Notion’s Mergers and Acquisitions Playbook in Tough Times – Protocol

Hello and welcome to Pipeline. My name is Biz Carson and I would like to wish my brother a very happy golden birthday.

This Week in Startup World: VCs Want to Fight IRL, LA gets its own tech week and my exclusive report on Notion’s takeover bid and what it means to play offense in a downturn.

Play offense in a downturn

Venture capitalists have all given the same advice to startups: cut costs, lay off, become more disciplined, and get positive cash flow to survive a downturn.

For Notion though, the game has in many ways returned to its own turf.

“We’re in an interesting position because we’ve always had positive cash flow and we don’t need to do these things,” Notion COO Akshay Kothari told me. “So we’ve been thinking a lot over the last six months about the question, ‘Well, if everyone zigzags, how do we zigzag?'”

Notion goes on the offensive while other startups play defense.

  • It acquired the Cron calendar app in June and added the Flowdash team earlier this month.
  • He launched a global advertising campaign – the opposite of cutting marketing spend.
  • It also launched an employee tender offer in June, allowing current and former employees to sell stock so they know it’s more than paper money. Sequoia and Index also had the chance to buy more at the same price as in its last funding round (a post-money valuation of $10.3 billion). “It’s not something that people feel like they can just retire, but I think it gives them peace of mind,” Kothari said.

This is not a position every startup finds itself in right now. Companies have implemented hiring freezes and cut staff, ICT Tac individually at Sub-stack. Klarna saw its valuation drop from $45.6 billion last June to $6.7 billion in July in its last round of funding. Stripe, following other startups like Instacart, cut his own internal valuation of 28%.

  • Notion is not immune to headwinds either. Many of its customers are startups, so any downturn that leads them to cut costs could mean tools like Notion could be on the chopping block. Kothari says the company is watching the turnover of its small businesses closely right now because of this, but it’s also seeing the number of its mid-tier businesses increase.
  • After reading about The regrets of Marc Benioff on not investing more in 2009 when Salesforce was doing better than expected, Kothari said he realized that Notion’s decision in this environment was to watch its numbers closely, but to play the offensive where she could.

Notion isn’t the only one looking at the recession. Companies like cryptocurrency exchange FTX saw this time as a privileged moment of purchase, and FTX founder Sam Bankman-Fried has invested in numerous companies in the struggling crypto space. Notion hasn’t been on the same scale as the M&A frenzy, but Kothari has noted a definite shift in entrepreneurs’ attitude toward deals. As funding has dried up and there are fewer exit routes, he’s found more founders willing to be part of bigger companies — and Notion is open to more conversations.

“I would say we’re very much in the market to continue talking to companies on both the product side and the acquisition side and see how we can accelerate our roadmap internally,” Kothari said.

My story about Notion’s takeover bid first appeared on Protocol.com. Read it here.

Understood

A true venture capitalist fight club. Inside’s Jason Calacanis and Founders Fund investor Trae Stephens will MMA fight each other in a ring for $100,000, as long as Calacanis doesn’t add terms to it.

“If your company lays off, [it] looks like you should be disqualified from all “best places to work” lists/surveys for at least a year after” Credit Karma human resources manager Colleen McCreary wrote on LinkedIn. Executives, however, are split on whether the layoffs should be a scarlet letter for a company or be seen as the normal course of business.

Not the discounts you want to see. “There’s nothing like having your inbox full of emails from brokers offering side jobs at VC-backed companies you love with deep discounts… Until you scroll down and see your own portfolio companies on the list 🥴” tweeted Elliott Robinson of Bessemer. The good news, as he underlinedis that one investor’s exit ramp is another investor’s on-ramp to a 10x outcome.

Is helium just a puff of hot air? Famous Web3 critic Liron Shapira did a tweet thread dissecting Helium’s business model after the highly publicized Web3 IoT company raised hundreds of millions of dollars. In a rare move, Sequoia’s Shaun Maguire tweeted that he agreed with Shapira and said it was important to voice skepticism in the industry: “I admire both Helium’s founders and early adopters for conducting this experiment. But I think this funding is absurd .

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inside track

In today’s market, it’s better to redirect sales strategies toward expanding current customers than trying to attract new ones. Initialized Jennifer Wolf spoke to Returnly’s former CRO Greg Lazarus on “Five Selling Strategies to Overcome the Market Slowdown.”

When will valuations bottom? Thomvest Ventures’ Don Butler did the math and found that it could be “several more quarters” before valuations bottom out and the rebound begins.

Raising an initial fund isn’t much different from raising for a startup – you still need to raise and tell a story to make it happen. weekend funds Ryan Hoover and Vedika Jain assembled a group of advice to new managers on how to raise from LP.

After thousands and thousands of pitch decks, there are three slides that are major red flags for Homebrew hunter’s march. One of them (misleading bios/logos of the founders) is also a major red flag for journalists.

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must know

Another spin on the focused interest carousel. The Schumer-Manchin climate agreement ended in a surprise line on carried forward interest. The provision is intended to reduce the tax loophole on deferred interest, which results in the predictable cries that it’s going to ruin the startup economy but also some VC support that see this as a worthy trade. Writing about someone trying to close the interest loophole is an annual exercise at this point, but maybe this time it will happen?

The only thing that passed is the Chips Act. The $52 billion for chipmaking is a huge boon to the industry, but now is the time to build.

The FTC has filed a lawsuit to block Meta’s acquisition of VR startup Within. It’s an aggressive move against Big Tech, and many are already concerned on the chilling effect this lawsuit could have on startups. “If the government prevents big tech companies from buying small startups in *nascent* markets, all that will happen is there will be fewer startups over time because investors can’t buy in. at risk”, tweeted Box’s Aaron Levie. “It’s bad for innovation and, ironically, good for big tech companies.”

LA Tech Week is now a thing, and it starts mid-August with Marc Andreessen as opening speech.

Narrative violation: While many venture capitalists are announcing their expansion outside of Silicon Valley, Los Angeles-based Upfront Ventures is open an outpost in SF. Upfront’s Kara Nortman and Greg Bettinelli will not invest of the new fund however.

From the protocol: SignalFire CEO Chris Farmer has been waiting years for the other shoe to drop. It is now ready for a recession and the investment changes that come with it.

Also on Protocol: Why Cloudflare’s march to network security can’t be ignored.

Your reading of the weekend: It’s the first anniversary of Robinhood’s IPO – and it’s not exactly happy. Yet its founders are zen about it and are already plotting their return.

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Shortage of microchips could harm national security: To ensure America’s security, prosperity, and technological leadership, industry leaders say the United States must encourage domestic chip manufacturing to reduce our dependence on chip producers. East Asia for critical electronic components.

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