Good morning, and welcome to Protocol Fintech. This Thursday: Vlad Tenev’s plan to rebuild Robinhood, layoffs at Chime, and a16z joins the Ooki DAO fight.

Off the chain

Maybe rising rates are … good, actually? There seems to be more evidence every day that a higher interest-rate environment helps fintechs, particularly those that have acquired charters that let them attract deposits and then lend them out. Even Robinhood (on which Ben Pimentel has more below) saw its interest income rise in the latest quarter. No wonder Binance’s Changpeng Zhao is eyeing banks, as he told Bloomberg in an interview at Web Summit: That’s where the money is.

— Owen Thomas (email | twitter)

Robinhood tries a makeover

Robinhood’s earnings report yesterday showed it’s still in a rut. But there are signs that the bleeding that began as the meme-stock and crypto crazes faded has eased dramatically. Now the hip app maker that got young people excited about stock trading on their phones is moving to embrace more traditional, if less thrilling ideas about money and investing.

Users are still a challenge, and crypto is a conundrum. Robinhood, which posted a year-over-year drop in revenue, is still grappling with serious issues: a shrinking user base and a wobbly crypto market.

• Robinhood said its monthly active users fell by 1.8 million sequentially to 12.2 million in September “as customers continued to navigate the volatile market environment.”
• It’s the company’s “biggest problem,” given how Robinhood’s business model is “still built around ongoing customer engagement and the rate of customer engagement continues to drop,” Alex Johnson, author of the Fintech Takes newsletter, told Protocol.
• Robinhood’s big plans to be a major player in the volatile crypto market are running into more headwinds. Transaction-based revenue for crypto fell 12% sequentially to $51 million.

So Robinhood is trying to reinvent itself. The company cut a lot of jobs, and it’s still focused on controlling costs. But it’s shifting to a growth path different from what made Robinhood, well, Robinhood.

• The company is now “much leaner and in a more scrappy position,” CFO Jason Warnick told analysts on the earnings call. CEO Vlad Tenev said a key goal is “diversifying our business beyond trading.”
• The company is about to launch a new retirement product “just in time for the new year and the heart of IRA season,” Tenev said on the call. Robinhood recently rolled out a debit card that offers rewards and incentives like early pay access.
• The company is “trying to present a more sober image and distance itself from its meme-stock notoriety,” Michele Alt, Klaros Group partner and co-founder, told Protocol. Johnson agreed. Robinhood is “trying to get out of the monthly active users game and attract more stable, long-term money,” he said.

“We don't want to just be a millennial-focused company,” Tenev said. Robinhood wants to serve “every generation” as they “think about opening not their first investing account, but also the first place they deposit their paycheck.” It’s quite a bold vision. But Johnson isn’t totally convinced Tenev can pull it off. Robinhood “offering to handle your retirement would be a bit like Mick Jagger offering to babysit your kids,” he said. “They could be good at it, but it’s not an intuitive fit.”

– Benjamin Pimentel (email | twitter)

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On the money

Stripe is cutting 14% of its staff. The Collison brothers wrote that the payments company must start "building differently for leaner times."

Opendoor has laid off 18% of its employees. The cuts of about 550 jobs are in response to what CEO Eric Wu called "one of the most challenging real estate markets in 40 years."

Dapper Labs is also cutting its workforce. The company laid off 22% of its staff as the market for NFTs struggles.

Customers are unhappy with changes Walmart is making to the neobank it acquired. Longtime users of One tell Business Insider that Walmart (which acquired One through a subsidiary) has removed popular products with little notice.

A16z has joined the Ooki DAO fight. Andreessen Horowitz wants permission from a federal court to join an ongoing lawsuit that argues the CFTC improperly served the DAO by using a website help bot and forum post rather than individual summons for its members.

Brex is partnering up with Techstars. Techstars accelerator companies can access a variety of benefits from Brex, including a special support team, a sign-up bonus for its program, supper club dinners, and other exclusive events.

Chime cuts back

Chime has laid off 12% of its staff, or about 160 employees, becoming the latest big-name fintech firm to cut jobs in this year's downturn. A spokesperson confirmed the number of layoffs, which were first reported Wednesday by The Information. "To ensure the long-term success of the business and as we look at current market dynamics, we are focusing our organization to be fully aligned with our company priorities," the company said.

In a memo to staff reported by TechCrunch, co-founder and CEO Chris Britt said the company remained "well-capitalized" and the cuts were among moves to position the company for success "regardless of market conditions."

Chime is a leader among a group of neobanks such as Current and Varo that offer checking accounts and other banking services for people who are unbanked or underbanked. Varo conducted layoffs earlier this year, cutting about 75 jobs, which represented about 10% of its staff.

Read the full story on Protocol.com.

— Ryan Deffenbaugh (email | twitter)

Moves and hires

Coinbase’s chief product officer is stepping down. Surojit Chatterjee was with the crypto exchange for three years.

Former Google Pay leader Caesar Sengupta has a new fintech startup. Arta Finance has raised $90 million in series A funding to help people launch digital family offices.

Mark Murphy is serving as president of Digital Currency Group. The former chief operating officer was promoted in a restructuring effort that included about 10 layoffs, Bloomberg reported.

Home insurance fintech Kin announced several C-suite appointments. Jerry Fadden is the firm's new CFO; Jessica Jacob the CLO; Effie Kyroudis is CHRO; and Pete Tiwari is SVP of product.

ICYMI: Why Marqeta’s Jason Gardner decided it was time to find a “late-stage co-founder.”

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Thanks for reading — see you tomorrow!

Stripe is laying off 14% of its staff, its co-founders said Thursday, as the fintech startup must start "building differently for leaner times."

---

The layoffs will bring the online payments company down to about 7,000 employees, according to a memo to staff from co-founders Patrick and John Collison that Stripe also posted publicly.

"We have always taken pride in being a capital efficient business and we think this attribute is important to preserve," the email said. "To adapt ourselves appropriately for the world we’re headed into, we need to reduce our costs."

Stripe in March 2021 raised a $600 million venture round at a $95 billion valuation, making it one of the most valuable startups in the world.

The company's revenue and payment volume tripled from the start of the pandemic as the "world rotated overnight towards e-commerce," the Collison brothers' memo said. But Stripe made mistakes mistakes leading into 2022, they acknowledged.

"We were much too optimistic about the internet economy’s near-term growth in 2022 and 2023 and underestimated both the likelihood and impact of a broader slowdown," the Collisons wrote. "We grew operating costs too quickly. Buoyed by the success we’re seeing in some of our new product areas, we allowed coordination costs to grow and operational inefficiencies to seep in."

The job cuts will return Stripe to the head count it had in February, and the company is also cutting costs elsewhere. The firm's recruiting division will be "disproportionately affected" by the layoffs since the company plans to hire fewer people, the Collison brothers wrote.

Affected employees will be given a minimum of 14 weeks' severance pay, according to the memo, as well as other assistance such as immigration support for workers in the U.S. as visa holders.

China President Xi Jinping delivered a speech last month for the Communist Party’s National Congress, which convenes every five years. Over the course of two hours, Xi laid out his grand vision for the future of China.

Protocol analyzed the text of that speech and compared it against National Congress reports going back as far as 1992. The data points to new trends in the 20th Congress, such as a renewed focus on the environment, a shift in emphasis from poverty alleviation to national security, and a push for economic self-sufficiency.

For tech leaders in the West, the National Congress offers a clear view into the political worldview of China’s ruling elites. “The Party Congress Report has always been a very authoritative document,” Neil Thomas, a China analyst at Eurasia Group, told Protocol. “If anything, the importance of the Congress Report has increased, given that Xi is in more control of Chinese elite politics than previous paramount leaders who ruled under a collective leadership arrangement.”

To that end, Xi emerged from this Congress with a level of power consolidation unseen since the Mao Zedong era. The Communist Party selected 13 Xi loyalists to the 24-member Politburo. At age 69, Xi will embark on his third term and has no designated successor.

“We have significantly boosted the Party's ability to purify, improve, renew, and excel itself,” Xi said in his speech.

A vision for China’s tech sector

Image: Protocol

We looked at how the frequency of words used in this year’s work report compares to the typical frequency in the previous 30 years of work reports. Words above the dotted line appeared more frequently in the 2022 report, while words below the line are more correlated with previous reports. Terms near the dotted line are used at about the same rate in both.

Three themes stood out, relating to China’s vision for its economy and tech sector:

Talent

Talent featured heavily in this year’s address. For instance, Xi said, “We must regard science and technology as our primary productive force, talent as our primary resource, and innovation as our primary driver of growth.”

This reflects China's attempt to shift its economy away from manufacturing. Instead, for the past 10 to 15 years, China has been attempting to move toward a more consumer- and information-oriented economy, according to Fei-Hsien Wang, an associate professor of history at Indiana University.

The heavier focus on talent this year could be the result of painful lessons learned through U.S. sanctions, which made clear China’s vulnerabilities in relying on more advanced supply chains in the West, particularly for semiconductors.

“Naturally, you would want to learn from that and reverse the situation to make other countries more dependent on you for high-value-added goods and services,” Thomas told Protocol. In this year’s address, Xi reiterated his goal to “further increase China's international standing and influence” and for China to “play a greater role in global governance.”

“There is little doubt China has been moving up the value chain,” Dali Yang, a professor in political science at the University of Chicago, told Protocol. While the U.S. has used tariffs to try to slow China’s development in certain sectors, trade between the U.S. and China in non-tariffed sectors has continued to grow, Yang explained. He also pointed out that China has successfully shifted its exports away from low-value-added sectors such as apparel and toward areas such as pharmaceuticals, automotives, and solar panels.

Green energy

“Carbon,” “pollution,” and “green” all featured more heavily in this year’s address compared to previous years. Xi spoke approvingly of China’s attempts at ecological conservation. He also called on China to become “actively involved in global governance in response to climate change.”

Green energy — especially in areas such as solar and battery production and rare earth metal extraction — has become a major competitive advantage for China, according to Yang. “China naturally wants to retain that dominance and enhance its competitiveness going forward,” he said.

But China is still a major polluter, especially when it comes to coal. In 2021, China accounted for more than half of the total coal consumed globally, according to the BP Statistical Review of World Energy. Xi called for coal to be used in “a cleaner and more efficient way.” He also said “greater efforts will be made to explore and develop petroleum and natural gas, discover more untapped reserves, and increase production.”

Xi called for accelerated development of hydropower and nuclear energy, promising China would “exercise better control over the amount and intensity of energy consumption, particularly of fossil fuels, and transition gradually toward controlling both the amount and intensity of carbon emissions.”

Self-sufficiency

Both talent and energy also tie into China’s drive to become more self-sufficient.

The push for domestic nuclear and hydropower energy production could lessen China’s reliance on energy imports from Saudi Arabia, Russia, and Iraq.

“My own reading is that [energy] self-sufficiency is more important than ecological sustainability,” Wang told Protocol. Wang added, though, that the concern over the environment is likely earnest, as China has been grappling with the environmental consequences of rapid development since the late 1980s.

U.S. and European actions targeting the Russian economy in the wake of its invasion of Ukraine have highlighted the importance of self-reliance for China, especially as Xi eyes the eventual “reunification” of China under the one-China principle — i.e., taking control of Taiwan. In this year’s address, Xi called on China to strengthen the “mechanisms for countering foreign sanctions, interference, and long-arm jurisdiction."

Xi also deemed China’s national security system to be “inadequate” and highlighted the need to “share resources and production factors between the military and civilian sectors.” He called for systemic improvements to be made in “economic, major infrastructure, financial, cyber, data, biological, resource, nuclear, space, and maritime” security.

Does the self-sufficiency drive mean there will be fewer opportunities for foreign investors? After all, the valuations of China’s largest tech stocks plummeted after news broke of the Politburo skewing further in Xi’s favor. But according to Eurasia Group’s Thomas, China will still welcome high-end foreign investment as it looks to advance domestic sectors further along the technology frontier: “There will be a lot of opportunities for foreign investment in these sectors, especially where there's a gap between leading Western technologies and China's domestic capabilities,” Thomas said.

Xi’s era

Image: Protocol

Xi’s most frequently used words also highlight two of his pet initiatives: the Belt and Road Initiative and the China Dream. But both of those were less emphasized in this year’s Congress compared to past addresses from Xi.

Mentions of the “China Dream” steeply declined since 2017, perhaps in part because China claims to have completed its prosperity goal. Xi spoke of China having already achieved “moderate prosperity, the millennia-old dream of the Chinese nation, through persistent hard work.”

The decrease in mentions of the “China Dream” could also simply represent a tactical shift in language use rather than a true change in priorities, University of Chicago’s Yang posited. After all, China is still pursuing its Centennial Goal to become “fully developed” by 2049.

“This year, of course, we see some of the struggles,” said Yang. “It does sound — especially related to the economy and zero-COVID — a little bit hollow. So maybe the people who are drafting the document had decided, ‘Oh, we don’t need to refer to that as much.’”

As for the Belt and Road Initiative, it has been declining in profile for “many years,” according to Thomas, because it “ran into a lot of problems with profligate lending and controversial projects, as well as issues with corruption and environmental destruction [and] geopolitical pushback.”

Xi’s choice of words could also reflect the greater emphasis placed on expanding China’s soft power, perhaps in lieu of these more ambitious tangible diplomatic projects. Xi called, for instance, for China to continually grow the appeal of Chinese culture.

Image: Protocol

We used term frequency-inverse document frequency to assess which terms made each work report unique relative to all the others, giving us a glimpse into shifting Party priorities. It’s a wonky term, but because it considers how a word was used not only in one document, but all of them, it’s more robust than just counting mentions in a single speech.

“Foundational” stood out from this year’s address, as Xi underscored his efforts to transform the state bureaucracy and private sector with his consolidated power. In the same sentence where Xi mentioned “foundational institutional frameworks,” he also cited the completion of “a new round of reform in Party and state institutions.”

Science and technology also factor heavily into this foundation, as Xi described them as being “strategic pillars for building a modern socialist country in all respects.”

Unsurprisingly, “strait” stood out this year. China saw House Speaker Nancy Pelosi’s visit to Taiwan as a direct threat to its sovereignty and security. Xi said “resolving the Taiwan question and realizing China's complete reunification is, for the Party, a historic mission and an unshakable commitment.” He coupled this with the aforementioned calls to strengthen China’s military and ready its domestic sectors for a potential conflict that would cut off current supply routes. Of note, Xi directly cited the need for China to bolster its military to “win local wars” — potentially referencing a conflict over Taiwan.

Hello, and welcome to Protocol Entertainment, your guide to the business of the gaming and media industries. This Thursday, we explain why Patreon is getting into video and take a look at Charter and Comcast’s new joint venture, as well as the latest in AI video creation.

Patreon creators are getting a native video player

Patreon is making it easier for creators to share videos with their audience: The company’s new Patreon Video feature allows creators to upload their video content directly to its platform. The feature will also make it easier for creators to share video previews in front of the paywall, in turn making their Patreon profiles more appealing to fans who haven’t become paying members yet.

Native video is another step for Patreon to be more than a payment processor. The company doesn’t just want creators to use its tech to bill members; it wants to give them tools to build and engage with fan communities, and help them monetize these audiences better than ad-supported platforms like YouTube.

Video seemed like a logical first step for Patreon’s approach, given its prevalence on and off the platform, according to Patreon CPO Julian Gutman. “It’s the biggest modality of sharing we have on the platform,” Gutman told me this week. “It’s the format of the internet today.”

• The company’s native video solution allows creators to upload and distribute HD videos of any length.
• There’s the usual features one might expect from a modern video player, including picture-in-picture on mobile, as well as Chromecast and AirPlay support.
• Patreon is also offering creators a way to quickly create video previews of up to two minutes, which can then be shared out on social media.
• Another advantage of these previews is that they also show up on Patreon profile pages, giving people who aren’t subscribers a way to sample content as opposed to just showing them blurry images that hint at what’s available behind the paywall.
• “Creators love features where they don't just have to ask folks to join their membership but they can demonstrate value,” Gutman said.

Native video hosting also solves a problem some creators have struggled with: leaked content. Some accounts have given their subscribers access to unlisted YouTube videos, which can easily be shared on social media to give those unwilling to subscribe a way around the paywall.

• This kind of leaking isn’t too common — turns out people willing to pay for content from their favorite creators actually want them to succeed financially — but it has happened, according to Gutman. “We've had some really big creators where it's been a big issue for them.”
• Patreon Video is being offered to Patreon Pro and Premium creators free of charge until the end of next year, with each member getting 500 hours’ worth of storage space.
• There’s no word yet on what native video support will cost when the company starts charging for it in 2024.
• Anyone who doesn’t want to upload their videos to Patreon can still use other platforms. “We're not going to turn off your ability to use Vimeo or YouTube. You can still use those if you prefer,” Gutman said.

Patreon has been trying to evolve past billing for some time. The company teamed up with Acast in 2020 to more directly integrate podcasts into its platform, and it has been experimenting with mobile storytelling formats as well.

• A next step for the new video feature will be to build out insights: for instance, show creators who is watching their clips, what subscriber tiers they are in, and which part of a video sees the most engagement.
• And Patreon won’t stop with video. “You'll see us do a lot more work on content and community for creators, and a lot more tools to move beyond ads and algorithms,” Gutman said.

Helping creators build sustainable income streams that aren’t dependent on ad revenue could be especially valuable in the current economic climate. However, Patreon itself has not been immune to economic jitters. The company laid off 17% of its staff in September and closed two offices in Europe.

— Janko Roettgers

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Comcast and Charter are betting on Xumo

Comcast and Charter have settled on a name for their streaming joint venture: The two companies are reusing the Xumo brand, which Comcast acquired in early 2020, for all their joint streaming services and hardware needs going forward.

• As part of the name change, Comcast’s Flex streaming box will now be known as the Xumo Stream Box.
• The JV will also make its own Xumo TV-branded smart TVs, with plans to start selling devices in Walmart stores in late 2023.
• The XClass TV brand, which Comcast unveiled last year to sell its own smart TVs, is apparently going away. However, Xumo TVs will still be powered by Comcast’s software, so we shouldn’t expect too many changes under the hood.
• Xumo’s free, ad-supported streaming service will live on as Xumo Play.

Fun fact: The joint venture was previously called Appco, which didn’t quite have the same ring to it.

— Janko Roettgers

​In other news

Tubi’s Q3 revenue grew nearly 30%. The ad-supported streaming service’s revenue growth has been “breathtaking,” according to Fox CEO Lachlan Murdoch.

PSVR 2 gets a price tag and release date. Sony’s new virtual reality headset launches on Feb. 22, 2023 for $600. That’s $50 more than the priciest PS5, but this time around, it ships with motion controllers and headphones.

Holoride launches in-car VR. The company is collaborating with Audi and HTC to launch its first consumer product in Germany.

Activision Blizzard tries to squash Albany union. QA testers at Blizzard Albany face an uphill battle as parent company Activision Blizzard filed two motions on Wednesday with the National Labor Relations Board to try to stall an upcoming union election.

YouTube now sells streaming channels. Taking some cues from Amazon’s channel store, YouTube is selling subscriptions for services like Paramount+ and Epix.

Square Enix Montreal is no more. Mobile studio Onoma, formerly Square Enix Montreal, was shut down this week by parent company Embracer Group, Bloomberg reported. The Hitman Go developer had just announced a rebrand last month.

Prime members gain access to 100 million songs from Amazon Music. Paying Prime subscribers will be able to play the entire catalog without ads in a Pandora-like shuffle mode.

Paramount+ now has 46 million subscribers. The company’s growing streaming business couldn’t quite make up for slowing TV revenues in Q3.

AI video creation

What if making a video was as easy as writing a tweet? Imagine writing a couple of sentences into a text box, clicking a button, and an algorithm spits out a clip made from AI-generated images, synchronized with text-to-speech narration. That’s exactly what New York-based video startup AugX Labs has been working on. Last week, AugX Labs CEO Jeremy Toeman gave me a preview of his company’s AI video tools, and I was impressed by how its technology made it possible to create professional-looking slideshow-like clips in mere minutes.

One thing that stood out to me during the demo was the company’s approach toward synthetic media. AugX Labs does use Stable Diffusion to create some of its imagery, but also relies on licensed footage as well as photos uploaded by creators, and I couldn’t really tell the difference. Still, Toeman told me that the company decided against only using AI photos. “Without AI-generated images, there’s no guarantee that a creator can find the perfect match to bring their story to life,” he said. “And despite the sophistication of AI Art, if there’s already an existing image or clip to represent a given scene, there’s no real value in generating a duplicate.”

There may be a lesson here beyond algorithmic video creation: Even with AI, there’s no need to reinvent the wheel.

— Janko Roettgers

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Thoughts, questions, tips? Send them to entertainment@protocol.com. Enjoy your day, see you tomorrow.

Good afternoon! In today's edition, we asked five founders to tell us what no one told them about the fundraising process for their companies. Questions or comments? Send us a note at braintrust@protocol.com

Zeb EvansClickUp

Founder and CEO at ClickUp

Don't expect VCs to tell you how to run your business. That's up to you. That will always be up to you.

VCs will certainly help you with many functions. They'll ensure that you get your house in order when it comes to finance, hiring, and certainly recruiting, but they won't come in and make your business better overnight.

It's really important for founders not to overvalue a VC in that regard. You must understand what their role is — and where your responsibility lies! A VC can be a great resource, but you should still be the one with the vision.

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Edith HarbaughLaunchDarkly

CEO and co-founder at LaunchDarkly

I have been a product manager and an engineering manager, and I had never raised capital prior to starting LaunchDarkly. Now I’ve raised more than $300M, and I’ve learned no one tells you raising money should be thought of like building up a muscle.

Initially, my co-founder and I put in $10K each of our own money to buy laptops and domain names. We then turned to our friends and family, convincing past coworkers to put in anywhere from $5K to $50K. It was not easy to ask for their money, but it helped me start to build that muscle and get used to pitching LaunchDarkly. I still remember a coworker saying “I have no idea what your new company does, but I know that you’re the best product manager I worked with. You were relentless when it came to iterating on product, and I know you’ll iterate and improve your pitch.”

Building the pitching muscle did not happen overnight. I recall how our pitch at our accelerator Demo Day for our seed round was, in hindsight, grandiose. I talked about how LaunchDarkly would help software companies all over the world launch, measure and control their own software. While we are seeing that vision come to fruition today, at the time it did not land. We only had one new investor from that audience invest in our seed round, as the majority didn’t understand what LaunchDarkly would offer.

With every subsequent round, we improved how we told the LaunchDarkly story and honed in on what we heard from our customers: we were making software development faster while decreasing risk. As our customer numbers grew from 100 to 1,000 to now more than 3,000, we shared those in investor pitches. As I improved the pitch and built that muscle, our customers served as proof points simultaneously.

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Francesco SimoneschiTrueLayer

Co-founder and CEO at TrueLayer

The amount of funding a company raises sets its ambition and expected trajectory. I’m not sure first-time founders all understand that. When fundraising it’s crucial to work out the math and detail of what the numbers mean for you as the founder and for your investors, particularly when it comes to growth rate and forecasting future valuations. The key to unlocking this process is being able to find alignment between founders and investors. In my experience building TrueLayer, fundraising has been a very organic process and we always tried to put ourselves in a position of strength and partner with investors with a long term view and incredible ambition. But it requires you to think in decades and ultimately commit to build a long-lasting business. This is not common or easy. In the current funding environment, founders need to give greater consideration to the finer details of terms and conditions, too. Board seats, voting majorities, and liquidation preferences can play a bigger role as investors’ approach to funding rounds has adapted to reflect the current economic environment.

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David HsuRetool

Founder and CEO at Retool

Raising capital comes after building a great business. You need surprisingly little capital to get started. And once you have a great business, raising capital is so, so, so much easier.

Think about all stakeholders when you raise capital: your employees, your shareholders, and your customers. Your employees and shareholders will prefer lower dilution. Your employees and customers will prefer a lower valuation (such that you're more likely to be able to raise your next round).

If you have a truly incredible business (think, the chance to be the Google/Facebook of your decade) with an enormously large TAM, most metrics aren't important anymore. Investors invest because they think you have a 10% chance of being a $100 billion company, not because of how you beat last quarter by 20% or because your multiple is "cheap."

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Tracy YoungTigerEye

Co-founder and CEO at TigerEye

Time kills all deals, so timebox your fundraising. If you hear a no from investors, move on. If you hear a yes, know that the deal is not done until the money is in the bank. After you set a predetermined amount of time to fundraise, go back to real work even if there is no term sheet in hand. Fundraising is not an indication of success or failure. It signals externally that you now own less of your company. Remember that raising capital is just a financing event, so don’t fall in love with it, and don’t go into a pit of depression over it.

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See who's who in the Protocol Braintrust and browse every previous edition by category here (Updated Nov. 3, 2022).