November 9, 2022

Today's Topics

Hi! Things are looking tighter than anticipated as midterm results across the country continue to roll in. Here are your non-political stories for the day:

  • Shockwaves. The crypto world is reeling from the fire sale of exchange FTX.
  • Flu. Influenza season is hitting earlier this year.
  • Dry powder. VCs are still sitting on mountains of cash.
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The crypto world was shaken yesterday as Binance’s CEO, known as “CZ”, announced the acquisition of their competitor, and the third-largest crypto-exchange, FTX.

This was not a long, or particularly friendly, courtship — and it has sent shockwaves through the world of digital assets, with Bitcoin, Ethereum and most major cryptocurrencies falling sharply in the last 24 hours.

Crypto clash

CZ and FTX founder Sam Bankman-Fried have clashed on social media for many months. That rivalry escalated over the weekend when Binance announced they would be selling their ~$530m of FTT, the native token of the FTX exchange, citing fairly cryptic “recent revelations”. Over the next few days, FTX faced urgent solvency issues — halting withdrawals from the platform on Tuesday, a death knell for confidence in any exchange — with investors fearing a repeat of the TerraUSD collapse from May.

That left FTX, which itself had been a white knight to troubled firms over the summer, to turn to one of the few companies large enough to help solve what was described as a “significant liquidity crunch” — its rival. Binance will now act as a backstop for users, though the situation remains incredibly fluid.

This saga marks an incredible fall from grace for FTX. Having been backed by prominent investors like Sequoia, and celebrities such as Tom Brady, FTX was most recently valued at $25bn in October. Given the last-minute nature of this fire-sale, that valuation has almost certainly evaporated, with any eventual deal likely to be for pennies on the dollar.

Influx

US hospitals could have a tough winter ahead, as flu hospitalizations reach their highest point since 2010 according to the CDC.

The early-season outbreak comes as health workers continue the ongoing battle against Covid and the rise of RSV, with officials warning that many hospitals ‘are at or near capacity’.

Pandemic-popularized precautions such as social distancing, regular handwashing, and wearing face masks, led to a remarkable period which, according to lab data compiled by the WHO, saw influenza infections almost disappear for 18 months. Influenza did eventually return in late 2021 and — unusually — stuck around into Spring 2022, though infections remained relatively low compared to previous years.

The early and extreme spikes in this latest outbreak, however, have led to speculation that the US could be in for its most-severe flu season in a long time. Last week, influenza A specimens (the infection’s most-common strain) were up to 7,568 — the most in a single seven-day period since March 2020.

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There’s a common refrain in entrepreneurial circles that some of the best companies are built in the toughest of times — now those tougher times appear to be coming.

Keep your powder dry

The last decade has seen record investments from venture capital investors to startups, but things are starting to turn. The latest data from PitchBook reveals that venture capital (VC) investment in 3Q 2022 was down ~$90bn, more than 50% on the same quarter last year.

Though investors wrote smaller checks in the third-quarter, VC funds are actually still awash with cash. Data from Preqin, reported on by the WSJ, shows that VCs are sitting on an astounding $500bn+ of raised cash that is not yet invested, known as dry powder in the VC world.

Choosers can’t be beggars

VCs are understandably cautious about future investments. High-profile unicorns like Robinhood, Rivian and Doordash have been crushed in public markets, and VCs are becoming increasingly selective on the companies they back, as sentiment has pivoted from "growth-at-all-costs" to "stuff-that-makes-money".

The flip side of the coin is that for founders building genuinely innovative companies, with a sustainable business model — or at least a credible path to one — there's still some $500bn of capital sitting on the sidelines, waiting to be put to work.

More Data

• Share the big screen: AMC and Zoom are teaming up to turn theaters into huge video meeting rooms.

• John Foley, Peloton co-founder and former CEO, has raised $25m for his new custom-cut rug company.

• Yes, you do have less leg space on your flight — a look at the airline industry’s shrinking seats.

Hi-Viz

• Public transport usage is still down some ~40% on pre-pandemic figures in New York.

• Think you could help the world reach net zero by 2050? Play the interactive Climate Game here.

Trendlines: As America elects its new Congress, including its first ever Gen Z member, what % of the current House is over 70, is it A, B or C? [Answer below].

Answer here.

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