Technology

United States District Court Judge Richard J. Leon has ruled in favor of AT-T in the governmentantitrust suit to block AT-Tproposed merger with Time Warner .

That decision matches word on the street over the past few weeks, and delivers a stern rebuke to the Trump administration, which had opposed the deal from its earliest days. The decision was made following the close of markets in New York, and after-hours trading was muted to the decision.

In light of todaydecision, Comcast, which has been eyeing its own content creator takeover of 21st Century Fox, will likely move forward with a bid as early as tomorrow.

In October 2016, AT-T announced its plan to acquire Time Warner for $85.4 billion, and a total of $108 billion with debt. The DOJ moved to block the merger in March, arguing that the merger would reduce competition and hurt consumer choice.

The nuances of this case are important, as the implications of this decision reach far beyond the individual businesses of AT-T and Time Warner to the vast media landscape as a whole.

First off, itworth noting that the overall goal of antitrust regulations is to protect the consumer from unfair business practices that may arise from a consolidation of power within a single company. But size isn&t necessarily whatmost important in these types of cases. In fact, sometimes a merger can help competition and consumer choice, as is more often the case with vertical mergers.

A vertical merger is when two companies who provide different or complementary offerings join forces, giving consumers access to a more comprehensive set of services, at a lower price, while still generating profits. Thatnot to say that vertical mergers get through regulatory approval free and clear — the FTC has fought 22 vertical mergers since 2000 — but they receive less scrutiny than horizontal mergers.

AT-T-Time Warner is considered a vertical merger, as AT-T is a content distributor and Time Warner is a content creator. But the overall landscape complicates the decision a great deal.

There are only a handful of companies in this space, and they are some of the most powerful companies in the world. AT-T itself is the largest telecom provider in the world, and via DirecTV, it is also the largest multichannel video programming distributor in the U.S. Time Warner, meanwhile, owns channels like TBS and TNT, HBO and Warner Bros., not to mention the assets to live sports and news orgs such as the NBA, MLB, NCAA March Madness and PGA.

The DOJ has argued that this type of consolidation would give the merged AT-T-Time Warner the ability to raise prices, thwarting the competitionability to compete by forcing them to raise prices to maintain carriage rights. The government has also argued that the newly rolled back net neutrality rules would no longer protect AT-T from, say, throttling Netflix if it didn&t purchase and distribute Time Warner content.

On the other side, AT-T and Time Warner (big as they may be) face steep competition from the FAANG companies (Facebook, Apple, Amazon, Netflix and Google), all of whom have made video a top priority. In fact, CNNMoney reported that AT-T-Time Warnercounsel Daniel Petrocelli made the argument that traditional media orgs have already been left behind in the digital revolution.

From the report:

Petrocelli told Judge Leon that their estimates show FAANG is worth $3 trillion collectively, while an AT-T-Time Warner entity post-merger would be worth $300 billion. ‘We&re chasing their tail lights,& Petrocelli said.

Italso worth noting that President Trump has been publicly opposed to the deal since he was on the campaign trail. Remember, Time Warner owns CNN, which is the object of some of Trumpmost focused hatred. At a campaign rally in 2016, Trump said his administration would not approve the deal, raising concerns over political interference. The government has argued that Trump did not communicate with antitrust officials over the deal and that their choice to fight the merger was not influenced by the White House.

In 2014, it seemed like pretty much anyone with a pulse and pitch deck was capable of raising huge amounts of capital from prestigious venture capital firms at sky-high valuations. Here we arefour years later and times have changed. VCs inked a little more than 3,100 deals in the last quarter of 2017, according to Crunchbase— about 500 fewer than the previous quarter.

For aspiring startup founders, ita &confusing time in the so-called Unicorn story,& as Erin Griffith put it in a column last May — an asset bubble that never really popped, but which at the very least is deflating. In the confirmation hearing for new SEC Chairman Jay Clayton, lawmakers lamented the dearth of initial public offerings as companies that thrived in private markets —from Snap to Blue Apron —have struggled to deliver meaningful returns to investors.

This all creates a number of dilemmas for founders looking to raise capital and scale businesses in 2018. VCs remain an integral part of the innovation ecosystem. But what happens when the changing dynamics of financial markets collide with VCs& expectations regarding growth VCs may not always be aligned with founders and companies in this new environment. A recent study commissioned by Eric Paley at Founder Collective found that by pressuring companies to scale prematurely, venture capitalists are indirectly responsible for more startup deaths than founder infighting, technical debt and slow customer adoption —combined.

The new landscape requires that founders in particular be judicious in the way they seek out new sources of capital, structure cap tables and ownership and the types of concessions made to their new backers in exchange for that much-needed cash. Here are three ways founders can ensure they&re looking out for whatbest for their companies — and themselves —in the long run.

Take time to backchannel

Venture capitalists are arguably in the business of due diligence. Before they sign the dotted line, they can be expected to call your competitors, your customers, your former employers, your business school classmates — they will ask everyone and their mother about you.

A first-time founder is also new to the pressures of entrepreneurship, of having employees rely on you for their livelihoods. Whether you are desperate for cash because you need to make payroll, or you&re anxious for the validation of a headline-worthy investment, few founders take the time to properly backchannel their investors. Until you can say you&ve done due diligence of your own, your opinion of your VCs is going to be based on the size of their fund, the deals they&ve done or the press they&ve gotten. In short, it will likely be based on what they&ve done right.

On the other hand, you likely don&t know anything about the actual partner that will join your board. Are they intelligent in your space Do they have a meaningful network Or do they just know a few headhunters Are they value creators What is their political standing in their firm Before you sign a term sheet, you need to take the time to contextualize the profile of the person who is taking a board seat. It gives you foresight on the actions your investment partner will likely take down the road.

Think beyond your first raise

If you do decide to raise capital, make sure you are in alignment with your board regarding your business plan, the pursuit of profit at the expense of revenue growth, or vice versa, and how it will steer your decision making as the market changes. It goes without saying that differences of opinion regarding your business strategy can lead to big conflict down the road.

As you think about these trade-offs, remember that as an entrepreneur, your obligation is to the existing shareholders: the employees and you. As the pack of potential unicorns has thinned, VCs in particular have turned to unconventional deal structures, like the use of common and preferred shares. For the founder who needs to raise cash, a dual ownership structure seems like a fair compromise to make, but remember that it may be at the expense of your employees& option pool. The interests of preferred and common shareholders are not perfectly aligned, particularly when it comes time to make difficult decisions in the future.

Is VC money right for you

VCs frequently share information, board decks and investor presentations with members of the press and the tech community, sometimes in support of their own personal agendas or to get perspective on whether to invest or not. Thatwhy itparticularly important to backchannel, and more importantly, that you have allies that you can call on and people who can ensure some measure of goodwill. A good company board cannot be made up of just the investors and you: You need advocates that are balanced and on your side.

These prescriptions can sound paranoid, particularly to the founder whose business is growing nicely. But anything can cause a sea change and put you at odds with the people funding your company — who now own a piece of the company that you&re trying to build. When disagreements arise, it can get tense. They might say that you are a first-time founder, and therefore a novice. They will make your weaknesses known and say you&ll never be able to raise again if you ignore their invaluable advice. Itimportant that you don&t fall into the fear trap. If you create a product or service that solves an undeniable problem, the money will come — and you will get funded again.

The term founder-friendly VC was always perhaps a bit of a misnomer. The people building the business and the people planning on cashing in on your efforts are imperfect allies. As a founder and business owner, your primary responsibilities are to your clients, to the company you&re building and, most importantly, to the employees who are helping you do it. As founders we like to think that we have all the answers, especially in bad times. Making sure you have alignment with your investors in challenging and unpredictable situations is critical. Itimportant to anticipate how your investors will problem-solve before you give up control.

Venture capital is far from the only way to finance an early-stage business. Founders looking to jump-start their business have a number of alternatives, from debt financing and bootstrapping to crowdfunding, angel investors and ICOs. There are indeed still many advantages to having experienced investors on your side, not simply the cash but also the access to hiring and industry knowledge. But the relationship can only benefit both parties when founders go in eyes wide open.

Tesla has laid off about nine percent of its employees, Electrek first reported. This is part of the reorganization Musk talked about in May on the companyquarterly earnings call.The layoffs reportedly started on Monday and will be made official at some point today.

Tesla, which also operates SolarCity, is only laying off salaried employees. Tesla isn&t letting go any production associates, as the company is trying to ramp up Model 3 production.

&We made these decisions byevaluating the criticality of each position, whether certain jobs could be done more efficiently and productively, and byassessing the specific skills and abilities of each individual in the company,& Tesla CEO Elon Musk wrote to employees in an email obtained by TechCrunch. &As you know, we are also continuing toflatten our management structure to help us communicate better, eliminate bureaucracy and move faster.&

When Tesla acquired SolarCity in 2016, its headcount increased to more than 30,000 employees. Toward the end of 2017, Tesla had around 37,000 employees.

In February, Tesla made a deal with Home Depot to sell the PowerWall and solar panels at 800 of Home Depotlocations. But Tesla has reportedly not renewed its contract, which means the Tesla employees working at Home Depot won&t be needed anymore. Instead, Musk said in his email that they &will be offered the opportunity to move over to Tesla retail locations.&

The hope with the restructure is to get to profitability. Last quarter, Tesla reported record revenues along with record losses.In Q1 2018, Teslanet losses were a record $784.6 million ($4.19 per share).

Herethe full email Musk wrote to staffers:

As described previously, we areconductinga comprehensive organizational restructuring across our whole company. Tesla has grown and evolved rapidly over thepastseveral years,which has resulted in some duplication ofroles and some job functions that,while they made sense in the past, are difficult to justify today.

As part of this effort, and the need to reduce costs and become profitable, we have made the difficult decision to let go of approximately 9% of our colleagues across the company. Thesecuts were almostentirely made from our salaried population and no production associates were included, so this will not affectour ability to reach Model 3 production targets in the coming months.

Given that Tesla has never made an annual profit in the almost 15 years since we have existed, profit is obviously not what motivates us. What drives us is our mission to accelerate the worldtransition to sustainable, clean energy, but we will never achieve that mission unless we eventually demonstrate that we can be sustainably profitable. That is a valid and fair criticism of Teslahistory to date.

This week, we are informing those whose roles are impacted by this action. We made these decisions byevaluating the criticality of each position, whether certain jobs could be done more efficiently and productively, and byassessing the specific skills and abilities of each individual in the company. As you know, we are also continuing toflatten our management structure to help us communicate better, eliminate bureaucracy and move faster.

In addition to this company-wide restructuring, we&ve decided not to renew our residential sales agreement withHome Depot in order to focus our efforts on selling solar power in Tesla stores and online. The majority of Tesla employees working at Home Depot will be offered the opportunity to move over to Tesla retail locations.

I would like to thank everyone who is departing Tesla for their hard work over the years. I&m deeply grateful for yourmanycontributions to our mission.Itis very difficult to saygoodbye. In order to minimize the impact, Tesla is providing significant salary and stock vesting(proportionate to length of service)to those we are letting go.

To be clear, Tesla will stillcontinue to hire outstanding talent in critical roles as we moveforward and there is still a significant need for additional production personnel.I also want to emphasize that we are making this hard decision now so that wenever have to do this again.

To those who are departing, thank you for everything you&ve done for Tesla and we wish you well in your future opportunities. To those remaining, I would like to thank youin advance for the difficult job that remains ahead.We are a small company in one of the toughest and most competitive industries on Earth, where just staying alive, let alone growing, is a form of victory (Tesla and Ford remain the only American car companies who haven&t gone bankrupt). Yet, despite our tiny size, Tesla has already played a major role in moving the auto industry towards sustainable electric transport and moving the energy industry towards sustainable power generation and storage. We must continue to drive that forward for the good of the world.

Thanks, Elon