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This week our work begins in China, digs into African startup activity, tackles China once again, takes a much deeper dive into the Latin American startup ecosystem, and takes a second look at the Robinhood IPO. In other words, there really wasn’t much going on!
You must have been surprised to see the huge drop in Amazon’s stock on Friday. After all, the company posted revenue gains of more than $113 billion during the quarter. And AWS, its public cloud business, seemed to tick up well.
But investors expected higher growth and priced the Seattle-based e-commerce player accordingly. When Amazon missed revenue expectations and forecast Q3 2021 growth “between 100% and 16%” compared to third quarter 2020, investors dumped its stock.
But as some financial press is noting, it’s not just Amazon that’s taking the stick from investors. Etsy and eBay also fell this week. It appears that investors are speculating that the period of turbocharged growth in e-commerce is at least slowing down due to the COVID-19 pandemic, and may in fact be coming to an end. This means that valuations are going to reset in many companies, including startups.
Not that every company is slowing down after suffering in the early stages of the pandemic, Duolingo managed a strong opening week as a public company despite slowing growth. But delta variant or not, investment classes are changing their market structure. We’d be smart to keep that in mind.
This is the product, idiot
Something is stuck in my teeth this week about how much Robinhood has changed the game with regards to consumer investing. Of course, this week was mostly about the company’s IPO and its early business performance. But, buried in its final S-1/A filing there is new evidence of Robinhood’s cultural influence.
At the top of the US consumer investing in Unicorn’s filing are a pair of figures. They look like this:
Dang, you’re thinking, that’s a lot of funded accounts and monthly active users. But then, those are the March 31, 2021, numbers. they are old. In the same filing, Robinhood indicated that the number of its funded accounts increased to 22.5 million in the June 30 quarter. That is, an increase of 25% in the same quarter!
Naturally, there were some things going on in the second quarter of this year that won’t happen again, but it’s still a good result.
early robinhood investors index of mass hammer Sent on a comment in the wake of the public offering of its investment, arguing that the company is part of the work being done by tech companies to shake up financial services. Companies like Robinhood, he wrote, “are not just a fresh coat of paint for the same old financial products.”
I think it is correct. And this is very damaging for the existing players who are still in the market with dated websites and mediocre mobile experiences. Can you imagine getting Gen Zer to swap Robinhood or eToro or M1 Finance for John Hancock? Toothpaste, as they say, is not going back into the tube.
How can Fidelity and Vanguard convince Robinhood users to switch to their services? Will they be able to, or have an entire generation of investors abandoned traditional finance players altogether? Robinhood bullies must think so, and I really can’t find it to fight from perspective.
I don’t know how Robinhood will perform in the coming quarters, but it feels like — MAU numbers from Robinhood, AUM figures from M1 and so forth — that fintech startups stole several marches on your trusty 401(k) provider. A market that I’m sure fintechs will dig deeper into soon.
Rounding out Africa, what about some of the July data? Our exploration of the continent’s strong H1 2021 performance kicked off in June, so let’s add some data. Per Africa-publishing The Big Deal, African Startups Raised $308 million in 71 deals in the quarter. That’s a run rate of about $3.7 billion. Or in simpler words, African startups are still on pace for their best year ever when it comes to raising venture capital.
Hug, and get vaccinated.