactly, Biden’s approach to energy and transportation policy will be, but the former vice president has said that under his watch the U.S. will rejoin the Paris Climate Accord and work to drastically reduce its greenhouse gas emissions. He spoke in the second presidential debate specifically about beginning to phase out carbon-producing industries like coal while putting significant federal resources into developing renewable energy sources like solar and wind.

As Crunchbase News columnist Joanna Glasner also noted in her most recent article, many of the cleantech areas that Biden talked about early on in his campaign, including more pedestrian-friendly infrastructure and electric cars, are sectors that the startup world is heavily invested in.

• China trade and foreign policy: The Biden administration will have a fine line to walk when it comes to dealing with China. While Trump relied on ineffective and disruptive blunt-force methods like tariffs, the new White House team will have to confront China’s trade antagonism while ensuring that American industries and companies don’t become collateral damage in the standoff. That likely will mean a departure from both Trump’s heavy-handed tactics and the Obama-era approach, which was criticized for being too soft on the Chinese government.

“President-elect Biden and his advisors have largely recognized that the Obama-era China strategy relied too heavily on the notion that cooperation and integration would yield positive changes in Chinese behavior,” the Information Technology Industry Council, an industry advocacy group for the tech sector, noted in a recent white paper on the Biden-Harris administration. “Coupled with congressional and China hawks’ rejection of this thesis, the Biden-Harris Administration will need to show that they can confront China where necessary and cooperate when possible.”

• Antitrust and regulation: Few tech-related issues have received bipartisan support, but antitrust regulation is one of them. Lawmakers on both sides of the aisle have indicated they’re interested in reining in the technology giants. Ironically, as I’ve noted before, some of the moves aimed at curtailing Big Tech—such as discouraging companies like Google and Facebook from buying smaller companies—may actually cause more harm than good for the startup industry.

Biden has already tapped former administration officials with experience in antitrust enforcement as he assembles his transition team. They include Gene Kimmelman, who served in the Department of Justice’s antitrust division under President Obama and is now an adviser at Public Knowledge, a tech policy group that advocated for the DOJ to bring its antitrust case against search giant Google.

“The question isn’t whether a Biden administration will be more aggressive, but how much more aggressive” on antitrust enforcement against the tech giants, Michael Kades, a former Federal Trade Commission lawyer who now serves as director of markets and competition policy at the Washington Center for Equitable Growth think tank, recently told Bloomberg Law.

• Taxes: Democrats are likely to push for higher taxes on high earners and businesses, including via increased capital gains taxes, but they’ll only succeed if they can wrest control of the Senate from Majority Leader Mitch McConnell. And that remains a big “if” that hinges on the outcome of swing-state Georgia’s January runoff election for the Senate.

Above all else, stability

On almost every policy stance, a Biden-Harris White House is likely to look starkly different from the Trump administration. But more than any single issue, Joe Biden offers the promise of stability and predictability.

As venture investor Bradley Tusk said in a recent interview with Protocol: “I think the thing that everyone would love—by the way, I think this is even true on the Republican side to some extent—is a boring presidency that’s relatively calm. Not the anxiety and chaos that we have with Trump every single day. I think people really want that. Look: Companies, investors, markets, they like predictability. Volatility is a problem.”

Yes, Joe Biden is kind of a boring guy. But after four years of disorder and confusion, that’s OK.

Among Crunchbase News’ most popular articles last week:

  • Reporter Sophia Kunthara did an analysis of how much it costs to take a company public via an IPO. What she found: Underwriting fees alone can cost $7 million for a $100 million IPO. And that’s before law firm and auditor fees that typically add millions more to the price tag.
  • IPOs may be pricey, but that doesn’t seem to be a deterrent to the many companies that may still go public this quarter or in early 2021. Early last week, Sophia also spoke with investors and IPO experts on which companies we should expect to see go public in the coming months, and why the IPO pipeline is so robust as we head toward the end of the year. By the end of the week, DoorDash had also dropped its S-1 filing in preparation of a public-market debut and reports emerged that Instacart had engaged Goldman Sachs to lead a 2021 IPO.
  • Illustration: Dom Guzman



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    Square Rolls Up Afterpay As BNPL Market Stays Hot

    Payments platform Square plans to buy Afterpay, an Australian buy now, pay later service, in an all-stock deal valued at around $29 billion.



    Payments platform Square plans to buy Afterpay, an Australian buy now, pay later service, in an all-stock deal valued at around $29 billion.

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    Melbourne-based Afterpay is publicly traded on Australia’s ASX exchange. It currently counts more than 16 million consumers and nearly 100,000 merchants globally as users of its platform, including major retailers across fashion, homewares, beauty, sporting goods and other categories. The company, backed by investors including Tencent and Coatue, has raised just under $449 million in funding, per Crunchbase data.

    Afterpay competes in the increasingly crowded buy now, pay later space, which allows consumers to break up online purchases into smaller payments. Its biggest competitors include Stockholm-based Klarna, which has raised $3.7 billion from private investors to date, and Affirm, which raised $1.5 billion in venture funding before going public in January. Affirm’s share price has since plummeted to less than half of its 52-week high in February, but jumped 14 percent in morning trading on Monday after the Afterpay acquisition was announced.

    Another major player in the BNPL space includes fintech giant PayPal, which in 2008 purchased Bill Me Later, an early pioneer in the space.

    All told, venture investors poured $1.7 billion into buy now, pay later companies between 2016 and 2020, per Crunchbase data. A Bank of America survey late last year predicted the BNPL market was poised to “grow 10-15 times by 2025 to eventually process between $650 billion and $1 trillion in transactions.”

    Venture investors like the BNPL business model because these startups essentially have two revenue streams, Kamran Ansari, a venture partner at Greycroft, which invested in e-commerce pay-over-time financing tool Credit Key, told Crunchbase News earlier this year.

    The first revenue source is the actual transaction, when the merchant typically pays between 2 and 3 percent of the purchase price to the BNPL service in exchange for being able to offer that convenience to its customers. The second revenue stream for the BNPL service is interest payments from borrowers.

    Square’s shares have surged 105 percent over the past year amid a boom for digital transactions such as its mobile Cash App. It also reported second-quarter earnings on Sunday, revealing that revenue had more than doubled from the same quarter the previous year, to $4.7 billion.

    San Francisco-based Square said it plans to integrate Afterpay into its Cash App and seller ecosystem.

    “By combining with Square, we will further accelerate our growth in the U.S. and globally, offer access to a new category of in-person merchants, and provide a broader platform of new and valuable capabilities and services to our merchants and consumers, Afterpay co-founders and co-CEOs Anthony Eisen and Nick Molnar said in a statement announcing the deal.

    Illustration: Li-Anne Dias.

    Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.

    Another major player in the BNPL space includes fintech giant PayPal, which in 2008 purchased Bill Me Later, an early pioneer in the space.



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    Cryptocurrency Experts Say These 4 Factors Are Driving Change In The Industry

    The COVID-19



    The COVID-19 pandemic accelerated acceptance of digital currencies like Bitcoin and the underlying blockchain technologies that power them. And while Bitcoin volatility continues — with the currency hitting its lowest point in months this week — investors are optimistic momentum will continue even as the world slowly starts to return to normal.

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    The crypto and blockchain sector has attracted nearly $12.4 billion in venture investment into U.S.-based companies since 2017 and $19.4 billion globally, Crunchbase numbers show. In fact, data so far for 2021 shows dollars were nearly 3x from 2020 for both global and U.S. investments. But the sector also faces continued opportunities and challenges going forward, including more widespread adoption and new regulatory pressures from governments around the world.

    Case in point: Earlier this month, El Salvador became the world’s first country to adopt bitcoin as legal tender. At the same time, Thailand’s Securities and Exchange Commission ordered its exchanges to delist meme coins, such as Dogecoin, as well as NFTs, exchange tokens and fan tokens, saying those tokens have “no clear objective or substance or underlying [value].”

    Stepped-up efforts by China’s government to rein in the crypto space had the largest impact on valuations. On Friday, authorities in China’s Sichuan province, one of the country’s largest mining centers, reportedly ordered cryptocurrency miners to shut down their operations,

    Cryptocurrency experts say these kinds of polarizing events put a spotlight on the space.

    “Blockchain was accelerated five years in the pandemic,” according to Alon Goren, founding partner at blockchain fintech venture studio Draper Goren Holm.

    Here’s a closer look at four factors that are likely to drive big changes in the cryptocurrency space in years to come.

    1) Mainstream adoption

    Cryptocurrency startups are working to make the process of using, buying, trading and finding digital currencies easier, driving greater consumer awareness and adoption.

    Increasingly, mainstream adoption of cryptocurrencies is “crazy important” to the growth of the sector, according to Goren. Still, some of that adoption has come from less serious applications of digital currencies, including “meme coins” — assets based on jokes but with no real value other than those given to them by social indicators — a phenomenon that also concerns Goren because they reinforce the notion that cryptocurrency isn’t legitimate.

    “Publicly traded companies can show quarterly earnings, you can follow the CEO on Twitter and you know their opinions on things,” Goren added. “In crypto, you don’t have those kinds of things to show legitimacy.”

    Meanwhile, Hsuan Lee, CEO of Portto/Blocto, said the adoption of NFTs — non-fungible tokens — is one of the biggest factors that has changed the industry in the past year. Portto is a Taiwan-based company that aims to make blockchain simple for users and developers.

    Although NFTs have been around since 2017, they were initially not appealing for typical use, but that all changed when they became approachable by retail investors, including when sports organizations got involved in selling digital clips and cards, he said.

    “The National Basketball Association doesn’t market itself as a blockchain, but offering collectibles on it appeals to fans,” Lee said in an interview. “With those kinds of applications, even introducing a music NFT would potentially attract existing music fans. With that kind of people joining the party, it will make crypto more mainstream.”

    Muneeb Jan, a cryptocurrency and fintech expert operating out of Hong Kong, said the investor base for cryptocurrency is still largely retail investors, while major financial institutions are in the discovery phase.

    Still, new companies are announcing on a daily basis that they will accept bitcoin and other cryptocurrencies, and banks are facing crypto investor demand to get more involved in the space, Jan said.

    “Crypto funds are increasingly viewed as an asset class,” he said in an interview. “There is not much of a use case currently, but they want to jump onto the bandwagon. If more large institutional investors come in, there will be price stability, and it will improve the legitimacy.”

    2) Price volatility

    Jan believes two of the biggest headwinds slowing more mainstream cryptocurrency adoption are price volatility and the fact that bitcoin as a mode of payment is not yet completely viable due the current inability to quickly process transactions.

    Bitcoin has been particularly volatile in recent days. After surging above $40,000 about a week ago, the currency fell below $30,000 this week, recovering to around $32,400 as of Tuesday afternoon. Over the past year, the price grew to a peak of more than $60,000 before falling back to half that at the end of May.

    Just processing transactions is not a sustainable use long-term due to the expensive transaction fees associated with it, even though people want bitcoin to be able to do that, he added.

    “Other cryptocurrencies are not volatile because the community investing in them have come to a consensus on the price,” Jan said.

    Lee said price volatility will be aided by regulations, especially as cryptocurrency is adopted more broadly. Price volatility will only be fixed with time, he said.

    “This is a very young market and it has attracted attention, which makes prices volatile,” he added. “It can be dangerous to get into a space without established regulations. Being at an early stage, there is a lot of imagination that can be had for these cryptocurrencies. At the same time, when bad news comes out, it can easily dump harder on crypto than other companies.”

    3) Regulatory pressure

    Regulations proposed for cryptocurrency have gained steam since the beginning of 2021.

    Among them: The U.S. Department of the Treasury announced in May that it will require any transfer worth $10,000 or more to be reported to the Internal Revenue Service as part of an effort to curb tax evasion.

    “I’m happy to see regulations come into place because it will be good for the industry overall,” Lee said. “It will minimize possible scams or malicious use cases and make it better for everyone to get on board.”

    The government is also examining possible regulations of cryptocurrency exchanges with a focus on protecting investors and preventing market manipulation, as well as financial account reporting as it relates to cryptoasset exchange accounts and payment service accounts that accept cryptocurrencies.

    Goren called a focus on Bitcoin, Etherium and the public markets “a double-edged sword.” Any real value is eroded when inflation occurs, but Bitcoin is a decentralized currency, so its value holds up well against inflation.

    And the more institutions that participate, the more legitimacy it creates so regulators are less likely to fight it, he said.

    “Most lawmakers know crypto is not used by criminals, but the people who put them in office are large financial institutions that are cheering when they say that happens,” Goren said.

    While he understands why there have to be IRS reporting requirements for tax purposes, he disagrees when government regulations don’t consider Bitcoin a currency, but then treats it like cash.

    By instead treating cryptocurrency as a capital asset, the IRS is taxing capital gains, which could also have implications on the venture capital world, he added.

    Goren said other countries have a bit more clarity, but there is still misunderstanding in the U.S. when it comes to how cryptocurrencies should be reported financially, and it won’t change until there is clear categorization of cryptocurrencies.

    4) Beyond Bitcoin

    Rocketfuel Blockchain founder Peter Jensen said it will take time for the public to understand and be comfortable with cryptocurrency, much as people had to acclimate to the idea of online banking and ATM cards before that.

    Jensen’s company, based in San Francisco, processes crypto payments. He believes people are distracted by the price volatility of Bitcoin, although it is just one out of some 200 cryptocurrencies.

    “We need to move people’s minds away from Bitcoin because who knows if cryptocurrency will survive,” Jensen said in an interview. “There are many cryptocurrencies pegged to the dollar, which means they have zero volatility. If you take those and use them for payment, then you get the benefits of that.”

    Global developments — such as El Salvador adopting cryptocurrency and both Sweden and Dubai issuing their own digital currencies — bring promise for the future of the industry, and Jensen predicts the U.S. will eventually issue a digital version of the dollar.

    He sees a world where when you get a job, you will have the choice of receiving your paycheck in dollars or cryptocurrency, and there will be no volatility because those funds will be guaranteed by the U.S. government.

    “We feel that the U.S. has an opportunity to be ahead, even though China is adopting cryptocurrency faster, as well as those with less-efficient banking systems,” Jensen added. “If we don’t stay in front, we are going to be last.”

    Crunchbase Pro queries listed for this article

    The query used for this article was “Global Cryptocurrency Companies,” in which “Bitcoin,” “cryptocurrency” and “virtual currency” were the organizational industry search terms. The data was then separated out by changing the headquarters location to “United States.”

    All Crunchbase Pro Queries are dynamic with results updating over time. They can be adapted with any company or investor name for analysis.

    Illustration: Dom Guzman

    Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.

    Stepped-up efforts by China’s government to rein in the crypto space had the largest impact on valuations. On Friday, authorities in China’s Sichuan province, one of the country’s largest mining centers, reportedly ordered cryptocurrency miners to shut down their operations,



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    Zenefits Payroll Glitch Results In Delayed Paychecks For Small-Business Employees

    Employees of several small businesses weren’t paid Friday after payroll and benefits platform Zenefits closed for the Juneteenth holiday and experienced a glitch, two people affected told Crunchbase News.



    Employees of several small businesses were paid late Friday after payroll and benefits platform Zenefits closed for the Juneteenth holiday and experienced a glitch, two people affected told Crunchbase News.

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    Zenefits provides tools for businesses to handle HR, onboarding, benefits and payroll. It’s used by many small and medium-sized businesses. The San Francisco-based company has raised at least $584 million in known venture funding, per Crunchbase data, and was most recently valued at $4.5 billion by private investors when it raised funding in 2015.

    On Friday, several people took to the comments section of a Facebook post Zenefits made in honor of Juneteenth, which this week became a federal holiday celebrating the end of slavery in the U.S., to complain that their employees hadn’t been paid, despite their respective companies processing payroll.

    The post was soon deleted.

    John Bazyk, CEO of Connecticut-based security system company Command Corp., told Crunchbase News that he realized Friday morning that his company’s employees hadn’t been paid after one of them contacted him.

    Command usually sees a tax withdrawal and employees’ net pay come out of its bank account on Wednesday, but this week only the tax withdrawal was taken on Wednesday, Bazyk said.

    The payroll amount was taken out this morning, but had yet to be disbursed to employees as of 4 p.m. Eastern, he said.

    Bazyk said he spent four hours Friday trying to deal with the issue, and hadn’t received any communication from Zenefits such as an email alerting him of the issue.

    Some employees have bills that automatically debit from their bank accounts, he said, and not being paid could put them in a bind.

    “The employees are upset at me, they think I didn’t run payroll,” Bazyk said. “Some of these are new employees. They’re joining a new company and it’s like, ‘Wait I’m not getting paid?’ ”

    Usually preceding a holiday, Zenefits will remind customers to run payroll early, Bazyk said, but that wasn’t the case this week. He noted that he understands it’s a unique situation — with President Biden on Thursday signing legislation that made Friday a new federal holiday in celebration of Juneteenth — but the situation and lack of communication from Zenefits were frustrating.

    “Even if they make it right, we’re probably going to leave them because it’s an unacceptable mistake,” Bazyk said.

    It’s not clear how many of Zenefits’ customers or their employees were impacted by the error.

    Nancy, a controller and HR administrator at a company in the Washington, D.C., area, said she was notified by two employees Friday that they hadn’t been paid. Around 2:15 p.m. Eastern, she saw a notification in the Zenefits portal acknowledging the issue. Nancy did not want to share her full name because she was not authorized to speak on behalf of her employer.

    “Businesses can make mistakes,” she said. “Whatever caused the debit to not go out is not good. But then to not be there to answer what happened … that’s bad.”

    A Zenefits spokeswoman said in an email to Crunchbase News that the issue causing the payroll delay was resolved, and that employees would receive payment by 5 p.m. Pacific time.

    “Today, Zenefits experienced an issue that resulted in a delay for some employees’ direct deposits,” the statement read. “This has been resolved and we can confirm that employees who did not receive their direct deposit this morning will receive it today by 5 PM PT. All employees will be paid and the funds have already been processed. We are currently waiting on the banks to send them out this afternoon.”

    Another Zenefits spokeswoman said in an email at 2:40 p.m. Pacific time that the issue was resolved and affected employees had been paid.

    Illustration: Li-Anne Dias

    Editor’s Note: This story was updated after it was first published to reflect that payment for affected employees had gone through late Friday afternoon, after Crunchbase News first spoke with sources.

    Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.

    On Friday, several people took to the comments section of a Facebook post Zenefits made in honor of Juneteenth, which this week became a federal holiday celebrating the end of slavery in the U.S., to complain that their employees hadn’t been paid, despite their respective companies processing payroll.



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