Mamdani won. Now what?

Welcome to Cautious Optimism, a newsletter on tech, business, and power.

Happy Wednesday! Forget Uber’s AWS era, I look forward to OpenAI’s Google Docs era, here’s to everyone selling their internal tooling. Stocks in Asia rose today, and are generally lower in Europe. Domestic indices are flashing green this morning, with Coinbase set to add to its 12% gain recorded yesterday; as noted here, the stablecoin train is racing ahead, which could prove a boon for Coinbase given its close ties to Circle.

We’re in the quarter’s garbage time, waiting for Q2 to close so that we can start a new earnings cycle, reset the IPO counter and get busy in the back-half of 2025. News might slow for a few days. Or not. It’s 2025, after all. Onward! — Alex

• 📈 Trending Up: Apple not learning from the past … uncertainty on the effectiveness of airstrikes … European AI investment … Daydream’s launch … Synthflow AI’s revenue … even more money for voice-focused AI … paying as little as possible for AI …

• 📉 Trending Down: GOP unity … irony … cybersecurity … AI prices …

Who the hell is Melio?

Xero is a company that doesn’t get talked about enough. This is probably because it’s based in New Zealand, which is miles from major global economic centers. However, the accounting software company has accumulated a roughly AU$30 billion valuation in the public markets and is again snapping up a smaller company.

This time Xero is buying Melios, a US-based venture-backed startup that had raised around $650 million while private, including funds from Accel, General Catalyst, Coatue, Thrive Capital, and Fiserv. Melios offers accounts receivable and payable tooling to small businesses, and corporate partners. Gusto, for example, recently launched bill pay using Melios tech.

Like many companies that raised quickly during the COVID-era, Melios saw its valuation soar. Valued at some $4 billion in 2021 when it raised a $250 million Series D, Melios’ worth fell to just over $2 billion when it raised last year. That makes the company’s $2.5 billion sale to Xero an up-exit of sorts, albeit from a lowered base.

Thankfully as Xero is a public company, it dropped a deck discussing the purchase. Here’s the key graphic:

Melio’s annualized revenue run rate is greater than 10% of Xero’s total revenue in its last fiscal year, so it will be materially accretive in terms of revenue. Xero is in a sense buying a chunk of growth.

The gist behind the deal is that Xero knows it’s good at accounting; the United States payments market is growing; Melios is a US company; and if you add accounting tools to payments tools, you get three instead of two. All that sits well with me, but I am a bit stuck on the following:

• Xero says the deal is worth 14.3x Melios’s March 2025 annualized revenue, or, if you prefer, 9.7x its March 2025 annualized revenue if you take into account “pro forma F728 expected revenue synergies.”

Paying 14.3x for Melios feels a bit cheap given that the company grew from $109 million worth of top line in its fiscal 2024 to $153 million worth of revenue in the next. That’s just over 40% growth, and the company’s subscription business is only now starting to generate real income. All told, I would have held out for more, but the sale price does mean venture liquidity, and that’s no small prize in the current market.

• Recall that Carta data indicates that dollars returned from VCs to their own backers have been thin for ages.

Here’s an interesting thought: To generate DPI, will VCs have lower expectations for sale prices so long as they are returning funds to LPs at a tidy profit?

Mamdani won. Now what?

Cuomo has called to concede, and it appears that New York City is on track to elect a mayor that is far less aligned with the city’s wealthy than most are accustomed to. I think the Sourcery headline of ‘NYC … Yikes’ encapsulates tech vibes well. Or this tweet from David Friedberg, who writes that Mamdani’s win will lead to the “elimination of the NYPD” and that “if Americans don’t want to learn the lessons of socialism’s failures elsewhere, we should aim to learn them here as quickly as possible.”

I recall calls after Trump’s second win to judge him based on his performance in office, and to give him the benefit of the doubt. He’s all our president, after all! Those calls do not seem to have echoed long enough for Mamdani to get the same treatment.

Former Governor Cuomo’s loss in the race, however, is an interesting moment in time. Not because NYC Democrats just elected someone handsome and young to lead them in the upcoming election instead of recycling someone from prior contests — the Marvel cinematic universe method of election, in which Democrats cannot summon a new idea to save their own franchise life — but because I think it will only undergird the anti-democratic views of some in the technology industry.

• Peter Thiel’s views are well known, but I was surprised to learn that Marc Andreeseen reportedly sent people from his firm to Curtis Yarvin’s writings. The man’s a self-described Jacobite. Neo-monarchy is an attractive proposition if you anticipate wearing a crown, I suppose.

Regardless, there are a lot of wealthy folks in New York City, many from technology circles. And they just got hit with a public vote that likely means higher taxes on their own earnings and accumulated capital. Thus, I consider the Mamdani win, apart from whatever it means for New York City itself, another log on the still-burning fire in certain tech circles that democracy doesn’t really work because people don’t vote the way that they should.