🗞 Venture Chronicles - April 2022
Hi, it’s Alexandre from Eurazeo. I’m investing in seed & series A consumer and consumer enablers startups all over Europe. Overlooked is a weekly newsletter about venture capital and underrated consumer trends. Today, I’m sharing the most insightful tech news of April.
For 2022, I want to pick one piece of news per day and write a short comment about it. I want to talk about something that strikes me. Something that happened in the tech ecosystem. Here is the issue for April!
Friday, Apr. 1st: Iconiq shared a presentation on the path to IPO for healthcare startups. - Iconiq
Saturday, Apr. 2nd: Bloomberg wrote about the electric bikes' boom. Ebikes sales are driven by a combination of factors: spring, lower pandemic restrictions, return to the office and fuel price increases. In the early 1970s, a Bike Boom also happened in the US, driven by the rise of fuel prices. - Bloomberg
Sunday, Apr. 3rd: Kyle Harrison wrote about innovators in the VC industry. He called them the renegades and defined them as "any fund or investor disrupting the status quo in venture and realigning their offering to optimize for a founder's needs and odds of success." - Kyle Harrison
Most legacy venture firms are led by partners who are omnipotent on the fund's strategy and structure. It creates poor incentives within firms. It forces investors "to be heavily output focused (good deals) vs. input focused (building systems)." Non-investors who're key to running the firm and bringing value to founders are treated as second-class citizens. Non-partner investors don't collaborate because they're just optimising for reaching the partnership - most of the time at the expense of their colleagues.
Innovation in the VC industry is driven by two factors: (i) reshuffling the org. chart to escape the issues related to the omnipotence of partners investors and (ii) being creative on building the best product for founders.
"The world has woken up to the exciting world of venture and they're getting pretty dang creative. We'll see renegades emerge in areas like climate change, crypto, mobility, consumer apps, healthcare, and every other category. They can't win every deal, but they'll win the deals they've built just the right [product] to win."
In 2021, Stripe processed $640bn in payments (60% growth YoY) and onboarded 1.4k new businesses every day.
"Stripe’s mission is to grow the GDP of the internet. That means both helping existing economic activity migrate to the internet and enabling completely new undertakings that couldn’t exist in an offline world."
"We look for people who aren’t put off by that intensity and rigor. Nobody enjoys postponing a launch or redoing a page for the third time, but we try to find people who’d rather do that than ship something subpar. And we try to find people who genuinely care about making those around them better off and can face challenges with a good sense of humor. The Nebraskan philosopher Warren Buffett once referred to the “ABCs of corporate senescence”: arrogance, bureaucracy, and complacency. We’re terrified of these failure modes. We work hard to convey to new people joining Stripe that humility and curiosity are strict prerequisites for improvement."
Stripe is bullish on two trends: the creator economy and embedded finance.
Tuesday, Apr. 5th: Amenitiz raised a $30m series A led by Eight Roads. It's an all-in-one vertical SaaS for B&Bs and small hotels (<50 rooms) with a property management system, a website builder, a channel manager, a booking engine, a marketplace for additional modules and an omni-channel payment processing capabilities. Amenitiz has 4k properties in 37 countries (vs. 3k in November 21). Amenitiz will use the funding to pursue its geographical expansion, to recruit 200 people and to add products on its platform (e.g. revenue management system and distribution). - Tech.eu
Wednesday, Apr. 6th: Our portfolio company Avi Medical (💙) raised a €50m series B led by Balderton. Avi Medical is building a full-stack healthcare platform owning primary care clinics and building tools for all the stakeholders (patients, doctors, admin staff). Its full stack approach is key to operate more efficiently, generate more revenues and save costs compared to your average clinic. It's also a model in which you free time for doctors so that they have more time for their patients and in which you can move from reactive to proactive health. Avi opened its first clinic in Apr. 2021. It operates 7 clinics in Germany and plan to open 100 more clinics in the next 3y. - Sifted, Balderton
Thursday, Apr. 7th: Exor is launching a seed program similar to YC in Italy or Kima in France. It will invest €150k in 2 Italian startups per week in exchange of a 5-8% equity stake. Exor is a Agnelli's family holding owning companies like Ferrari, Stellantis, Juventus, The Economist or Christian Louboutin. Exor has already invested massively into tech with $700m deployed into 40 startups including Via, Avant Arte Casavo or Qonto. - Sifted
In 2020, Shein was valued at $15bn.
Shein is the most innovative and popular fast fashion brand in the world beyond Zara, H&M and Forever21. It has built a powerful manufacturing OS and it constantly offers updated trending clothes at a cheap price that are only distributed online.
"Shein’s success, which relies on a constant flow of fresh, inexpensive styles, points to fast fashion’s continued appeal among budget-conscious shoppers."
Saturday, Apr. 9th: You should hire people who care about your company and about work in general says Alexandr Wang (Scale AI's CEO).
To evaluate whether people care about work, you should ask them about the time they worked extremely hard.
"What’s the hardest you’ve ever worked on something?
How many hours were you working a week?
Why did you work so hard? Why did you care?"
You should also recruit people who "identify with [your] mission, [your] product, and [your] problem." When you scale and you reach a certain level of success, a big risk is to have people who will join you to get a credential and not because they really care about your company.
Sunday, Apr. 10th: The Economist published a paper on the importance of influencers for brands when they're marketing their products - especially to younger audiences. - The Economist
In China, influencers contributed to 1.4% of the Chinese GDP ($210bn). 75% of US marketers leveraged influencers in 2021 (vs. 65% in 2020). 1 out of 10 dollars spent on social media is spent on influencers.
It's a new paradigm. You replace expensive and standardised marketing campaigns with famous celebrities by partnerships with social media influencers who are more authentic and who are able to repackage your product into their universe.
Social media influencers are alose more equipped than traditional ambassadors. "They are video editors, scriptwriters, lighting specialists, directors and the main talent wrapped into one."
Monday, Apr. 11th: Creandum and P9 led a $9m seed round into Hamburg-based Procuros which an API platform that enables B2B businesses to collaborate more easily with their trade partners independently from their IT stack. It aims at replacing outdated communication formats (e.g. phone or fax) or long IT integration processes (instead of doing 1-1 connections, you just connect to the Procuros network). - P9, Tech.eu
Tuesday, Apr. 12st: EuroVC shared its quarterly update on funding raised by European funds. - EuroVC
In Q1-22, 33 European funds raised €4.8bn.
European funds have c.€30bn in dry powder which is capital raised but not yet invested into startups.
In the past 5y, 30-50% of the new funds raised had EIF or a national governmental agency as a LP. It's a big number but it's a number that has been decreasing overtime showing that the venture ecosystem is maturing and can keep growing without public funding.
Wednesday, Apr. 13th: Epic Games raised $2bn from Sony and the family owning Lego at a $31.5bn valuation. Epic Games is a gaming conglomerate with very diverse activities like a game engine called Unreal Engine, a batte-royale game category leader called Fortnite, an app store called Epic Games Store. Epic is partnering with Lego to build a metaverse targeting kids with a suitable, fun and secure experience. - Bloomberg, Techcrunch
Tuesday, Apr. 14th: Choco raised a $111m series B2 at a $1.2bn valuation (vs. $600m valuation for the last round 6m ago) led by Insight and G Squared. It’s a B2B marketplace between restaurants and food producers & wholesalers. It digitizes an ordering experience that was mostly pen and paper based. Choco is present in the US, Spain, Germany, France, Austria and Belgium. It grew its restaurants user base by 350% in 2021. It has 15k restaurants and 16k suppliers. Choco will use the funding to expand into new markets, grow its workforce from 400 to 700 people and to start testing monetization via financial services for suppliers to help collecting cash from restaurants. - Tech.eu, Techcrunch, Sifted
Friday, Apr. 15th: Estonian-based startup Montonio raised a €11m series A led by Index with the participation of Tera Ventures. Montonio is building a one-stop-shop checkout solution for small and medium size merchants. With Montonio, merchants can easily set up multiple payment options (cards, BNPL, open banking payments, etc.) via a simple interface. Montonio also helps merchants support e-commerce processes such as refunds or automatic generation of deliveries. - Techcrunch
Peter Thiel's accomplishments: founded Paypal and Palantir, was the 1st investor into Facebook, wrote a best-seller called Zero to One, ran 3 venture funds and 1 hedge fund.
Thiel was born in Frankfurt in 1967. As a kid he lived in South Africa and in the US. He entered Stanford in 1985 to study law. He quit his 1st job in law after 7 months. He switched jobs to become a derivative trader before starting his own hedge fund financed by friends and families. In parallel, he invested into Max Levchin's company, then became CEO of this company which is now known by the name Paypal.
"In 2005, he established a venture-capital firm, Founders Fund, which announced that it would be seeking riskier, more out-of-the-box companies that really have the potential to change the world.”
BeReal was founded in 2020. In summer 2021, it became extremely popular in Europe. Today, the app is getting a lot of traction on US campuses and has reached 2.5m DAUs.
It's an anti-Instagram social network. Once a day, users receive a push notification and are prompted to take a picture in the next 2 minutes that will be shared with their friends. You can only see the pictures from your friends after taking your own picture.
BeReal became a success on US campuses thanks to an ambassador program which paid students to promote the app during sponsored events (e.g. free admission to a party if you download the app and add 5 friends).
Schuster Tanger who is a partner at TQ Ventures and who invested into BeReal's series A: BeReal is an antidote to the 2 largest pain points for social media which are “a) information overload and b) overly perfectionist lifestyle fashioning”. “What excites us recently is that the hope is you have a really good mouse trap for viral growth. The next question is sort of the holy grail: Can that viral growth be turned into enduring sustainable growth?”
Jokr is a quick commerce startup. It sources products directly from producers and manufacturers and builds a differentiated assortment of products. Indeed, it not only focuses on convenience but it also covers the whole spectrum of grocery products with a specific focus on fresh products (fruits, vegetables, meat, fish). Jokr is now contribution profit positive in all its markets.
Jork is present in 6 countries (U.S, Brazil, Mexico, Colombia, Peru and Chile). It does not plan further country expansion in the short term. Instead, it will focus on strengthening the assortment, on expanding beyond groceries (inc. adding a private label offering) and on expanding in the cities in which Jork is already present.
It gathered data from 51 funding rounds from European and US companies (10 in seed, 15 in series A, 21 in series B and 5 in series C).
50% of B2B marketplaces raising a series B were growing at more than 4x YoY in GMV compared to 40% in series A.
Macro-trends are favourable to B2B marketplaces: (i) covid accelerates digitalization and therefore the adoption of B2B marketplaces, (ii) it has become easier to add financial services as a monetization layer as embedded finance tools have exploded in the past couple of years and (iii) API-driven architecture makes it easier to integrate 3P applications and datasources.
Targeting repeat purchases is key because it makes it easier to grow your share of wallet with your buyers and to monetize as you should have a daily/weekly active usage in this case.
Wednesday, Apr. 20th: Left Lane raised a $1.4bn second fund. Founded in 2019, Left Lane raised raised an initial $630m fund. It invests in series A to C with ticket size between $5m and $75m in sectors like ecommerce, food, healthcare, edtech, gaming & entertainment, SMB tech and fintech. Left Lane opened an European office in 2021 and has invested into European companies like Choco, GoStudent, Yokoy, Memmo or Wayflyer. - Techcrunch
Thursday, Apr. 21st: Ben Thompson interviewed Ramp's founder Eric Glyman. Ramp is a finance automation platform which raised $750m at a $8.1bn valuation in March 2021 and which grew its revenues almost 10x YoY in 2021. The company was incorporated in March 2019 and launched publicly in February 2020. - Stratecherry
Ramp's product combines a corporate card, expense management, bill payments and accounting automation. Its core value proposition is to save money for its customers (3-4% savings per year) and to accelerate accounting month-end closings (by 8x) i.e. spend less money and spend less time.
Ramp is targeting 3 segments (1/3 each in terms of spend): micro-SMBs, SMBs/mid market and enterprise customers.
Ramp's business model is to earn money on interchange fees when its businesses makes transactions. Ramp does not charge a SaaS fee for its tools. In the US, there is a 2.5% interchange fee. Ramp takes 1% and gives 1.5% in cash back to its customers.
Ramp has 4 drivers behind its "why now?": (i) open-banking as credit risk is easily managed because you can connect to your customers’ bank account, (ii) a great macro-environnement to raise debt capital to pre-fund the expenses of your customers, (iii) the rise of embedded finance tools (e.g. Marqeta, Stripe) and (iv) small banks willing to work with startups to capture additional volumes by becoming their card providers.
Friday, Apr. 22nd: Zenly shared a general update with Techcrunch. Zenly is a social network based on a social map where you can follow and interact with your friends. Snap acquired Zenly in 2017. Today, Zenly has 35m MAUs and is the 10th more downloaded social app in Mar. 22 (before Discord and Twitter). Zenly shipped a major design update to appeal to a broader audience beyond the Gen. Z and to build a place graph where Zenly will automatically record all the places in which you go. Zenly's founder and CEO Antoine Martin is also leaving the company. - Techcrunch
Afterpay was created in 2015 in Australia. It reached $20bn in GMV, 19m users and 122k merchants before selling the business to Square/Block for $29bn. It’s the category leader in BNPL together with Affirm and Klarna. Afterpay started by focusing on the fashion category before expanding into other verticals.
BNPL accounts for 2% of global e-commerce transactions. It’s a way to buy something online in instalments. Instead of paying for the total amount of your purchase when you purchase it, you will pay it in several times (e.g. 33% at purchase, 33% 1 month later and the rest 2 months later). If you pay back on time, there is no fee.
BNPL is an alternative to credit cards. On a credit card, you have an approved amount of money that you can spend every month. At the end of each month, if you go above your transaction limit, you have to pay interests. With BNPL, credit worthiness is done at the transaction level while with credit card, it's done at the user level. If you're struggling financially, interest fees compound and are high with a credit card when they're transparent and fixed with BNPL. Moreover, BNPL solves a strong misalignment between banks and end consumers. BNPL makes more money when the customer pays on time while credit cards only make money when customers are struggling. In Australia, the number of credit cards is the lowest it's been since 2006 because of the rise of BNPL.
The initial insight behind the company's creation is that millennials have an aversion to credit and credit cards but they still want flexibility and budgeting tools.
Afterpay's value proposition for merchants is strong: conversion improvements, higher purchase rate and a 30-40% AOV uplift. It was so strong that Afterpay did no outbound acquisition before 2017.
It went to the US by partnering with US VC Matrix Partner (who took a 20% stake into the business). Afterpay took the time to expand abroad and started by New Zealand before expanding in the US.
Afterpay is both a payment tool that consumers use and a payment processor - similar to Paypal. Afterpay charges nothing to consumers but charges 4% to merchants (c.2% for large merchants and 6% for small merchants). It has the following costs: payment processing, financing and losses partly compensated by late fees.
Afterpay sends a lot of business to the merchants via its app - it generates 1m leads per day and they are highly qualified because the customers have already used Afterpay and have high intent as they are on the Afterpay’s shop directory.
In Australia where Afterpay is ultra dominant, merchants have to offer Afterpay as a payment method if they don’t want to lose business to competitors (happened to ASOS).
Sunday, Apr. 24th: The Economist wrote about the growing pressure from institutional investors on companies to step-up on ESG topics. - The Economist
There are more and more investors that require that ESG topics are raised during annual meetings. In 2022, 576 proposals have already been filed (vs. 499 in 2021).
In 2021, BlackRock, Vanguard and State Street owned 22% of the average S&P 500 company (vs. 13.5% in 2008). These asset managers have recently built teams to work on voting policies to push their portfolio companies forward when it comes to ESG issues. "Passive investors have become, if not exactly activist, undeniably more active."
The Economist mentioned our portfolio company Tulipshare (💙) who is transforming retail investors into activist investors by pooling their shares to file proposals on ESG topics. "Tulipshare designs proxy resolutions before soliciting investments from retail investors until they have a large enough stake to file a proposal."
Monday, Apr. 25th: LottieLab raised a $4m seed round led by P9 with the participation of 20VC, EF and top angels like Vlad Magdalin (CEO at Webflow), Josh Buckley (ex. CEO at PH) or Tamar Yehoshua (CPO at Slack). It builds an animation editing tool based on the Lottie format which is becoming the standard to make animations without coding. LottieLab wants to be a better tool for people that create animations on Adobe After Effects but wants to democratize animation creation for non technical or creative people. - LottieLab, EU Startups
Tuesday, Apr. 26th: The New York Times wrote about GoPuff who is the US-based quick commerce category leader and creator. - The NY Times
GoPuff was planning to go public in 2022. But, the macro-environment changed and now GoPuff is looking to raise a $1bn convertible bond instead and is reducing its cash burn by laying off people and decreasing salaries for new blue-collar workers. GoPuff has also paused some expansion plans.
GoPuff has 700 warehouses delivering in 1.2k cities in North America and in Europe. It has also launched retail stores in New York, Texas and Florida.
In 2021, GoPuff generated $2bn in revenues (vs. $340m in 2020) and burnt $500m.
Wednesday, Apr. 27th: Snap launched a mini-drone camera called Pixy which is available in the US and in France for $230. Pixy is extremely simple to use. You have a button to launch it. You can select 4 preconfigured flight modes. Videos created are sent to Snap and are editable on the app. - Techcrunch, The Verge, The Wired
"The correction started happening in public markets (sometime in H2 2021), then propagated down to the private venture growth market (Q1 2022), then to the Series A/B stage (currently)."
"The growth market seems effectively dead right now. Tiger, after a very intense couple of years at the growth stage, seems to have moved overnight to seed/Series A. The two firms I’m seeing consistently active at the growth stage right now are Insight and Softbank"
Seed (because it’s too early to be affected) and crypto (because it has its own ecosystem with token investments and there is too much cash to be deployed compared to the number of projects) have not been affected by the current public market turmoil.
Capital raised by VCs may shift from investing into new companies to supporting their existing portfolio companies that are running out of cash.
The variance in the market will be higher than ever. Capital will chase top performing assets ("flight to quality") and others will be left behind or acquired.
VCs will take more time to deploy capital. Instead of 18 months, VCs will deploy their funds in 3-5y like they were used to.
Founders should control their burn and should expect longer fundraising processes than what they were used to in the past 18 months.
Friday, Apr. 29th: Nikhil Basu Trivedi wrote about the fact that employees have become the scarce resource in venture capital. We don't need more capital or more founders. We need more employees. The more money you raise and the higher your valuation, the less attractive your stock option packages for employees will be. As a result, both founders and investors should work on an equity story that makes sense to maximise their chance to recruit the best talents. - NBT
Saturday, Apr. 30th: USV raised two new funds: (i) a $275m core fund n°8 and (ii) a $350m opportunity fund n°4. It's more money to do the same: small fund, active investors, thesis driven approach ("USV backs trusted brands that broaden access to knowledge, capital, and well-being by leveraging networks, platforms, and protocols"), transparency at the core. USV raised its previous generation of funds in 2021. In 2021, it also launched a $162m fund dedicated to climate. - Techcrunch, USV
Thanks to Julia for the feedback! 🦒 Thanks for reading! See you next week for another issue! 👋