Newsletter
July 11th, 2022; Newsletter #10
Hi y'all, how about we pony up some change and buy Twitter. I heard from the grapevine it's back open for bids, and besides I can do with some algo tweaks to get more likes & RTs.
While you search under couch cushions for the change, enjoy reading this week's newsletter!
Interesting Company/Opportunity of the Week
CarbonChain is a carbon accounting platform that enables companies in the most polluting industries such as metals and mining, oil and gas, and agriculture to track their supply chain greenhouse gas emissions to help them track their transition to the low-carbon economy.
The platform digitizes the supply chain by asking the customer to upload their data regarding the supply chain, transactions, and assets screening reports. It then maps the digital supply chain data to its carbon production database to generate an emissions report. It supports a wide range of hard and soft commodities with its database of greenhouse gas emissions factors covering individual assets from mines to ships. Not completely clear if cow burps are in the database as well. Through this report, CarbonChain enables commodities companies to identify their highest polluting transactions and take the steps necessary to protect their supply chains against rising carbon prices. This benefits them with lower interest rates to ESG leadership recognition. The platform also integrates into the customer workflow for ongoing automated carbon accounting, tracking, and reporting.
CarbonChain was founded by Adam and Roheet who are experienced in the EU supply chain. They are headquartered in London. Its primary customers were Chief Sustainability Officers but they realized the lack of budget, so they pivoted to serving CFOs. CFOs can get better access to green loans, which hit $680B in global lending in 2021. CarbonChain also focuses on providing investable information to traders, financiers, and logistics firms in the heaviest emitting industries: metals and mining, oil and gas, and agriculture.
CarbonChain aims to tackle Scope 3 emissions - the holy cannoli of Carbon Accounting - with a combination of the supply chain analysis and carbon production database. This is a common problem with even large companies such as Amazon only reporting CO2 emissions from Amazon-branded products. It will also help uncover carbon production hotspots in the supply chain so that COOs can find more sustainable alternatives. If CarbonChain can also integrate with carbon exchanges, it could become an extremely powerful tool to financialize the supply chain for making or raising money.
CarbonChain has raised $125k+ in Seed funding from YC and others. Its competitors include Persefoni and CarbonStop. Persefoni is a carbon footprint management and reporting platform that has raised a total of $115M. CarbonStop is a consulting service that focuses on carbon emission measurement and management.
News of the Week
Amazon now also delivers food to your homes in partnership with GrubHub. GrubHub+ is a subscription service in which members can get free delivery for $10 / month. Amazon now offers GrubHub+ for free as part of their Prime membership. Along with this, Amazon also receives warrants for upto 15% of GrubHub for approximately $1B.
Amazon had already tried its own restaurant delivery service called Prime Now, which was shut down. Sidebar, according to an article, there was internal politics between Prime Now and Prime Fresh teams over which one would continue, and the other would be shut down.
All delivery apps such as Uber Eats and Doordash haven’t done well this year compared to the COVID surge in orders. GrubHub’s revenues have declined 5%
Read More: 1
What I Read or Watched
Marketing Tech in web3
Redpoint Ventures folks are one of the leading thinkers in the transition from web2 to web3. They’re the right balance of optimism and pragmatism. Tomasz Tungus has a series of blogs on the topic that I follow avidly, especially his thoughts on the web3 marketing tech stack. According to him, the wallet will be the ‘cookie’ for a consumer in web3. In that context, the marketing/ads flow will integrate Ad Networks with Virtual Wallets and public blockchain data to execute campaigns. An interesting company in this space is Dune Analytics.
The questions for marketing remain the same in this new world - who are my customers, where are they spending their money/tokens, what are their interests/behaviors, etc. Only the technologies to measure data and execute plans will differ. For e.g., instead of spending on facebook to serve ads to users about BFCM sales, marketers could airdrop tokens into customer’s wallets. Companies will have to revise their understanding of the economics of marketing in web3. Typically measured by the community ownership as a percentage of total Enterprise Value of the web3 project, Tomasz claims marketing is at least 3x costlier than web2. The study of NFT economics is called ‘Tokenomics’ and a friend working in this space tells us that this might be the next hot thing.
July 1st, 2022; Newsletter #9
If you're on the beach, in a hammock, sipping Pina Colada, and watching the fireworks - then why are you reading this? For everyone else, enjoy this long-weekend edition!
Interesting Company/Opportunity of the Week
MCCPDC
No, it’s not a roman number, this stands for Mark Cuban Cost Plus Drugs Company which is an online pharmacy that sells cheap generic medication directly to patients. Cost Plus is a Public Benefit Corporation that is different from a for-profit or non-profit in the terms that they’re allowed to price products with a specific public markup.
Cost plus is able to price products as low as 0.4% of the cost of similar patented drugs. They can do this because:
They cut out the middleman such as Payors, Wholesalers, and Pharmacies in the supply chain. That means there are so many fewer stakeholders who handle the drugs and take a profit percentage off the total cost. It also provides a better patient experience as they no longer have to file rebates, guess the next refill’s price, clip coupons, etc.
They cap the profit to 15% over the manufacturer’s price. This allows them to support their lean operations while keeping the price low. This also enables them to become a Public Benefit Corporation that has its own benefits to operational efficiency.
They sell directly to consumers which gives them the efficiency of scale as well as direct consumer data to make better product decisions. Cost plus ships the drugs to customers from a warehouse, so they don’t need expensive retail locations, or have to sell chips and cookies along with Lipitor.
They work with generic drugs which by definition, can be made by multiple manufacturers. This means that there is less supplier power in this industry as compared to patented drugs, for which pharmaceuticals can charge very high. Cost Plus can negotiate and choose with manufacturers to sell to their customers.
Cost Plus sells drugs for most common conditions such as Diabetes, Cancer, Blood Pressure, etc. The CEO and co-founder Alexander Oshmyanksy started Cost Plus in 2016, and launched their website to consumers in Jan 2022. Alexander graduated with a BA in Biochemistry at age 18! Phew.
Cost Plus partners with Truepill, a private $1.6B valuation pharmacy fulfillment company. This enables them to keep overall costs low. Further, Cost Plus is going upstream by launching their own manufacturing facility. Given the direct consumer data they have collected so far, this will give them an incredible advantage in the market to invest in the best drugs.
News of the Week
Klarna - Buy Now / Why Now
Klarna is a private Swedish BNPL startup. News broke this week that it was looking to raise a new round of funding at a $6.5B valuation, that’s 1/7th of its $45B valuation 1 year ago. Klarna had recently failed to raise at $30B and $15B valuations, so this is not a good sign. Klarna’s primary competitors include US-based Affirm (tie-up with Amazon), Square’s Australia-based Afterpay, and Apple’s new feature called ‘Pay Later’. This highlights the challenges in the BNPL industry with unit economics failing the default-alive test. The charges are too low to support the growing demand for credit by GenZ. A survey suggests about half of GenZ and Millenials have used, or plan to use BNPL services. The risks in this business are compounded by inflation eating into the customers’ ability to pay, besides decreasing the real value of interest earned.
What I Read or Watched
Where Does AI Go Next?
Key Takeaways:
GPT3 is a Paradigm shift. Developed by OpenAI (Elon Musk is a member) using the Transformer AI models, it can recognize images & patterns to generate language, text, and images on its own. Typically AI is used for classification, but this allows creation. This has the potential to make chatbots and customer interaction more powerful.
AI drives Businesses. Currently for major implementations, AI helps reduce cost of predictions by automating manual tasks such as fraud detection and demand forecasting. The future of AI is to become prescriptive, and transform processes to improve value proposition.
AI in real time. Today AI uses batch processing of data to analyze and learn from, and generate insights. As the speed of business increases, it’s like playing yesterday’s game today. In the future, AI will connect with live data streams to analyze and generate insights on the fly such as loan creditworthiness and sorting through codes.
Read More: 1
June 20th, 2022; Newsletter #8
It's Monday again. Feels like it was here just 7 days ago - got to look into that. If I haven’t already told you my spoon-fork-knife joke, give me a holler. Enjoy the newsletter!
Interesting Company/Opportunity of the Week
X (name redacted for relationship's sake) & Automated Cloud Infrastructure Setup Industry
So just to get this disclaimer off the table - X is my friend’s company so I’ll be brutally harsh because he owes me $50. I also intend it to be a case-study for IAC.
X created a secure, scalable, compliant Infrastructure stack for your startup in less than an hour on AWS, GCP, and Azure. They categorize themselves as an Infrastructure-as-Code (IAC) framework and help customers that use microservices architecture and K8. This involves multiple aspects such as instance management, monitoring, CD (not CI), security & compliance, and autoscaling among others. In other words, it takes over where code build ends and through getting the service live. Their primary product is Z which is open source. Built on Terraform with abstractions, it includes public cloud libraries and also integrations with 3rd party software such as Datadog. Their current offering is customer support for their open source Z with a yaml configurator but they’re working on a cloud-based offering to be launched very soon.
The typical customers of IAC are startups with little DevOps and cloud infrastructure expertise. They can range from 2 to 100 employees. As they get larger, the custom needs integrations, scaling, and deployment will push them to build their own DevOps model. Hence the IAC must be a starting point but should be flexible enough to avoid lock-in. X has adopted this model to allow customers to pick and choose Z libraries as well as be transparent to using Terraform directly. You also shouldn’t need to launch with the IAC platform but have the choice to adopt it later in the life cycle. This is important as customers might want to experiment and customize their own setup until they achieve sufficient complexity to require IAC. X started offering this capability recently and found it effective for Go-To-Market. Another set of customers are cloud infrastructure consulting companies who design and set up the cloud platform for their clients.
Founded in 2020, X raised a $Money MM seed last year led by Y. They have 20 customers up to 100 engineers in size. Their major challenge at the moment is Go-To-Market beyond the initial customers as they find it difficult to up-sell/cross-sell to growing customers.
The benefits of implementing IaC are increased speed of deployment, cheaper infrastructure management, and improved consistency of infrastructure configuration. Best practices for IaC says that the infrastructure should be defined as simple text files and these scripts should be kept close to the application code in Git. Additionally, the vendor should build tools to turn these scripts into infrastructure quickly.
The biggest risk for IAC developers is that cloud platforms are themselves launching quickstart options with the infrastructure already setup and integrated deployment. AWS offers Cloud Formation which stores templates that describe ‘what’ was the deployment. Similarly, Google offers Cloud Platform (Deployment Manager) for a similar offering.
Some of the largest tools in this industry are Red Hat Ansible, Puppet, and Terraform.
News of the Week
Crypto Lost Its Bear-ing
Due to inflation and common-sense finance, your bitcoins are worth nothing. And they still managed to drop lower this week. It started with Luna valuation dropping after its reserves in bitcoin lost value and the founder Do Kwon was found to have sold a chunk of his holdings. Following this the TerraUSD algorithmic stable coin lost its peg to the dollar, and then to the cent. This week, Bitcoin is down 2/3rd from its peak. The total cryptocurrency market cap is below $1T.
Celsius paused all withdrawals, swaps, and account transfers of crypto on its platform. It is an exchange that lends cryptocurrency between accounts for interest rates upto 18%, which means that volatility can play havoc with their financials. It has 1.7MM users so as the value of crypto dropped, Celsius has to start pushing margin calls which will kill its users and business. To avoid it, they’re looking at financing options and have hired a restructuring law firm.
Coinbase has laid off 18% of its workforce after claiming that the business was stable and had cash reserves. They also rescinded offers to new graduates. Their stock crashed 21% on Monday behaving more like a typical cryptocurrency than equity.
MicroStrategy’s Michael Saylor took a boring business and tried to make it exciting. Like doing drugs at a children’s birthday party, it only lasted for a while. Fun fact - I did some MSTR projects and I’d happily trade it for bankruptcy via crypto. MSTR bought about $4B worth of Bitcoin which is down by about 25%. Saylor is still confident in Bitcoin and plans to continue holding or buying.
This is going to ripple through the entire crypto industry and it’s going to get worse before it gets better. There’s likely going to be regulation in this sector and as the crisis worsens, the regulators will have the upper hand in drafting legislation with their preferred terms. Kicking them when they’re down.
What I Read or Watched
Key takeaways from the 2022 State of the Crypto Report:
We’re in the 4th major downturn for Crypto. Typically stock prices fall as lagging indicators of the company’s performance in the recent quarter. Crypto prices conversely are a leading indicator of the innovation and startup activity that will occur in this space. Higher prices draw more talent to build more companies and increase developer activity, creating value in the ecosystem.
Web3 has found the use-case that flips the value proposition compared to web2 - creator economy. No longer can people say ‘a simple database can do that’. OpenSea’s take rate is 2.5% compared to 30%+ of Apple, Google, and Facebook. OpenSea has 22,400 creators on its platform - still a tiny %age of web2 creators. There is a huge opportunity in bringing the remaining millions to web3 platforms through LC/NC tools.
Crypto taking up real world use-cases. It’s no longer just bits being traded by junkies - it exists IRL. From Carbon Credits to Decentralized Wireless Network and booking Hotel Rooms.
The War of the Blockchain has a winner - Ethereum. For Now. Ethereum has the largest 4k developer base and activity due to its proof of stake protocol which makes it cheaper to develop. Ethereum also has a large base of motivated contributors led by Vitalik and they’re constantly improving (there’s a merge coming up). Other blockchains that are trending include Solana, Polygon, and Avalanche which have much better performance and are cheaper to transact than Ethereum. Customers currently pay $15MM total gas fee on the Ethereum network.
June 13th, 2022; Newsletter #7
It's Monday - Mon means 'My' in french so make it your day with a freshly baked newsletter (it's pronounced as Craw-saw). This week we met a bunch of companies at social events and even ran into one of our favorite Series A investors (story for a different time). Enjoy!
Interesting Company/Opportunity of the Week
Thrasio is an aggregator of Amazon sellers. This means that they acquire amazon sellers, typically commodity products with a positive brand, to consolidate them and improve operational efficiencies. Think spatula, pillows, or whiteboard markers - the exciting stuff! They use data from Amazon and 3rd Party to identify the categories that are in demand. They then analyze product sales, ratings, and reviews from sellers such as Amazon to identify and acquire brands. After acquisition, Thrasio’s repeatable business model is to bring immediate value in bringing together the different businesses to run more efficient production, marketing and analytics, and fulfillment across them
This is similar to roll-ups that were pioneered by Private Equity companies since the 1970s to acquire and merge multiple similar businesses into an operationally efficient and professionally run organization. Common examples include funeral homes and waste management. Not a typical MBA playground I guess.
Thrasio was founded in 2018 by Carlos Cashman and Joshua Silberstein and is based out of Massachusetts. Greg Greeley, a former executive of Airbnb and Amazon, is taking on the role of CEO this August.
Thrasio has raised $3.4B so far, including $1B Series D from SilverLake at $5B - $10B valuation. This has helped them grow rapidly and become the largest reseller. When it raised its $1 billion round last October, it was buying businesses at a rate of 1.5 per week. It now has more than 200 brands in its portfolio globally, including TrailBuddy, Kizen, and Mixology. They claim that 1 in 6 US households have bought Thrasio products. Their portfolio companies have doubled their revenues every year on average since the acquisition! Remember that “average” numbers are typically skewed by outsized winners.
Thrasio’s start was based on Amazon Marketplace, which has millions of businesses and brands selling on it (nearly 2 million active sellers by one estimate). Fun fact is that Marketplaces didn’t get much love as an idea within Amazon, and now they’re a third of the revenue. Thrasio itself became a top-five seller on Amazon. Thrasio generates a total $1B in revenue and is expanding its channel and geographical reach to continue its growth, expanding last year across Europe, China, Japan, and most recently, India. It has also taken some steps to be a little more like Amazon and Shopify itself, adding its own warehousing for product fulfillment. In channel, it has made a parallel move into bricks-and-mortar retail as it seeks to evolve from its roots as an aggregator to its own global omnichannel consumer-facing company. Their strength is speed of transaction much like Tiger VC, a repeatable model and expertise developed over iterations, and facilitating assets that can be amortized over portfolio companies.
Thrasio is the largest and dozens of other aggregators followed in its wake — some 100 according to Marketplace Pulse, collectively raising some $15 billion for the same aggregator economy with Thrasio leading the way at $3.4 billion. Competitors include Perch, Berlin Brands Group, Heyday and Branded. At least 55 brands have raised more than $100 million. It’s still early in a marketplace with nearly $400 billion in total third-party sales in 2021 and trillions more in the broader retail ecosystem.
Things are not all rosy. Scale introduces new challenges as you grow from $1 million to $10 million, the margins decrease making it harder to make returns. The easy wins that were achieved by access to capital is not sustainable as such businesses run out. Thrasio has been building a business spanning a number of different consumer categories, geographies and demographics which are expensive to manage. Integrating even similar businesses can be costly and difficult (and it often goes wrong). Aggregators generally position themselves as solving those issues with tech, but in some cases, aggregators are not building as much that technology: they are buying third-party tools to help with SEO, fulfillment and more. Thrasio is expected to lay off about 20% of its staff as per recent reports. Thrasio alludes to growing too big, too fast in the joint memo to employees. Plans to pursue a SPAC last year were scrapped amid complicated financial audits across its hundreds of brands.
Interesting company in a large TAM space, I’ll be following them to identify any opportunities that open up. With the expected downturn, it’s possible that Thrasio gets a 2nd wind as it swoops down on struggling small businesses with its checkbook.
News of the Week
Oracle-Cerner Deal
Oracle has received regulatory clearances to complete its $28.3 billion purchase of digital medical-records provider Cerner Corp. Cerner is one of the largest EMR in a healthcare space that is dominated by a very few, highly integrated legacy software companies.
We don’t usually talk about acquisitions in this news space but this deserved a spotlight.
With this acquisition, Oracle now has access to a database of patient’s medical-records which makes it easy for it to expand further into healthcare with a proprietary database. Healthcare data has always been a challenge for enterprise SaaS to break into - my personal experience working with Snowflake was that they’re way behind on Healthcare offerings.
Oracle is the second largest software maker by Revenue, supported largely by its database that’s an enterprise standard and used by almost all large companies. It’s very difficult for customers to move off the platform, which Oracle fully exploits through predatory pricing. When Amazon moved all its workloads to its own DB from Oracle, they threw a huge party!
Oracle’s healthcare-focused cloud offering will get a huge push from this acquisition. Imagine you’re a healthcare startup that wants to analyze EMR data, now you might think about hosting on Oracle Cloud for their out-of-box Cerner integration and data package. Larry Ellison also believes they’ll be able to solve some of the largest issues in healthcare with anonymized or consensual patient data sharing nationally. Imagine - Kaiser can treat you more accurately with vitals from previous treatments at Mass General and without filling out lengthy forms. Oracle also plans to modernize Cerner's Millennium EHR platform with updated features such as voice interface, more telehealth capabilities and disease-specific AI models. Cerner had very little incentive to innovate by itself. It'll be exciting to see if Oracle can dominate this space like they did the Enterprise database.
What I Read or Watched
Events Recap
Bring out the FitBit, we are going for a walk. We met quite a few founders this week working on very different challenges. Below are some key highlights:
SuperDAO - Makes it easy to start a DAO with clicks, including establishing community rules such as treasury, governance, voting etc. They are the Shopify of DAOs
Market is hot. They raised $10MM before any product or team, just based off of a Notion doc. Notion ftw.
They have started 700 DAOs on the chain in 3 months, with the focus primarily on enterprise offerings which enables large companies to experiment with DAOs and NFTs. They have 5k customers on the waiting list
The future of DAO is that they can beat traditional monopolies in both business and investments by removing middle-men and upending financial relationships
There is a new movement towards ‘Flexible DAO’ which is much more open and integrates with web2 businesses to append use-cases instead of replacing them
SuperDAO plans to build a reseller organization to package, sell, and customize the DAO deployment. Web2 analogy is Salesforce’s System Implementor network.
Only 100k people trade NFT on OpenSea per month which has 80% market share. Hence, there’s a huge opportunity in bringing new customers into web3
Founders’ Night
Travel is back! A lot of the ideas were in the travel space. This includes Greether.com (greet-her) which helps women find local women when traveling to a new city as city guides and hosts. Founder is Vanessa Karel. Another company was tokenizing hotel rooms to make group booking and reselling more profitable for hotels by giving them a cut of future transactions (i.e., Hotels.com selling Marriott rooms will give 10% back to hotels). Buk Technologies led by Arul Prakash is already working with Taj in Dubai. Bad ideas are also back with a P2P outdoor gear lending marketplace looking to raise funding. (company/founder name withheld to avoid being sued).
Healthcare is still interesting. I was really impressed with Calmsie, a pediatric mental health company targeting depression in children 8-12 years old. They gamified the treatment and analysis for children. They’re working with payors and providers to get access to the patients. Andrew and I discussed their brief in the context of Datakeep. Another company - Stone Brook Risk - is helping Regional Health Plans grow into National players by using data and analytics. I have a call with them this week to dive into their Analytics platform.
June 6th, 2022; Newsletter #6
No funny quip; the only humor was in the Dubs' whopping. Enjoy the newsletter!
Interesting Company/Opportunity of the Week
NEAR Protocol
NEAR Protocol is a scalable new Level 1 blockchain designed to provide the performance and user experience necessary to bridge the gap to mainstream adoption of decentralized applications (dApps). This is a new generation blockchain with a focus on both developers and end users of dApps while still providing the scalability to serve those users.
NEAR Protocol was founded by Alex Skidanov and Illia Polosukhin in 2018. As with most other popular crypto projects, NEAR Protocol is owned and managed by a foundation collective - NEAR.
NEAR Protocol is a Proof of Stake (PoS) blockchain, which is similar to Ethereum compared to Proof of Work used by Bitcoin. This protocol makes it faster and cheaper to execute transactions on the blockchain. NEAR operates in a similar manner to other centralized data storage systems like AWS that serve as the base layer on which applications are built. Conversely to AWS, rather than being run by a single entity, NEAR is operated and maintained by a distributed network of computers. These computers (nodes), along with the foundation, form a voting organization to make decisions about the protocol. Just as AWS allows developers to deploy code in the cloud without needing to create their own infrastructure, NEAR Protocol facilitates a similar architecture built around a network of computers and its native cryptocurrency, the NEAR token. NEAR token is the currency of transaction on the protocol, i.e., developers pay computers to host their applications using NEAR tokens.
NEAR Protocol has several advantages compared to Ethereum and other L1 protocols. Central to NEAR Protocol’s design is the concept of sharding, a process that aims to split the network’s infrastructure into several segments in order for computers, also known as nodes, to only have to handle a fraction of the network’s transactions. Yes, sharding! The solid web2 scalability mechanism also applies to the web3 architecture.
By distributing segments of the blockchain, rather than the complete blockchain across network participants, sharding is expected to create a more efficient way to retrieve network data and scale the platform.
Sharding results in distributed processing which needs to be compiled into a public central database. For that, the product Nightshade allows NEAR Protocol to maintain a single chain of data, while distributing the computing required to maintain this data into “chunks.” These chunks are handled by nodes, who process the data and add the information to the main chain.
This result in another benefit is that its architecture allows for fewer potential points of failure when it comes to security, as participating nodes are only responsible for maintaining smaller sections of the chain.
Finally, NEAR Protocol also provides a tool - Aurora, a Layer 2 scaling solution built on the L1 Protocol that makes it easier for developers to launch their Ethereum decentralized applications on NEAR’s network through built-in tools.
Some other minor benefits are better sustainability - the PoS network was certified as carbon-neutral in 2021. It’s also cheaper to build and operate dApps with 1000x lower transaction fees compared to other blockchains.
NEAR Protocol has raised $530MM from leading venture capital firms including Andreessen Horowitz and Pantera Capital. Approximately 35% of the initial supply of 1 billion NEAR tokens has been sold to such early stage investors to raise funds to develop and maintain.
As we explore company formation in the blockchain space, NEAR Protocol will be one of the foundations that we will look to build upon. We won’t be buying tokens or bitcoin anytime soon though! This is not financial advice.
News of the Week
Salesforce Reports Q1 FY23 Earnings
Salesforce is that grand-parent that still does Crossfit at 70 and stays up even after 8pm. On Tuesday, Salesforce reported its Q1 FY23 earnings and at 24% growth, blew through most of the estimates for revenue growth and forecast. The stock was ~9% after hours as the lovely Jim Cramer probably popped Dom Perignons. Boo-Yeah!
So why does it matter - Salesforce at $30B in annual revenue and multiple $1B ARR products that span enterprise SaaS - is a bellwether of the overall SaaS industry and software buyer sentiment. Tomasz Tunguz calls it the Index of Software Buyers. It can provide insights into the trend and health of the IT Spend and enterprise software industry. So let’s dive into the earnings to pull any interesting trends or facts:
Overall revenue growth was consistent at 24% YoY to $7.41B in Q1’22. Salesforce has historically grown around that range. The revenue forecast for the full FY23 is $31.7B with the earnings at $4.76 a share
Cloud-Level Breakdown of quarterly revenue & growth:
Sales Cloud (CRM) - $1.6B with 20% YoY Growth; Solid Business.
Service Cloud (Customer Service/Support) - $1.8B with 19%
Platform & Slack - $1.4B with 58%; Slack with $330M in Q1 revenues shows that it’s still riding on the COVID wave of remote work and collaboration. The new huddle feature is a recent example of great feature development geared towards non-text conversations that so far Slack hadn’t successfully entered. They also probably benefited from Salesforce’s power of Enterprise sales to tack-on to their PLG approach.
Marketing & Commerce Cloud - $1.1B with 24%; This is both disappointing but meets the benchmark. Disappointing because marketing competitors like Twilio are growing 2-3x faster and expected because ecommerce is slowing with Shopify growing 21% recently. Commerce Cloud has historically grown slower than Shopify.
Data (Mulesoft and Tableau) - $1B with 15%; Small but profitable businesses that aren’t Salesforce’s focus at the moment.
Regional breakdown of quarterly revenue & growth
Americas - $4.9B with 21%; Large and solid businesses where Salesforce is top of mind. Most product development happens in AMER and for AMER customers
EMEA - $1.7B with 39%; Small but growing very fast as EU businesses digitize. The new CRO is British, emphasizing the focus on growing revenues in EMEA. Impacted adversely by the strengthening of the dollar.
APAC - $0.7B with 32%; Extremely small accounts that are further impacted by the exchange rate. Japan and Australia are the primary markets.
Interestingly, most future TAM expansion is expected to come from the Marketing, Commerce, and Data clouds. This is the inverse of existing business sizes so Salesforce will hope to capture market share of the $284B TAM to drive its business growth.
Salesforce is looking to change its selling strategy to focus more on up-sell/cross-sell. Marc Benioff - “We’re going to focus more on how we can deliver productivity for the customer, and lower their cost.” I also heard some troubling sales-related stats from an insider, so expect some downsizing of sales executives. Can’t personally verify this.
Most surprisingly, the only risk highlighted was the currency exchange rate - which would decrease the international revenue in terms of USD. They don’t anticipate a slowdown in software sales in the next 1 year.
What I Read or Watched
Quick Commerce in Emerging Market
This week we're going to go with What I ‘Heard’ because I analyzed that I listen to podcasts for about 3 hours a day, including when bench pressing at the gym. Those Squarespace ads are a really effective pump. My go-to podcasts are unfortunately an unhealthy dose of bro-chats: The All-In, This Week in Startups, and My First Million. What are your top 3?
I want to share insights from an episode of Harry Stebbings’ 20VC Pod that spotlight Quick Commerce in Emerging Markets. Quick Commerce is a filler-commerce model that appends the large carts from supermarkets. This is relevant especially in light of the WhatsApp Conversational Commerce idea that we’re exploring.
The guests to this episode were Founder-CEOs:
Usman Gul - Airlift - $100MM Raised - Operates in Pakistan
Aadit Palicha - Zepto - $360MM Raised - YC Grad and Operates in India
Ralf Wenzel - JOKR - $288MM Raised - Operates in US and LATAM
Below are some key takeaways from the chat
Emerging Markets (EM) are important for Quick Commerce because the cost efficiency from lower wages results in a quicker path to profitability. For Quick Commerce (QC), density is destiny. With several higher density cities in EM, it’s even further easier and cheaper to operate.
In EM, there is a higher focus on ‘fresh produce’ as customers prefer to shop more frequently and in less quantity due to lack of cold storage. Supermarkets such as Walmart and Target are also in lower density in such markets so the user behavior is still majorly small quantity QC.
Shopping does take more time as supermarkets are not in geographical proximity and also convenience stores are typically vertically focused. So shoppers have to go to multiple stores on a single trip. This lends to higher value proposition from QC
The biggest challenges for QC are infrastructural issues such as poor connectivity and weather issues. Another challenge is offering enough SKU assortment to customers to become a single stop shop. This assortment needs a brand new custom built supply chain which currently does not exist. Hence, it’s not enough for tech companies to just be a marketplace or to rely on partnerships. QC companies need to build a combination of micro-hubs and large distribution centers.
The companies on the pod had an average procurement and product margin of 50% total, and 40% on fresh products. Vertically integrated supply chain is extremely important for a seamless customer experience as well as financial efficiency. Picking, Packaging, and Delivery costs are 15% of revenue, which can be reduced down to 7% - 10% through automation and planning. Another way to improve margins is to push products with a higher product margin. The AoV in Asia is $10 and LatAm is $25.
Advertising businesses are an add-on to QC because the hyper-local model provides better understanding of customers. Ads have become 5% of JOKR’s revenue within a few months of launch. We see this model on Instacart as well. Companies such as CPG can use this model for targeted marketing for which RoI is very easily measured. Read our last week’s note on RoAS!
May 31st, 2022; Newsletter #5
Hope y'all enjoyed a sunny Memorial Day and an extra day off from staring at your stonk portfolio. Enjoy reading!
Interesting Company/Opportunity of the Week
Taranis
Today’s company is Taranis, an agriculture intelligence platform that uses AI & ML on satellite image data to monitor farms and fields. It’s headquartered in San Francisco and was founded in 2014 by Ofir Schlam, a child-prodigy coder from a 4th generation farming family.
Taranis is named after the Celtic god of Thunder - a classic naming technique of picking your favorite pagan mythology and its industry-relevant god. (My myth of choice is Norse, Odin - the 10 min. diet coke delivery app).
Taranis’s primary customers are farmers, however indirectly they also serve associated industries in the supply chain from farm equipment manufacturers to retailers such as Walmart. Taranis’ AI product enables farmers to make informed decisions by detecting early symptoms of weeds, pests, and other problems on their farms with the goal of reducing damage and improving yields. Taranis’ cloud based solution has leaf level precision and can detect insects as small as 2 inches. It can also identify nutrition deficiencies and dead plants. Taranis also maintains fleets of planes and drones to enhance its proprietary imaging data, which consists of data from a constellation of satellites.
Taranis offers 2 products - SmartScout and Connect. SmartScout provides real time intelligence through broadacre coverage (integrated imaging data from large fields down to a single leaf). Connect is a mobile app that sits on top of SmartScout data to deliver insights and enable collaboration between the team members.
Taranis offers 3 tiers pricing which primarily depend on the volume and depth of data collected and analytics provided. Some other differences are support, offline education and engagement, and data persistence. Taranis’ estimated revenue is $20MM.
Taranis has raised a total of $60MM so far upto Series C. It employs over 100 people worldwide in the US, Israel, Argentina, and Brazil. Taranis is already monitoring millions of acres of farmland in Argentina, Brazil, Russia, Ukraine, and the United States.
Taranis also links to the climate change efforts as they can help improve and optimize farming practices to reduce the carbon footprint for an industry contributing 18% to global emissions. Companies like Cargill, AB, Walmart are paying their supplier farmers to adopt greener practices. Taranis can play a major role in the same by using data from multiple sources such as weather, transportation, and health department. It can overlay the satellite imagery and draw insights to help farmers decide what inputs to use, when to harvest, and where to sell.
AgTech is a multi-trillion dollar industry, especially technology that prevents wastage, reduces costs and increases yield per acre. About $500B worth of agricultural products are lost every year to natural conditions or pests. This is obviously a very important market which will continue to grow with the population and median wealth. Taranis’ top competitor is Arable, a similar early stage startup that uses sensor data to advise on decisions.
News of the Week
Snapping of SNAP
What’s your longest Streak on Snap? Regardless, it’s not helping because Snapchat’s CEO/Founder Evan Spiegel just shocked the market by forecasting 20-25% lower growth in earnings than the lower-end of expectations.
When I forecasted the same for my grades, I got the hell smacked out of me. Evan’s just become a single-digit billionaire.
This surprised the market, not only because it was announced at a non-company JP Morgan event, but also because Evan cited the reasons as inflation and the Ukraine war.
Instead, I feel the actual reasons for lower revenue growth are more likely:
Apple’s ATT taking effect which restricts apps from collecting 3rd party user data from iOS users. It directly impacts the RoI of direct response with lower targeting accuracy
Snapchat’s primary revenue driver are Brand advertisements which don’t have the long tail of direct response advertisements. Typically Brand and DR ads balance each other but in Snap’s case, both are decelerating at the same time
Lack of nuance in financial forecasting at Snapchat - they have taken opposing stances over the last 2 years on the impact of ATT on their business and more recently, lowered guidance given as recently as late April.
Brand advertisement is typically expected to decrease with poor economic conditions as companies spend less on just messaging. However this can be recovered by an increase in the RoAS of DR ads which can actually be measured accurately. That’s the reason Facebook and Google are actually in a better position to deal with ATT than Snapchat, Twitter, or ad-supported streaming. FB and Google will receive the first dollar by advertisers before they flow over to the other platforms.
What I Read or Watched
SaaS Rule of 40
I first read about this in a post by Tomasz Tunguz, which was a follow up on the origin of this rule in Brad Feld’s blog in which he says that the moment of happiness for companies is at least 40% growth. You’ve probably heard of T2D3 - a SaaS startup should grow its revenue every year by Triple Triple Double Double Double. Now, what after Year 5?
According to this rule, maturing SaaS companies’ growth rate + profit margin should be at least 40%. That means a company with 25% annual growth should aim for at least 15% profit margin. A company losing 50% of revenue should grow at 100% YoY (double). This benchmark is especially relevant for investors in Public companies as it has shown to significantly impact the Valuation multiples.
Profit margin could be defined as different metrics based on the type of company - EBITDA, Net Income, Free Cash Flow, etc.
McKinsey’s research of 100 public SaaS companies finds that barely one-third of software companies achieve the Rule of 40 in 2021. The median revenue growth rate was just 22 percent and free cash flow was 10% of revenue.
This metric matters because it proves to investors that the company has better operational rigor and consistent performance than the average company. This also points to sustainability of several underlying indicators such as CAC - top quartile companies recover CAC in 16 months while bottom quartile take 4 years. It also points to lower customer churn and higher net revenue retention.
Overall, SaaS companies can achieve this goal by following the below measures:
Set realistic growth targets to improve Marketing & Sales costs
Prioritize net retention by improving customer success
Optimize go-to-market spend to lower CAC
Build new products and revenue streams — fast.
May 23rd, 2022; Newsletter #4
Happy Monday!
My health turned out to be more fragile than the global supply chain for 10nm processors. After a week's break recovering from COVID, we're back with a bang(-ing cough) to bring you the news from this side of the world. Enjoy!
Interesting Company/Opportunity of the Week
RevOps: This week’s snooze-fest is about RevOps - or Revenue Operations - for the academics. Did we bring Alice back from Wonderland yet?
RevOps is a newer segment of companies and products that automate internal sales, marketing, and revenue processes, and unlock account/opportunity insights using data captured in all of these ops.
They help customers to:
Up-sell/Cross-sell to existing customers by drawing insights from engagement information and buyer profile with the account management team
Focus and close the best deals faster by adding information from Sales & Marketing Ops to enrich opportunities in the pipeline
Manage all revenue information in a single platform so it’s easy to tie Sales and Revenue insights together for use-cases such as Rev projections, quota-setting, etc.
They use events and engagement data to infer indicators such as ‘Customer Gone Silent’ or ‘Change of Executive’ and ‘Multiple Modes of Engagement’ and bring them all together to that specific account/customer/opportunity.
RevOps is a new category of business software that is CRM-adjacent, that is, they capture a lot of the exhaust fumes from Sales Ops and turn them into useful carbon. The carbon in this case is Revenue $. Other similar categories include Dealrooms, Finance Ops, etc.
The benefit of RevOps software is that it bridges marketing and sales data to provide a better integrated customer experience from the first outbound message to account management and aligning all customer facing teams. Yes, you’re right, it’s one more piece of software that you need because you bought some software in the past. Racketeering, for lack of a better word, is profitable! Another goal is also to identify product sales and GTM opportunities from the marketing and sales data.
However the existing products don’t deliver on the above promise. Currently, RevOps is treated as a sub-function or a support team for Sales. I interviewed some leaders and entrepreneurs in the space and identified the below problems:
The VP of RevOps doesn’t have a seat at the table. It’s typically the Sales leaders doing the talking, while RevOps is relegated to pulling data on the latest quarter or forecasting revenue based on the sales team’s quota planning
RevOps tools don’t provide a strategic capability to the VP of RevOps to make business decisions with the information captured. The current analytics is tactical while the real differentiator would be a tool with prescriptive AI for product and sales decisions
Integrations. The most dreaded word in enterprise software - forms the core value proposition of the RevOps market. RevOps relies on all the underlying CRM and MarTech systems to provide the data so the product that offers the most integrations wins. This also makes implementations expensive and RoI accrete slowly.
Most RevOps tools still rely on proprietary company data from sales and marketing. They could be much more powerful by connecting 3rd party data (Twitter, LinkedIn, Industry Reports, etc.) to provide insights better than a simple table-join SQL query
I believe there is an opportunity and space for us to build a company to solve the above challenges and provide a strategic and AI powered tool to all customers.
The market for RevOps is maturing. According to Gartner, 75% of the top companies in the world (in terms of growth) will deploy a RevOps model by 2025. Plus, the number of “VP of revenue operations” job titles is rapidly increasing with job postings for CRO doubling in 3 years to 9000. Between 2018 and 2019, there was a 55% increase in the number of companies with a Revenue Operations group and an 80% increase in the number of companies where the group was being formed. These still comprise less than 30% of respondents.
Some of the largest RevOps companies are Microsoft and Salesforce.com, while newer upstarts such as Clari, Outreach, and People.ai are growing quickly. The newer standalone companies have severe platform risks as they sit on top of Salesforce and engage in co-opetition.
News of the Week
I caught the bug!
Other than that, I recently read an article that Instagram will start to incorporate NFTs. Instagram will partner with creators to post their NFTs on the app that are based on Ethereum or Polygon. It will also integrate with existing wallets to make it easier to publish NFTs. Initially Instagram will not engage in commerce but I believe that’s the end-state: I can pay you to buy your Mona Lisa DP and make it my own.
What also stood out is Instagram stressing on keeping the NFT offering decentralized, especially considering what happened with their cryptocurrency. The ethos of the web3 ecosystem is completely at odds with Facebook’s corporate goals and strategy. I’ll be keeping an eye on the adoption of this feature by creators.
Read here.
What I Read or Watched
We put on our walking shoes and headed out to conferences and meetups. Below are some relevant takeaways from all those sessions:
Future of Green Energy:
The demand for green energy is increasing, especially from businesses. The choke point is that the supply still cannot match the generation from carbon
Amongst all the use-cases, it’s easier to decarbonize heating first due to lower fluctuations
The physical charging hardware is a range of capacity: from the dominant 4 kWh energy going to 8 kWh, but the 100 kWh energy storage capacity will be ground-breaking. However upgrading physical infrastructure is expensive and requires long outages
80%-90% of EV Charging will happen at home, so utilities are trying to forecast and plan the increase in domestic demand. VC’s are realizing that charging is both software and hardware play and they currently don’t have data to predict demand and outages;
General positivity in the political environment and interest from institutional investors. The storage industry is going to have multiple companies each solving a subset of problems (probably by storage capacity); they will all be required for a blended solution
Interesting Read: Ragone Plot
Web3:
Web3 can mean a lot of things but we heard a lot about blockchain, NFTs, and metaverse. Surprisingly, the companies we met are in touch with the real-world (very few crazy conspiracy theories) and solving industrial revolution problems.
Authena.io - This Swiss company provides NFT as an authentication technology for expensive luxury items such as handbags, jewelry, wines, etc. The benefits of NFT is also that brands can provide a better digital customer experience to the token holder
According to a16z, e-games will be the first industry to flip to crypto dominant offering. We discussed the trend of players buying skins, add-on packs, and personalizing their avatars in the games today. Blockchain will enable them to carry their avatars into any e-game world. This will need the game designers to rethink everything from scratch.
Others:
Logistics had a major presence. We learnt that there is a lack of visibility into the end-to-end supply chain, from finding manufacturers to getting delivery. Currently this chain is broken into different segments catered by specialized vendors. Silq
Deluge of products for ‘Product Management’ from collaboration to product board and prioritization to analytics. You wouldn’t be the first to confuse Miro and MURAL, Heap and Mixpanel, or finally ClickUp (“The one app to replace them all”). From conversations, seems they are trying to carve specialty niches and co-exist but PMs will only need so much
May 9th, 2022; Newsletter #3
By now, hopefully this newsletter has become a habit and part of your Monday jazz & blues. If it hasn't, I appreciate any feedback or funny memes. Enjoy!
Interesting Company/Opportunity of the Week
Pipe: Just when you thought we couldn’t get more boring with these companies, today’s company is Pipe.com. This company finances SaaS companies by purchasing their recurring revenue streams in exchange for up-front cash for a discount. zzzzz…snore*...huh.what.what?
‘Pipe gives you less money now in exchange for more money later’.
The platform also allows for trading of contracts as securities, so other people can purchase, sell, and trade rights to your future income.
Pipe evaluates the risk and probability of churn so that investors can calculate the appropriate price for the monthly/quarterly contract. It also integrates with enterprise billing and payment products to feed the contracts data directly into Pipe in real-time. As an extended use-case, the CEO of a SaaS company can use Pipe as a dashboard for getting a real-world perspective on their finance KPI.
Pipe is a classic double-sided network with investors on one side demanding stable income and companies on the other demanding instant cash.
Pipe is primarily used by mid-stage and moderate-growth private SaaS companies that need to fund either their growth or an acquisition, and can’t raise funds at attractive valuations.
Investors in Pipe are usually betting on the SaaS asset class which, at <5% avg. churn rate is generally low risk. Typically investors pay 90%-95% of the MRR highlighting the same.
Pipe earns money by charging a ~2% fee for every transaction, so as the platform grows in both quantity and size of deals, it makes more money. It was recently valued at $2B and est. revenue is $6B - $12B as 10k+ companies are using the platform for fund-raising.
The benefits of Pipe is that companies with revenue can raise money that’s non-dilutive (equity) and nonrestrictive (debt). Founders love it because even after raising funds and financing growth, they’re left a larger ownership of their company. They also like that they can spend less time on fundraising. There’s no ‘fun’ in fundraising ;)
Investors like Pipe because it automates a lot of the underwriting and due-diligence even before they look at the securities. Pipe.com also uses historical data to de-risk the investments by scoring risk and health.
Pipe competes with a few other companies in this space such as Lighter Capital, ClearCo, re:cap, etc. Pipe is considered a better product because of its deep automation and integrations. It’s difficult to determine its market-share at the moment, but the pie is definitely growing bigger very fast!
Read more: 1
News of the Week
Roe v Wade & Data Sharing
It was again a tumultuous week of earnings reports. We’ll recap it all in a later newsletter but this week we’ll spotlight another big news - the location data sharing company - GraphSafe. This is especially important as news came out that they were selling data of people visiting abortion clinics to advertisers. In 2016, women sitting in Planned Parenthood were sent targeted advertisements. We’ll keep the politics out of scope. This highlights how our real-time location data is being tracked and shared by various companies who we might not have given direct rights to collect our data. GraphSafe pays app developers to embed their SDKs into their apps, and in return collects location data from those apps. These apps could be as harmless as weather apps. GraphSafe then classifies, groups, and sells this data to advertisers without stringent checks on use-cases. Customers can pay around $160 for certain classes. The data is supposedly anonymized to not be individually identifiable, but it’s not very difficult to triangulate the identity with technology. Have you ever wondered why you started getting hotel ads when you traveled to a new town? Data collection, usage, and sale needs to be regulated by the government because users may not realize that when they say ‘yes’ to location tracking by a prayer app, they might actually be sending their data to pesky Geico. Otherwise, time to go burner-phone.
What I Read or Watched
Extending Through The Value Chain for Vertical SaaS
This article starts with understanding the Vertical SaaS Model - a vertically integrated SaaS product that solves multiple problems throughout the customer’s supply chain. The article talks about how a Vertical SaaS Vendor (VSV) can extend their offering from just their core customer (e.g., merchant) to their customer’s target customer (e.g., shopper) for the up-sell/cross-sell benefits as well as becoming a core part of the merchant’s offering to the shopper. The steps for a VSV to follow to accomplish this extended integration are:
Identify merchant’s key JTBD with respect to the shopper
Activate merchant-side network effects
Develop an offering at the customer’s control point
Nurture a two-sided network with the merchant and customer
For example, let’s say our VSV is Toast, a restaurant software company. In its first step, it identifies that one of restaurant’s key JTBD is on-table digital menu, ordering, and payment capabilities. After it builds that solution, it looks for restaurant-side network effects which are typically in data sharing or group purchasing - i.e., efficiencies of scale. Let’s say Toast identifies which dishes are being looked at and ordered the most off the menu, and provides restaurants with insights on timing-dish preparation. The more restaurants on the platform, the more accurate the insights. After this Toast decides to extend its offering to the patrons that are already interacting with Toast for the above functionality. It identifies payments as a control point (interaction b/w patrons and restaurant) and decides that it will integrate into Venmo so the bill can be split at the time of the payment. Integration into existing workflows to add value is recommended over replacing it, initially. Finally, it nurtures the end-to-end workflow as a 2-sided network as more patrons using Venmo to split-pay bills via Toast will encourage more restaurants to offer Toast and the cycle continues.
May 2nd, 2022; Newsletter #2
Enjoy!
Interesting Company/Opportunity of the Week
MaxMind: MaxMind is a Massachusetts based enterprise products and services company that provides geolocation solutions. Its main product GeoIP2 identifies the location of the users in lat/long format based on their IP Address. The company has recently been upgrading its services to use IPv6 from IPv4 which improves accuracy and works better for mobile devices. The service is available via APIs (send IP, receive location) as well as a file dump which has an IP-Geo mapping that customers can use as reference to determine location. We used this method at Salesforce Commerce Cloud for geo-fencing, fraud detection/prevention, and localization. Maintenance typically involves an annual refresh of the file, and otherwise, it’s a low effort-high value product with typically a long contract duration, an awesome sustainable business model! MaxMind screens over 200 million e-commerce transactions a year and it charges about $300/yr for the file-download product.
MaxMind’s competitors include IP2Location, Neustar, and other companies that focus on the ‘IP intelligence’ adjacent products. MaxMind’s competitive advantages are its existing integration into many large enterprise products and its low cost of ownership and maintenance.
It’s surprising that even after 10 years, MaxMind is still only 50 employees and $7.4MM in Revenue. It’s a classic lack of ambition and product growth (I mean being HQed in Waltham MA says it all, doesn’t it). I feel there’s an opportunity for such a company to expand quickly into adjacent features such as fraud, data security & localization, regulatory compliance, bots management, load balancing, etc. This will be one of the ‘seeds’ we germinate soon.
News of the Week
This was my first week in the office and it was great to connect with y’all and also figure out who’s the loudest at the lunch table! We got active with a bunch of whiteboard sessions with Sooze, Gal, and Jeremy about formation. We also met with an LP to discuss climate-tech opportunities.
We interviewed a co-founder candidate with a stellar academic background and Google PM experience.
Last week we were exploring the early stages of a couple of ideas and you can read their hypothesis to catch up: Blockchain Sandbox for Enterprise and Software Subscription Management.
This week, we are picking up on an idea from the climate-tech discussion which is around the EV Charging Station software space. Read out hypotheses. We think there’s a ‘thingy’ here from our brainstorming and googling. The next step is to get to know the user and customer pain-points better by Buying/Renting/Borrowing a bunch of EVs and driving to independent charging stations to 1) Understand charging user experience 2) Talk to owners/managers about the unit economics and incentives.
We are also meeting Tom & Vivek to discuss the architecture of the formation process. The goal is to make strategic decisions about opportunity space, capital deployment, and velocity based on prior learning. This is a v1 discussion - much like trying to find PMF and we will continue to iterate on our architecture as we churn out more cos. “Throw out the plan, it’s the planning that’s important”
What I Read or Watched
Social Capital (Chamath’s Fund) Annual Letter
Chamath published his annual letter last week for the year 2021. It provided a high degree of visibility into the quantitative performance of his fund - Social Capital. In 2019, he converted it into a proprietary fund, i.e, he does not take outside capital and hence has no distribution commitments or IRR benchmarks. Below are my key takeaways from the letter:
SC has been investing since 2011 and has returned a Gross IRR of 33% and Net IRR of 25% to his LPs. The difference are fees and costs of the fund
SC’s proprietary fund, launched in 2019, has a Gross IRR of 166%, testament to both the great investing cycle and optimizing for IRR vs Distribution.
SC’s TVPI is 4.6x but the DPI is 0.9x-4.5x, which means most of the gains are still on-paper
Chamath’s things to watch for:
Inflation
Demographic Aging
Waning US Hegemony
Chamath is now pivoting to a risk-off mode as the markets seem to be in a down-turn.
April 28th, 2022; Newsletter #1
Enjoy!
Interesting Company/Opportunity of the Week
Link-in Bio: This is a tool used by influencers to connect their users to their other social media and ecommerce pages via a micro-page. Influences create this micro-page and post the url on their IG, Snap, Twitter bio. It solves the problem of these platforms allowing only 1 link in a user's bio. They also offer features such as tipping, personalization, commerce, etc.
Some interesting startups in this space are Willow, Linktree, and Shopify’s own Link-In-Bio feature.
Linktree has more than 25MM users, including Selena Gomez, MLB, and others. They deliver Billions of clicks / yr.
Linktree makes money through subscriptions (upto $21/mo.) and will transition to a %GMV model.
Many influencers are replacing their website with Link-In-Bio as the primary engagement and commerce platform.
Linktree has about 88% market share due to its A-list customers, but other tools are gaining fast with their own partnerships.
The vision of this industry is to make the Linktree like a calling card; all your assets, profiles, engagement happens via a single link.
The threat is that the product is not technically complex, so any major platform (FB, Apple, Google) can monopolize with a vertically-integrated offering.
News of the Week
If you are expecting more of ‘Elon buys Twitter for $44B’, then you’d be absolutely correct! Elon went ‘Straight to the End’ with this and Twitter’s board (chaired by my former CEO) had no choice. But more important to watch is what he’s going to do with Twitter as a private company. Eliminate Bots? Introduce Censorship Policies? Make Edit Button the top priority? Also read Tom’s take on this.
What I Read or Watched
Book Excerpt: https://andrewchen.com/chapter-one-cold-start/
Andrew talks about the chicken-egg problem that every network based startup faces: generate the supply first or the demand first. Without demand, supply won’t be attracted to invest in the platform, and without supply, the demand won’t sign up. Andrew’s solution to this is the order: Supply-Demand-Supply-Supply-Supply…. The first iteration of supply generation needs to be a stand-out, like a superstar guest in a TV show. They will need to be incentivized heavily for this. After that, the demand that is generated will drive further supply organically. I really liked Andrew’s examples from Uber and Tinder (dating is probably the toughest network challenge).