After the FTX Collapse: Tokenomics Could Change Everything — If We Want It To

November 26, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 26th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

After billion-dollar crashes and fraud across the crypto world, many are wondering whether the market is simply over. But what is called “tokenomics” has the potential to reshape large parts of society. The more interesting question is: do we even want that?

In the autumn of 2021, a piece of American history came up for sale at the prestigious auction house Sotheby’s. One of the thirteen surviving copies of the US Constitution was on the block. The slightly yellowed pages are considered a national treasure.

So far, perfectly normal.

Then the crypto world got involved.

A so-called DAO was formed — a decentralised autonomous organisation — with one single purpose: to buy the Constitution. Think of a DAO as the crypto world’s equivalent of a homeowners’ association. There are rules to follow, but no single person is in charge. Decisions happen through voting. Tokens give you a vote.

The DAO raised the equivalent of over 400 million kronor in just a few days. Tens of thousands of people participated from around the world, each buying in with crypto. It was a remarkable demonstration of what this technology can enable.

In the end, a private bidder outbid the DAO, and the document went elsewhere. But the experiment stuck.

Equity trading happens on exchanges with rules, customs and laws. That creates reasonably fair conditions. Trading in unlisted shares carries higher risk — which is why we have the term “venture capital.” Cryptocurrencies carry even higher risk, and far fewer rules. Fraud and pump-and-dump schemes are part of everyday life, even among established players.

There are differences between projects. Many enthusiasts would argue that Bitcoin is fundamentally different — technically and philosophically — from everything else. That may be true, but many speculators are not there for the philosophy. They are trying to make money.

Looking at price versus value in crypto, it is no exaggeration to say that prices have been high relative to the underlying value, which has often been low. But the function — the underlying promise of what this technology could enable — is worth examining independently of price.

That is where the real rescue of crypto’s reputation may eventually come from.

One area where it could have genuine impact is traditional finance. These initiatives are known as “DeFi” — decentralised finance. The idea is to trade financial products without centralised intermediaries like banks or central banks. Transactions can be faster and cheaper, at least in theory.

The underlying technology — blockchains — makes this possible. As a developer, you can build your own financial company on the Ethereum blockchain without needing external approval. Trying to do the equivalent inside Nordea or Swedbank would be nearly impossible, requiring both their goodwill and their permission.

DeFi removes the middlemen from financial transactions. Instead of trusting institutions, you trust the technology. Predefined smart contracts execute the transactions — no one interferes.

Another area is NFTs — non-fungible tokens. The NFT market has also crashed after intense speculation. Sales volumes fell 99 percent between May and September this year. But the underlying function remains, and it is a genuinely novel way to regulate ownership in a digital world that has historically been driven by copying. It also works for representing ownership of physical things. In the US, the first physical house has already been sold as an NFT.

There are interesting tendencies on the horizon, despite all the crashes. When, or perhaps if, these markets can regain consumer trust, tokenomics could become building blocks for a new kind of internet.

But perhaps the most interesting question is also the simplest: do we actually want it? When more and more things are represented as tokens, more things become tradeable commodities. Life starts to resemble a trading floor — one that can also get hacked. Tokenomics makes it possible to own a fraction of nearly anything. That is a significant statement about where the world might be heading.

Streaming’s New Normal: How Netflix Is Going Full Seinfeld

November 22, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 22nd, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Hoping for a new Squid Game this winter? You might be disappointed. Everything points to Netflix’s content becoming more like Seinfeld than big prestige dramas. The reason: a new business model.

“We basically sold nuclear weapons to a third-world country, and now they’re using them against us.”

It sounds like a declaration of war — for good reason. But the slightly dramatic statement came before the war in Ukraine, and carries less geopolitical weight than it implies. We’re talking about streaming. Nothing more serious than that.

The quote comes from Bob Iger, the then-former CEO of Disney. He was talking about how the entertainment giant licensed its content to Netflix for years. It was good money in the short term, but it also meant Disney+ took a long time to launch.

When those contracts expired, Netflix went from being a customer to being a competitor.

Last weekend, Bob Iger reclaimed the CEO role after his successor Bob Chapek was fired after just over two years. The internal power dynamics at Disney are a story in themselves — but what matters for this analysis is what it means for the streaming market.

Until now, Netflix has been able to focus solely on its subscribers. Now it has added a new target audience: advertisers.

For anyone who has worked in commercial television, this is nothing revolutionary. It’s how the industry has always worked. For Netflix, it is not trivial.

Suddenly, the streaming giant needs to ask itself what advertisers think about its content. And the answer to that question has major consequences for what content gets made.

Netflix ads haven’t arrived in Sweden yet, but the effects are already becoming visible — through the shows they commission and acquire.

Julia Alexander at the newsletter Puck calls this the “Seinfeld strategy.” What works well right now is comedy — preferably light, something you can watch actively or have on in the background. Timeless themes where familiarity is part of the charm. Seinfeld and The Office are the clearest examples.

Netflix’s own comedy Blockbuster — set inside the video rental chain they helped kill — fits the mould exactly.

The ad-supported tier points in one clear direction: safer, more mainstream content. Nothing that alienates advertisers, nothing too challenging or niche.

The hope is that you’ll sit there with half an eye on the TV while scrolling on your phone. A few ads roll by in the background. Bingo.

That, in essence, is Netflix’s new business model.

FTX Files for Bankruptcy — The Crypto Giant Was Run Like a Youth Hostel

November 14, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 14th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Billions disappeared when crypto company FTX collapsed. The question being asked now is how investors could have placed so much money in a company run with so little professional rigour.

Ten people living together in a luxury penthouse on the Bahamas, worth around 415 million kronor. Most of them in a romantic relationship with each other — something its founder openly discussed on social media.

What sounds like the premise for another bad reality TV show was in fact the operating base of FTX, one of the world’s largest crypto exchanges, which has now filed for bankruptcy. The final accounting is still not complete, but debts from the collapse appear to run between 10 and 50 billion dollars.

Many are now asking how this could have happened. Among them, presumably, are a large group of Canadian teachers whose pension fund invested heavily in FTX.

How did it happen?

Looking more closely at Sam Bankman-Fried — known widely as SBF — you don’t find obvious answers. A 30-year-old with dishevelled hair, who wore rumpled shorts to meet world leaders, and who cultivated an image somewhere between eccentric genius and accidental billionaire.

In 2019 he founded FTX and Alameda Research and moved to Hong Kong. Two years later he relocated to the Bahamas. Timing, as they say, is everything.

Bankman-Fried became known as one of the strongest supporters of the cryptocurrency Solana, which was also popular with other investors who believed crypto could be the foundation of “a new kind of internet.”

Clearly, that did not come to pass in the way they imagined.

But the perceived excitement around that vision led several investors to set aside ordinary principles around risk management. Investors poured over 2.2 billion dollars into FTX. For a time, the investment looked like genius. Bankman-Fried appeared on conference stages alongside Tony Blair, and his family sponsored investigative journalism.

Then it all collapsed, very fast.

In the space of a few dramatic days, FTX went from global star to the crypto world’s most notorious cautionary tale. The details of how unprofessionally the company was actually run continue to emerge, and they are alarming.

That the crypto market is volatile is no surprise. That fraud and incompetence exist in any industry is also not surprising. What is striking in the FTX case is that the chase for the next big thing seems to have led investors to make enormous concessions on the most basic principles of due diligence.

Polestar Solves Its Immediate Cash Crisis — But an Enormous Challenge Remains

November 11, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 11th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

While Tesla’s CEO is busy elsewhere, the other EV companies are scrambling to find their footing. Polestar has solved its immediate cash crisis — but an enormous challenge still lies ahead.

17 billion kronor.

That is what Polestar’s main shareholders — Volvo Cars and PSD Investment (owned by Volvo’s chairman, who represents Geely) — have committed to lending the struggling electric vehicle company. And now that Polestar has released its latest quarterly figures, it is clear why those billions are needed. The money is still flowing out fast.

The new quarterly numbers show revenue doubled year-on-year — from 213 to 435 million dollars. That is a positive sign. But the losses are still significant: the company lost 196 million dollars, roughly two billion kronor, in the third quarter alone.

That is a meaningful improvement compared with the same period last year, but the path to profitability is still far off.

That more capital would be needed was therefore no surprise. And tapping the stock market in current conditions was not a realistic option.

A loan from existing shareholders was therefore one of the few reasonably viable alternatives left.

But Polestar is far from alone among EV companies facing this pressure. Consider just a few of the share price performances this year:

Xpeng: down 86 percent. Rivian: down 68 percent. Fisker: down 52 percent. The list goes on. With that kind of share price performance, the stock market becomes a liability rather than an asset as a source of capital.

In times like these, having well-capitalised shareholders matters enormously. Polestar appears to have them — but the expectation is that those owners are growing increasingly impatient.

Further down the list sits the EV company the world watches most closely: Tesla. Its share price is down 52 percent since the start of the year.

A few weeks ago, Tesla’s CEO Elon Musk was forced to sell around 4 billion dollars worth of Tesla stock — around 43 billion kronor — presumably to help fund his Twitter acquisition. The debt structure behind that deal may well become a significant financial problem down the line. With Pfizer, Carlsberg and Audi all pausing their advertising on Twitter, the pressure on the platform is only growing.

The market leader’s CEO therefore has his attention firmly elsewhere. He is a multi-billionaire — but one who has now bet enormously on a very different kind of company. Does Tesla miss his undivided focus?

The answer is probably yes.

Tesla’s lead in the market was not built on Musk’s undivided attention alone. But the main challenge for the EV industry right now is intensifying competition — and that is exactly where leadership presence matters.

Volkswagen’s various ID models now share the roads with Audi’s e-tron, the Renault Zoe and Kia’s EV6. Polestar’s parent company Volvo Cars just launched its first fully electric SUV, the EX90 — competing in the same segment as Polestar itself.

The bottom line is clear. With a tougher financing environment, Polestar’s ability to keep pace with the competition has become harder to take for granted.

The Strategic Move That Brought Down One of the World’s Largest Crypto Exchanges

November 9, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 9th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

A strategic masterstroke brought down one of the world’s largest trading platforms in less than 48 hours. In doing so, it may have changed the direction of the entire crypto market.

Thousands of visitors had gathered at the Token 2049 conference in London to discuss the latest in crypto. It would be hard to imagine a worse day for an event of this kind. It was the equivalent of running an “Investment Banking Executive” conference the day Lehman Brothers collapsed.

That is where the crypto market finds itself right now. FTX, the world’s second-largest exchange for cryptocurrencies, has imploded.

It is a strategic move that will be written about for a long time.

It all begins with an article in trade publication Coindesk, which obtained the balance sheet of Alameda Research — a trading firm controlled by FTX founder Sam Bankman-Fried. The balance sheet revealed that Alameda was heavily exposed to FTT, FTX’s own native token.

The problem is that FTT is not heavily traded, and therefore has low liquidity. That means a large seller can crash the price on its own.

That is where Changpeng Zhao steps in. He had previously invested in FTX, but having now seen the balance sheet, he announced on Twitter that Binance would be liquidating all of its FTT holdings.

Zhao knows the market cannot absorb this. There are no buyers. The price drops 20 percent immediately. Users start withdrawing their funds en masse.

FTX asks Binance to step in and rescue it. Binance initially agrees — then backs out when it sees how deep the hole truly is.

It is simple, elegant, and brilliant. Zhao himself claims it was not planned — but it is hard to believe a person of his experience didn’t understand what his announcement would set in motion.

Less than three months ago, Sam Bankman-Fried appeared on the cover of Fortune magazine, celebrated as a crypto billionaire and philanthropist. The fallout from this crash, however, will have effects far beyond him personally.

Trust in crypto trading was already fragile. Seeing one of the largest exchanges go under — seemingly overnight — will not help. Coinbase, the largest US-listed crypto exchange, has tried to put a distance between itself and the chaos.

FTX was also a company with enormous venture capital exposure. Sequoia — one of the world’s most prominent investors — has already written down its entire stake. Other major funds followed. Valuations that looked impressive are now worth nothing.

Crypto enthusiasts have long promised to reshape finance, to build a new system that is fairer, faster and more transparent. What this week has shown is that the industry still has a very long way to go before it can credibly make that case.

The Fed’s Triple Rate Hike Sends New Shockwaves Through Tech

November 3, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 3rd, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

The triple rate hike was expected. But Fed chair Jerome Powell simultaneously sent new shockwaves with the announcement that the terminal rate may need to go even higher than the central bank had previously believed. Years of excess at the tech giants may now be coming to an abrupt end.

Five men sitting on a rooftop. All employed, but none of them with any project to work on. The newest member asks the others why they even come to work. The answer is short, concise — and telling for an era that now appears to be drawing to a close.

“Rest and vest.”

“Vest” means your stock options are paying out — typically gradually over several years. “Rest” means exactly what it sounds like.

The now-classic scene from the satirical TV series Silicon Valley illustrates how idleness and excess became an integrated part of many large tech companies. They have simply been so enormously profitable that it barely mattered — or seemed to matter — whether every employee was working at full capacity.

On the discussion forum Reddit, there is an entire section of tech workers openly describing how they hold multiple jobs simultaneously without their employers noticing.

That era now appears to be ending.

When American central bank chief Jerome Powell announced, on Wednesday evening Swedish time, the expected rate hike of 75 basis points — to the range of 3.75–4 percent, the fourth consecutive rise — he simultaneously signalled a gravity for the American economy that is hard to ignore, even for the very largest companies.

Sundar Pichai, CEO of Alphabet (Google’s parent company), had been on this question earlier in the autumn. At a conference he talked about how he believed the company could increase its productivity by 20 percent, and admitted that internal bureaucracy could slow decision-making. Turning around a company of that size is no trivial matter, however. In Alphabet’s latest quarterly report, the number of employees had grown by over 36,000 in just one year, to a total of 186,779. For comparison, that would make it Sweden’s fourth-largest city.

That it is hard to maintain productivity at this scale is therefore not surprising. The adjustment for many tech giants is likely to be both painful and slow.

A big part of the reason is that employees have limited incentive to help. They get free food, laundry services and gym access, and have earned fortunes as American middle managers while share prices rocketed.

Despite recent declines, Alphabet’s share is still up over 3,200 percent since its IPO in 2004.

But growth has stalled and margins have shrunk. Alphabet — despite all the new hires — grew revenue by just six percent in the third quarter, compared with 41 percent the year before. The profit margin fell from 32 to 25 percent. The immunity to bad times that tech giants once displayed has vanished.

The same pattern is visible at other giants. Amazon recently forecast a weaker fourth quarter than expected, with a growth rate of between 2 and 8 percent. A company of Amazon’s size — over 1.5 million employees — can both influence the American economy and act as a barometer for it. That figure spans office, delivery and warehouse workers. Most of them have not had the luxury of sitting on a rooftop doing nothing.

During the holiday rush at year’s end, Amazon will hire 150,000 people in the US to handle demand — the same number as last year. But in October, 10,000 open office positions were quietly cut as the economic outlook grew increasingly bleak.

CNBC’s legendary commentator Jim Cramer — known for his often dramatic formulations — said Amazon will need a dedicated team with a single goal: firing people. According to Cramer, the company may need to lay off around half a million workers.

In total, over 95,000 tech workers have lost their jobs this year, according to the site Layoffs.fyi.

When Jerome Powell earlier this year said that a 75-basis-point hike “was not something the committee was actively considering,” the tech-heavy Nasdaq 100 immediately rose 3.4 percent. The hope of a so-called “soft landing” for the economy was still alive, and tech companies could keep developing in a low-interest-rate world.

Now the situation is suddenly the reverse. Rates are at their highest since 2008. Neither the tech companies nor their employees have experienced anything like this before.

After more than 15 years of almost incomprehensible success and excess, a new reality is drawing closer. When tech workers realise that the best years may be behind them, daily life will get harder for them too. That is precisely the message Jerome Powell wants to send. And on Wednesday he was clear on one point: future hikes may come in smaller steps, but the Fed has no plans to pause. If anything, rates could end up higher than the central bank had previously anticipated.

Meanwhile on Nasdaq, the big tech stocks lit up red: Alphabet, Amazon and Meta all fell to year lows on Thursday. Apple fared slightly better but still dropped around 5 percent. The Nasdaq Composite fell 3.4 percent.

Dream Games’ New Strategy for Mobile Gaming

November 2, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 2nd, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

For years, Swedish gaming company King has dominated the charts with Candy Crush Saga. A young Turkish studio is now looking increasingly like a genuine challenger.

The mobile gaming market is made up of countless micro-genres where developers compete to be the best. In what is called “match 3” — where you swipe to line up three identical items — Candy Crush Saga has long been dominant.

The genre is deceptively simple at first glance. There are hundreds of games that look almost identical. The difference lies in the details that give players the urge to keep going. For many, Candy Crush just feels better. But creating that feeling is an entire science in itself, behind the scenes.

That is what makes it so remarkable when a brand-new match 3 game appears and becomes enormously popular. Turkish studio Dream Games was founded as a spin-off from Peak, which was acquired by the American company Zynga. In just three years, they have created one of the world’s most successful mobile games — Royal Match. In a genre that every major studio has tried to crack, it is a small upstart that has done it better than most.

The key may lie in unusually sharp focus. The entire company — around 100 people — works on a single game. The result is a highly polished and elegant experience where something new happens every day. The numbers speak clearly to the success of that strategy: estimated revenue over the past twelve months is 4.7 billion kronor.

Apple’s Masterstroke Is Systematically Crushing Its Rivals

October 28, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on October 28th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Apple’s privacy strategy is a masterstroke that is systematically crushing rival tech giants. But behind the scenes, the motives are less noble.

Rarely has an aggressive business strategy been framed so elegantly as Apple’s “privacy is a fundamental human right.”

It sounds consumer-friendly and principled. But the practical consequence of that sentence is currently erasing billions in revenue at Apple’s competitors.

The abbreviation ATT — App Tracking Transparency — is what it all comes down to. Through a change to Apple’s operating system earlier this year, the company made it effectively impossible for other businesses to track which of their ads actually work.

This was all done, so the story goes, to protect users’ privacy from being tracked in inappropriate ways.

Many iPhone users have by now grown accustomed to saying yes or no when a newly downloaded app asks whether it can track them.

Fair enough. But among the motivations there were also less noble considerations. It was an indirect attack — on Meta (Facebook), Snap, and YouTube (owned by Alphabet).

The mobile gaming industry and e-commerce companies saw an immediate effect. They scaled back and redirected their ad spending to other platforms, hitting the companies mentioned above, who are the ones selling the ads.

Last week, Alphabet (Google), Meta (Facebook), Microsoft, Apple and Amazon all reported their quarterly results. These companies are often referred to collectively in this column — and elsewhere — as “tech giants.”

Scale is one thing they share, but their businesses and revenue models have always been quite different. And it is the companies with a particular kind of advertising at the core of their model that Apple’s strategy has hit hardest.

YouTube, for example, reported falling revenue for the first time ever — something several analysts attribute directly to Apple’s ATT.

For Meta, it was even worse. The stock fell almost 25 percent — to its lowest level since 2016 — after reporting results that fell short of market expectations.

CEO Mark Zuckerberg tried to explain the situation: “There are macroeconomic headwinds. There’s a lot of competition. There are advertising challenges — especially those coming from Apple.”

Back in February, Zuckerberg had said that Apple’s change would cost Meta $10 billion (around 108 billion kronor) in lost revenue during 2022.

What do these companies’ ads have to do with Apple? They are displayed on Apple’s hardware. And iPhone users are, in general, more sought-after in the advertising market — they spend more money on average than Android users. Billions are spent every month to reach precisely these users. A challenge that has now become significantly harder and more expensive.

Given the heightened tension, you might assume Apple has some principled objection to advertising. Not so.

Apple’s own advertising revenues are already estimated at around 44 billion kronor annually — a figure that, according to Bloomberg, is set to grow to over 110 billion.

On top of that, Apple expanded its own ad network this week. The App Store now carries more ads than ever before, and under headings like “our favourites for children” you could find direct ads for casinos.

Apple was forced to pause some of those ads the very next day, after developers complained. Targeted digital advertising is harder to get right than most people realise.

One might assume it is the global macroeconomic environment — war in Ukraine, rising interest rates, inflation — that is causing ad-dependent companies to lose revenue. The picture is more complicated.

Amazon — a far larger player in the advertising market than most people realise — posted advertising revenues of over 100 billion kronor in its third quarter. That is more than Twitter, Snapchat and Pinterest generate from advertising combined. And more importantly, that figure grew 25 percent compared to the previous year.

The same trend can be seen at advertising conglomerate WPP, one of the world’s largest buyers of ad space. They reported growth in advertising and raised their growth targets for the year. The overall advertising market appears to be doing quite well. Apple’s own ad revenues are growing.

But those who have been subjected to Apple’s rule change are going through a baptism of fire.

Apple introduced itself to the world with an ad called “1984” — a reference to George Orwell’s novel. Looking at how the company is behaving now, they seem to have drawn more inspiration from his other book, Animal Farm. All advertising is equal, but some advertising is more equal than others.

TikTok’s Content Moderators Are Having Nightmares About Their Work

October 25, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on October 25th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

TikTok’s algorithm has been praised as the best in the world at selecting content. But the hardest decisions are made by people who watch thousands of disturbing clips every day — for a wage of around one hundred kronor a day.

Luis, a 28-year-old Colombian student using a pseudonym, spoke to The Bureau of Investigative Journalism about the kind of content he has to watch as part of his job. Luis is a content moderator for TikTok, reviewing material uploaded to the platform. Several people interviewed by the TBIJ describe having developed nightmares and psychological problems from the work. To hit the targets set, moderators must watch between 900 and 1,000 videos per day. Pay for this is around 2,800 kronor a month — barely above the Colombian minimum wage.

Much of TikTok’s success is attributed to its algorithms — the software that determines which content is shown to each individual user. It is personalised, so each person gets the content the algorithm thinks they will watch. But that should not be confused with content they actually want. There are countless examples of users being served material they dislike, yet end up watching anyway — something SvD documented in an investigation last year, which focused on eating disorders. That is far from the only example.

With sophisticated algorithms, you might expect this kind of offensive material to be filtered out automatically. But the internal systems designed to do that are far from adequate. Human moderators are needed to fill the gap, manually reviewing disturbing videos.

There is another reason the system works this way: it is cheaper. Roy Carthy, head of marketing at moderation company L1ght, told TBIJ that competing with those low wages simply isn’t possible. For TikTok, solving this problem technically is not profitable.

The situation is familiar. A few years ago, news site The Verge reported how Facebook moderators were developing symptoms resembling PTSD — post-traumatic stress disorder — without being entitled to any support from the companies purchasing their services. Both Facebook and TikTok use subcontractors in low-wage countries for this work, increasing the distance and reducing visibility into exactly how it is conducted and what is done to support the workers.

Another worker, named Alvaro in the TBIJ report, says “you have to work like a computer. Say nothing, don’t lie down, don’t go to the bathroom, don’t make a cup of coffee, nothing.” He describes the home environment that many moderators work in, where they are also monitored by video cameras by TikTok’s subcontractor. Bonuses are paid based on the number of videos watched. Alvaro received a written warning after watching only 700 videos in one shift.

Once again, we are confronted with the priorities of large tech companies. That people upload inappropriate or outright illegal content is not the platform’s fault — individual users are responsible for that. But when platforms create the infrastructure for it, you can be certain of what will follow. No one can reasonably claim to be surprised by the outcome.

As a user, you can sometimes marvel at how good free services are. How can all this content — entertainment, information, culture — be delivered to your phone at no cost? But there is almost always a price. It is just that someone else is the one paying it.

Ark Kapital: Tailored Financing for Startups

October 23, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on October 23rd, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

What happens when venture capital dries up for software companies? A new industry of alternative financing emerges. Ark Kapital is one of them.

It might seem like a return to an older era. How did companies get funded before venture capitalists started investing our pension savings? Often, with loans.

Getting a bank loan when you had a factory and wanted to build another was relatively straightforward. Startups today don’t have that luxury. The risk is too high and companies are usually at too early a stage for banks to feel comfortable lending.

As venture capital becomes more cautious, a new type of player is emerging — lenders who use companies’ own business data to secure their credit decisions.

Ark Kapital connects directly to customers’ internal systems to assess risk and need. It is essentially the opposite of the big banks’ somewhat rigid model — a system built explicitly for fast-growing software companies.

Because many startups are so-called SaaS companies — offering software as a service — it is easier to forecast how their revenues will develop. With predictive models, you can also calculate what effect additional capital might have on the business.

Ark Kapital is part of a new wave of fintech companies beginning to emerge. Startups as a customer category have grown large enough that dedicated services are now being built on their terms. The established players are left standing still, at risk of missing this new wave of customers entirely.

Business model: Providing loans to software companies — a customer category that has historically struggled to get this kind of support from major banks. Founders: Henrik Landgren, Oliver Hildebrandt, Axel Bruzelius. Notable figure: Has raised 3.3 billion kronor in investment capital.