Alternative Investing Report - November 4, 2024

*as of 11/3; Sources: S&P, BTC, FTSE, DJRE, CL50

Coinbase, one of the biggest crypto exchanges in the U.S., reported weaker than expected earnings for Q3 and saw its stock fall by 15% in the aftermath. Robinhood, which has expanded heavily into the crypto market, also saw disappointing earnings and its stock price fell by double digits. Meanwhile, Kraken, another major crypto exchange, laid off 15% of its workforce and appointed a new co-CEO.

➨ TAKEAWAY: While Bitcoin approached all-time highs last week, the poor earnings and layoffs point to the struggles crypto companies are having. Crypto VC funding fell by 20% in Q3, as many investors have decided to just allocate to Bitcoin itself rather than digital asset startups. One of the potential dangers of Bitcoin’s dominance in the industry is that nothing else will develop in its shadow, as many startups are having difficulty getting traction and generating revenue.

Tech layoffs hit their lowest level in two years, as the number of employees laid off in October fell to 3,000 from 8,000 last year. In Q3, 123 tech companies had layoffs, which was a 45% decline from Q3 2023. This mirrors the trend in the broader economy, as U.S. layoff announcements dropped 23.7% and hit a 3-month low last month.

➨ TAKEAWAY: Fewer layoffs are a promising sign for startups, as it shows the industry is stabilizing after the market downturn in mid-2022 led to heavy downsizing. If startups are reaching an optimal headcount and getting their spending in line, they are less likely to fail. As investors prioritize a path to profitability over growth, companies can focus on improving their existing business rather than expanding at all costs.

In this episode of Smart Humans, guest host and Vincent CEO Eric Cantor talks with Vincent co-founder Slava Rubin about his investment philosophy, his allocation to private markets, thoughts on early-stage startups and why he loves entrepreneurs.

🏡 Promising real estate markets: The Urban Land Institute named Dallas as the top city overall for real estate investment, followed by Miami, Houston and Tampa. Nashville, which had been #1 the past three years fell to fifth, as the Sun Belt dominated the rankings.

🚀 SPV spotlight: A look at Special Purpose Vehicles (SPVs) - typically used by VC investors to invest in a single asset - found that the median IRR for SPVs formed in the past three years has remained below zero, with those formed in 2021 finally seeing positive returns last quarter.

🎨 Top September sales: The biggest sales in the art world so far this fall were led by Van Gogh’s $32 million “Les canots amarrés” and Monet’s $30 million “Nymphéas.”

🤖 AI deal count: The number of AI startups that got funding in Q3 was 1,245 globally, the highest level in nearly three years, even as the number of deals in the overall venture market dropped by 10%.

🏢 Multifamily construction: Permits for multifamily buildings fell 10.8% in September and the total number of permits is down 17.4% for the year, while units under construction fell 3.5% monthly and is down 16.8% for the year.

🦇 Batmobile for sale: Ten replicas of the “Tumbler” Batmobile from Christopher Nolan’s trilogy of movies will be produced and sold for $2.99 million each.

Tuesday: Election Day. Please vote if you haven’t already!

Thursday: The Federal Reserve finishes its November meeting and releases its decision on interest rates - it is widely expected to announce a quarter-point cut; Christie’s 20th/21st Century Evening Sale in Shanghai, featuring Zao Wou-Ki’s “30.09.65” which carries a $6.3 million - $9.1 million estimate.

Friday: Consumer sentiment report released; Grammy nominations will be announced.

Saturday, Sunday: Phillips’ Geneva Watch Auction, featuring three potential seven-figure watches.