🤖How is Tech Doing? (Long Self-Imposed Pain)🤖

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Silicon Valley Bank ($SIVB) recently issued its “State of the Markets” report, reflecting tech-related activity over the first six months of 2019. Suffice it to say, despite a number of potential headwinds, e.g., trade wars and fears of stagnating global growth (particularly in Europe and China), tech continues to thrive. The question is: can that continue? Here are some key charts from the report:

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As we were writing this China announced that it would retaliate with tariffs on $75b more of US goods (with US auto taking a large hit of 25% on cars and 5% on parts).* As you no doubt know, President Trump responded in his usually temperate manner:

…blah blah blah…something fentanyl…blah blah blah. The stable genius and “Chosen One” then moved the US closer to the easily winning the trade war (cough) by imposing 30% tariffs on $250b of Chinese goods and 15% tariffs on an additional $300b of goods. Anyway, it’s safe to say that these headwinds will only get stronger and will have a big effect on tech.** To point, tech names got battered post-tweets:

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Why? Well…

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But, sure, tweets and stuff. Nothing to see here. Anyway, give the presentation a gander: it has some good slides on the state of venture capital, enterprise vs. consumer IPOs, and international developments.

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Meanwhile, The Information came out with this doozy earlier this week:

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#BustedTech (Short Busted IPOs…cough…DOMO)

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Tintri Inc., a publicly-traded ($TNTR) Delaware-incorporated and Mountain View California based provider of enterprise cloud and all-flash and hybrid storage systems appears to be on the brink of bankruptcy. There's no way any strategic buyer agrees to buy this thing without a 363 comfort order. 

In an SEC filing filed on Friday, the company noted:

"The company is currently in breach of certain covenants under its credit facilities and likely does not have sufficient liquidity to continue its operations beyond June 30, 2018."

Furthermore, 

"Based on the company’s current cash projections, and regardless of whether its lenders were to choose to accelerate the repayment of the company’s indebtedness under its credit facilities, the company likely does not have sufficient liquidity to continue its operations beyond June 30, 2018. The company continues to evaluate its strategic options, including a sale of the company. Even if the company is able to secure a strategic transaction, there is a significant possibility that the company may file for bankruptcy protection, which could result in a complete loss of shareholders’ investment."

And yesterday the company's CEO resigned from the company. All of this an ignominious end for a company that IPO'd almost exactly a year ago. Check out this chart:

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Nothing like a $7 launch, a slight post-IPO uptick, and then a crash and burn. This should be a warning sign for anyone taking a look at Domo â€” another company that looks like it is exploring an IPO for liquidity to stay afloat. But we digress. 

The company's capital structure consists of a $15.4mm '19 revolving credit facility with Silicon Valley Bank, a $50mm '19 facility with TriplePoint Capital LLC, and $25mm of 8% convertible notes. Revenues increased YOY from $86mm in fiscal 2016 to $125.1mm in fiscal 2017 to $125.9mm in fiscal 2018. The net loss, however, also moved up and right: from $101mm to $105.8mm to $157.7mm. The company clearly has a liquidity ("net cash") covenant issue (remember those?). Accordingly, the company fired 20% of its global workforce (~90 people) in March (a follow-on to a 10% reduction in Q3 '17). The venture capital firms that funded the company — Lightspeed Venture Partners among them — appear to be long gone. Silver Lake Group LLC and NEA Management Company LLC, unfortunately, are not; they still own a good amount of the company.

"Isn't cloud storage supposed to be all the rage," you ask? Yeah, sure, but these guys seem to generate product revenue largely from sales of all-flash and hybrid storage systems (and stand-alone software licenses). They're mainly in the "intensely competitive IT infrastructure market," sparring with the likes of Dell EMC, IBM and VMware. So, yeah, good luck with that.

Dentistry (Long Unnecessarily Techie Toothbrushes)

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Subscription-based razors? Check. Subscription-based contact lenses? Check. Now the direct-to-consumer digitally-native-vertical-brand world is coming for your teeth. Direct to consumer teeth alignment? Check. Subscription-based dental floss? Check. Subscription-based bluetooth compatible toothbrushes. Check. No. This is not a joke.

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