Hi, it’s Alexandre from Eurazeo (ex. Idinvest). 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 August.
For 2021, I wanted 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 August!
Please note that the date picked for each event is not always the exact event date but the one at which I decided to write about the event.
"Afterpay is a category leader in the growing BNPL opportunity, focused on helping consumers pay and manage their financial wellbeing responsibly and empowering merchants to grow their business. Square will integrate Afterpay into two of its existing ecosystems, strengthening the connections between its Seller and Cash App ecosystems and unlocking cross-sell opportunities with Afterpay. Together, Square and Afterpay will focus on delivering growth at scale, and intend on investing behind transformative opportunities to drive long-term profitable growth".
Together with Klarna and Affirm, Afterpay is one of the three "buy now, pay later" global giants. Afterpay has 98k active merchants and 16.2m active consumers.
Square highlights the following growth drivers for Afterpay: (i) growth in existing geographies (Australia, New Zealand, US, Canada, UK, Spain and France), (ii) geographical expansion in new countries, (iii) expansion into offline and new verticals, (iv) new products & revenue streams.
Square will integrate Afterpay within Seller (its B2B online and offline checkout solution for SMBs to let merchants add instalments into their checkout page) as well as with Cash App (its B2C financial app to let consumers manage their instalments and shop on Afterpay's affiliated stores).
Monday, Aug. 2nd: I listened to Netflix's Q2 2021 earnings call in which the top management introduced their ambition in the gaming vertical. - Netflix
Why is Netflix a great investment for the next 5-10 years? "The big picture that all investors get is being a secular Internet play. And as much as Amazon was strong in 2005 and 2008, all of us collectively underestimated the impact of what the Internet could do. And this is the Internet applied to entertainment, and consumer entertainment around the world is an enormous market. It has great potential for us and potentially our competitors."
Netflix sees gaming as a logical expansion of its entertainment offering. It will add gaming to the platform as it had added other video streaming genres. "We're going to start relatively small. We'll learn. We'll grow. We'll refocus our investment based on what we see is working, and we'll just continuously improve based on what our members are telling us is working."
The company thinks that it will able to build a differentiated value proposition in the gaming space because (i) it has built outstanding IPs that fans want to engage more with and (ii) it has a subscription based business model which enable them to release game experiences that are under-represented because they need to include other monetization schemes.
"We'll be very sort of experimental and try a lot of things in this space. A lot of what we have to do right now is just focus on learning. [...] So we're gonna try a bunch of different games through a variety of different mechanisms to see what's really working for our members. Part of that will be games that extend our IP. [...] But also, we'll do things where we try stand-alone games. [...]. Maybe someday, we'll see a game that spawns a film or a series. That would be an amazing place to get to and really see the rich interplay between these sort of different forms of entertainment. We'll also do licensing because we -- just as we've done in that sort of other genre expansion, it's a great way to increase the volume of the offering that we have at the start to learn more quickly. And then, as our internal production sort of scales, we can focus the energy on what we're learning in that regard."
On the long run, gaming could bring several benefits to Netflix's core offering: (i) a potential to increase ARPU, (ii) higher engagement and retention rates, (iii) a great acquisition lever (both paid and organic).
Tuesday, Aug. 3rd: I listened to a Tech Buzz China's podcast episode on livestreaming ecommerce with Lauren Hallanan who is a social marketing expert and who was a livestreamer between 2016 and 2017. - Tech Buzz China
Taobao added livestreaming to its platform in 2016 but livestreaming only really took off in 2019 in China. With covid, livestreaming reached massive adoption in China with both many consumers and brands trying livestreaming for the first time.
In February, livestreaming sessions had increased by 110% YoY and the number of merchants using livestreaming for the first time increased by 719% between January and February.
Livestreaming is well-known in ecommerce in China but it's also used across other industries like gaming and education. Depending on the industry, you have a different monetization model (product sales for ecommerce vs. ads and virtual gifting for gaming and education).
"While you’re watching the livestream, you can immediately do a one-click purchase, because usually these platforms are integrated with Alipay or WeChat Pay. So you can do a one-click purchase and you’re able to buy your product while still watching the livestream."
There are 4 key reasons explaining why livestreaming is so popular in China: (i) product discovery and education, (ii) building trust in the product, (iii) using scarcity and discounts to drive conversion, (iv) closest experience compared to going to an offline store.
Lauren doubts that livestreaming will become as massive in the U.S. as it's now in China but sees potential for the format (Twitch in gaming, Youtube and Instagram have livestreaming which worked well during covid).
Rappi was founded in 2015 in Colombia. It's the leading player in on-demand convenience delivery in Latin America with a presence in 9 countries, 200 cities and connections with 200k POS. Rappi has grown 24x in the past 3 years.
Latin America has key characteristics that make Rappi an attractive business and a defensible company.
Latam is one the most under-penetrated ecommerce markets in the world and one of the fastest growing. Convenience delivery is catching up with other regions. As customers had no other ways to buy ecomerce goods before, they become extremely sticky to a service like Rappi.
Latam cities have a high population density (e.g. Mexico and Sao Paolo) increasing the efficiency of on-demand delivery networks. You can deliver items at a faster spead compared with the US.
You had not a pre-existing tech stack or logistics stack in Latam. Rappi had to build anything from first principles while scaling operations.
Customers can pay $1.0-1.5 per order and riders are still earning 2x the minimum wage.
Rappi was started as a free app where customers could order anything they wanted. As a result, Rappi started early on as a multi-category delivery service. On its platform, it has restaurants, supermarkets, vertically integrated micro fulfillment centers, etc.
Early on, Rappi focused on unit economics to build a solid ground from which they scaled the business. It forced them to have the discipline to optimise everything, it gave them additional cash from to reinvest to grow and they were obviously in a much better position to raise venture capital with sound unit economics.
In the past 12-18m, Rappi launched hundreds of dark stores and dark kitchens. It has enhanced Rappi's flywheel bringing a fast and great experience to customers which has increased the purchase frequency and retention of the user base.
"I always believe that if you were actually to do it in a sequence it’s way better to actually grow in a very asset light way. So you're focused on building the network. You're focused on organizing the size of the marketplace with technology, which is extremely valuable and difficult to do. And once you have that scale, you start verticalizing your business, not the other way around, because if you want to verticalize early on, it means that you have to invest a lot of money and you're going to be able to expand much slower. I think it's a natural evolution for asset light business to actually started going more to say asset heavy."
Rappi launched a Prime-like subscription. For $7 per month, you get deliveries at no cost above a certain average order value. It had also a great impact on the business as you became the default solution to have products delivered. It works because Rappi is multi-category and has a high purchasing frequency. It was important to integrate the Prime-program deeply in the app so that the subscriber sees continuously the value of being a Prime member.
Thursday, Aug. 5th: Several pieces of news and rumours show that DoorDash wants to double down in the grocery space. Most of the large players in the broad food/grocery delivery space are expanding into adjacent verticals and DoorDash is no exception (from food delivery to dark kitchens, to dark stores and to partnership with local convenience stores).
DoorDash launched DoubleDash to let consumers shop in multiple shops in a single order. You can complement your restaurant order with additional items (e.g. a drink, a snack or a desert) that the Dasher will pick from a convenience store or a DoorDash's dark store. - DoorDash, Techcrunch
DoorDash held unsuccessful talks in Q2-21 to acquire Instacart for $40-50bn. It did not work out partly for anti-trust issues. Instead, Instacart will pursue its preparation for a public listing. Instacart is a leading e-grocery player in the U.S. partnering with retail giants to offer them the possibility to deliver orders through Instacart's app. In this case, an Instacart picker comes to prepare and pack the order before delivering it to the consumer. - Reuters
DoorDash is holding talks to either invest into Gorillas at a $2.5bn valuation or even to acquire the company. Gorillas is an European leading fast grocery delivery startup. Initially, the company expected to raise at a $6bn valuation. For DoorDash, it would be both a way to expand in Europe and in the ultra-fast grocery delivery space. In parallel, DoorDash has also started initial recruiting efforts to launch its food delivery service in Germany posting 15 jobs opening to open the country. - FT, Sifted
Friday, Aug. 6th: Dataiku (💙) raised a $400m series E at a $4.6bn valuation in a round led by Tiger with the participation of existing investors (Iconiq, CapitalG, FirstMark, Battery, Snowflake and Dawn) as well as new investors (Insight, Eurazeo and Lightrock). It's an "end-to-end platform to design, deploy and manage AI and analytics applications." Dataiku has 450 enterprise clients and has launched a fully managed version of its platform in Jun. 2021 called Dataiku Online to manage set up and infrastructure for its customers. - Techcrunch
Rappi "is an app that allows users to virtually order food from restaurants, as well as shop for groceries, take cash out from ATMs, pay delivery workers to do favors, and buy everything from sex toys to plasma screen TVs."
I love this user testimonial which shows both Rappi's greatness and internal issues. "Customers who use, and experts who follow, Rappi say the company’s service has worsened even as it continues to grow its business. Carolina Quiroga, a 33-year-old woman from the well-to-do neighborhood of Chapinero Alto, has ordered food three times a week on the app for the last six years. She said she’s noticed a decline in quality this past year. Last month, she complained after watching her pizza order cross the city before getting to her, despite the restaurant being 10 blocks away. Users say this is standard practice for the app’s overworked delivery riders, but customer support told her they never make drivers deliver two orders at once."
In 2018, the Colombian consumer protection agency published an investigation showing that around 2% of Rappi's orders during a 7-month period caused a complaint or a refund claim.
Rappi is still facing a strong competitive pressure from both food delivery giants with a footprint in Latin America (e.g. iFood, Uber) as well as newcomers with more vertically integrated models (e.g. Jokr, Foodology).
Instead of showing your GMV (gorss merchandise value) potential, you should rather show your monetization potential. A gross margin potential above $1bn will be considered as an attractive market by early stage investors.
When you present your competitors, you should not present them into a 2-axes chart. Instead, use a table with multiple criteria comparing your startup with competitors.
On the market, the best practice is to structure a data room with the most relevant market researches, studies and articles. You can also include in your data room customer and experts insights. You can add transcripts and audio recordings of the interviews that you have done while building your company.
You should include share of wallet (actual demand/potential demand of either a supplier or a customer) in your metrics as it shows how vital your business is becoming for both your supply and your demand.
On CAC, you should compute a fully loaded CAC (costs of salaries, marketing overhead, marketing expenses, marketing tools) including both the acquisition of the supply and the demand. To get deeper, you should (i) also distinguish the blended CAC and the the paid CAC and (ii) make a CAC analysis per acquisition channel.
Monday, Aug. 9th: Caroline Clark (ex. Atlassian & Sequoia) released a great presentation on scaling out a go to market strategy. - Caroline Clark
You need to have a great product before even thinking about your go to market strategy.
You need to answer 3 key questions: who is the ideal customer? how are you going to reach them? how are you going to scale?
Step 1: Identify your buyer personas. You should go deep into describing them. It will help you to understand who matters and to prioritize your sales efforts accordingly. In the early days, you will do mainly qualitative customer interviews to gather data on your buyer personas.
Step 2: Identify the right acquisition channels to reach your customers.
Step 3: Scale your go-to-market by looking at your efficiency to acquire each new customer (i.e. the ratio between his lifetime value and the cost to acquire him).
Figma has launched FigJam to expand its design platform upstream to the idea generation / wireframing phase. Forbes describes FigJam as "a digital version of a home or office wall covered in Post-it Note". It took 6 months to launch a product that is 25% complete in public beta. Figma will enhance FigJam overtime with new features. It has already launched audio support to chat with your teammates.
Figma was launched in 2016. It expects to double its ARR from $75m in 2020 to $150m in 2021. In Jun. 2021, it raised $200m at a $10bn valuation. Each founder is still owning 10% of the company.
"As Google Docs did for word processing and GitHub for code, so Figma is doing for design. “The entire economy is going from physical to digital, and design is just the latest chapter. And design is a team sport—it’s collaborative by nature.”"
"Today, with $200 million in fresh funding, Figma must decide how to prioritize international expansion (already 80% of users are outside the U.S., and its latest round included global-minded strategic investors, such as Brazil’s Base Partners), potential acquisitions (it has bought two startups, including one that revamped Figma’s mobile app) and new features to help it achieve its goal of becoming an end-to-end solution."
Wednesday, Aug. 11th: Reddit raised a $700m series E at a $10bn valuation led by Fidelity (vs. $250m round at a $6bn valuation in Feb. 2021). In Q2-21, Reddit generated $100m in advertising revenues (192% growth YoY). The company has 52m DAUs and 100k active subreddit. It will use the funding to grow the team, to enhance the product and to expand its users geographical footprint. - The Verge, Reddit, The NY Times
E-commerce as potential of total retail sales has stabilized after a temporary uptick in the middle of the Covid crisis.
The most underpenetrated categories like groceries will preserve more gains than the others.
Online share of grocery spending is around 20% in the US. Online grocery shopping is becoming an habit for consumers who value its convenience (time saving + easier to shop). Overall, 40%+ consumers expect to make more than 50% of their grocery shopping online (51% for Gen. Z and 61% for millennials).
As of end of July 2021, in the US, restaurant dining is almost back to normal and air travel is at 80% of pre-pandemic level mainly driven by leisure travel.
13 VC backed companies have made 2+ acquisitions in 2021 compared to 8 in 2020 including Hopin (5 acquisitions), SaltPay (4), Klarna (4), MessageBird (3), Kahoot! (3) and Glovo (3).
Startups acquire companies for several reasons: (i) geographical expansion, (ii) product expansion, (iii) team acquisition (esp. for tech talents).
Other featured acquisition include: Cazoo acquiring Drover, Bloom & Wild acquiring both Bloomon and Bergamotte, Travelperk acquiring Albatross, NexTravel and ClickTravel.
"The most successful early pioneers (what I call first generation, or “Gen-1” companies) [of a tech ecosystem], are companies that build around tried and tested business models that they then tailor for the local market (think ecommerce, online travel agencies, food delivery, ride-hailing, etc.). We saw this phase of development in China during the early 2000s and Southeast Asia in the early 2010s."
When Gen-1 companies become successful, they serve as role models for the rest of the ecosystem on three sides: talent (proving to anyone that it's possible to big a large business in the country), funding (wealth for investors, founders and employees involved in the Gen. 1 companies to be reinvested in the ecosystem) and demand (new generation of medium-class customers).
Gen. 2 companies will use this fertile ground of available funding, talent and domestic market to kickstart their business. "Because of easier access to top talent, high expectations customers, and also ample funding, these companies tend to be more innovative in nature too. It’s at this stage in an ecosystem’s development, that you see the truly innovative ideas. No longer are these companies copying well-trodden blueprints, but they have the confidence and resources to innovate at the leading-edge, on a global level."
In South-East Asia, we will witness in the next 5 years this exact shift from Gen. 1 to Gen. 2 companies. "According to Asia Partners’ 2019 Internet Report, there are ~1,200 alumni of global and regional Gen-1 technology companies, that have launched their own businesses (~4% of the total ~28,000 alumni)."
"Chinese Gen-2 companies were no longer copying well-trodden business models, but rather leading their fields in new innovation. Meituan launched within food delivery in 2013, and through their business model innovation became the first major food delivery company to achieve profitability globally. Pinduoduo is a pioneer in Social Commerce. And Bytedance invented an addictive new algorithm that learns what each user likes and personalizes the content feed for them. The more developed ecosystems in which these Gen-2 companies launched in gave them the freedom to pioneer and follow their own paths in their local markets."
Is this a need-to-have, or a nice-to-have? Is this product or service critical to the customer?
What is the share of that customers wallet? Is this offering a small percentage of the customer budget?
Is there a substitute for the product or service? If it didn’t exist, what would the customers or users need to do instead?
Can we identify a competitive advantage like network effects, brands, patents, regulated monopolies, high switching costs, first mover benefits, or scale? If we can’t clearly identify a competitive advantage today, can we identify signs that the business might develop one?
Does the management team have some competitive advantage, as people? Do they bring unique experience? Can we identify any shortcomings?
What are the key success factors to superior performance in this industry?
"You never really understand a person until you consider things from his point of view. Until you clim into his skin and walk around in it." - To Kill a Mockinbird
China is trying to face its internal problems which are curbing down on foreign investments in Chinese tech companies. Income inequalities have worsened in the past decade. Education and housing costs have skyrocketed preventing the rise of a sound middle class.
"In the last five year plan relating to 2021 – 2025 (meeting held in October 2020), the government discusses how it aims to become a moderately developed country by 2035 (i.e. $30,000 USD per capita). It hopes to achieve this via a focus on domestic consumption (and of domestic brands), and by continuing to close the urban vs. rural living standards gap."
Tuesday, Aug. 17th: Travel booking platform Hopper raised a $170m series G at a $3.5bn valuation. The company is on track to achieve 330% annual revenue growth in 2021 and has quarterly revenues that are 100% above pre-pandemic levels. Hopper will use the funding to increase the team size (hiring 500 employees, including 300 in customer support), to acqui-hire companies that can help in product development or international expansion and to white label its platform to third parties (e.g. Amadeus or Capital One). - Techcrunch
Many people are leaving their job when their employers are forcing them to come back to the office because they have found a much better work-life balance by working in remote.
On Indeed, since Feb. 2020, searches for remote jobs have increased by 550% and jobs postings offering remote working by 180% (10% of total Indeed job posts are remote-friendly jobs).
Some people are using remote to combine two-full time remote jobs to double their pay without working much more hours.
a16z started by counter-positioning Benchmark putting emphasis on: (i) multi-stage investing vs. series A only, (ii) supporting young technical founders vs. hiring professional CEOs, (iii) building a service platform vs. having a super lean organization relying mainly on a reduced number of partners.
a16z invested $50m of its fund I (1/6 of the fund) into Skype's spin-off from ebay together with Silverlake at a $1.9bn valuation (for 65% of the company) which gave them only a 1.8% stake into the company. It was seen as a complete heresy at the time. Marc Andressen helped Skype to recruit a new CEO and to strike a deal with Facebook. a16z ended up making a 3x multiple when the company was acquired by Microsoft at a $8.9bn valuation. The podcast is digging into several other crispy deal stories like Okta, Slack, Uber (a16z's biggest mistake) or Instagram.
"Many people on Wall Street — and a number of telecommunications experts I spoke to this week — were stunned by the price Skype sold for, and not just because we’re in the middle of a recession. That controversy ended this morning when Microsoft announced that it was buying Skype 18 months after we bought it from eBay." - Marc Andressen
Any partner can sign an investment cheque. No consensus amongst the partners is required. a16z will staff up another partner to build the bear case of a deal that someone is pushing.
a16z changed the job to be done for venture capital firms introducing key innovations: (i) VC platform, (ii) media empire, (iii) operators as partners, (iv) be ready to overpay deals and have no ownership target in companies, (v) investing into crypto startups.
Friday, Aug. 20th: Vertex Ventures published their 2013 Grab's investment memorandum. Vertex invested $2.15m at a $9m pre-money valuation in a company that was only ride hailing in South-East Asia. - Vertex
Grab was able to bring trust into the taxi market by screening drivers, send the driver name & photo to the consumer when a match happened and allowing riders to share their position with their loved ones.
"Further analysis on the cohorts has revealed a growing superuser behaviour. The percentage of heavy users (>9 bookings/month) increased from 1% to 14% within a year, with average bookings going up from 11.7 to 19.0 per month."
The two main risks associated with the investment were (i) competition with Western established ride hailing players and (ii) potential regulation by local governments.
Saturday, Aug. 21st: Matthew Ball wrote a paper on Netflix's expansion plan into the gaming world. - Matthew Ball
In a past quarterly investment letter (Q4-18), Reed Hastings (Netflix's CEO) mentioned that Fortnite was a more serious competitor to Netflix than other streaming providers. "We compete with (and lose to) Fortnite more than HBO”
In Netflix's Q2-2021 earning call, the company announced that it was seriously entering the space hiring a VP of gaming and lying the ground for how it's going to do it.
Gaming is slowly becoming the "total media" (e.g. Fortnite concerts, Twitch lives, etc.) and is social experience - two characteristics that makes it superior to any other media.
Netflix seems to start with casual single player mobile games available only for Netflix subscribers at no additional fee. You will have to download a specific app for each game. Games are discoverable in the Netflix's app and games won't be monetized with advertising or micro-transactions. It means that it's a value proposition similar to Apple Arcade.
Sunday, Aug. 22nd: The Economist did a great retrospective on Tim Cook's first decade at Apple. - The Economist
It was not an easy task to succeed to Steve Jobs. Nevertheless, Tim Cook has turned to be an outstanding CEO for Apple adding $2tn in market capitalization in 10 years.
Tim Cook has been able to seize key economical shifts in the 2010s:
A mobile-first digital economy: 1bn Apple devices are used worldwide.
A globalised economy: outsourcing manufacturing value chain in Asia and betting on China as the next consumer market to conquer.
Building a network effect business: Apple has a powerful flywheel with the AppStore and the iPhone (more apps > more users > more app developers > more apps). There are 2m apps on the AppStore which generated $643bn in sales in 2020 for developers.
Seizing the growing importance of privacy and sustainability for end consumers.
The paper also highlights the 3 main challenges going forward for Apple:
Growth: to sustain its growth, Apple will end up needed another radical innovation (similar to the iPod or the iPhone) like the iCar or iGlasses.
Geopolitics: growing tensions between the US and China could harm Apple's supply chain and impact its market expansion in China.
Competition: GAFAs are increasingly competing when they are launching new business lines (e.g. Apple thinking about launching a search engine or focusing on data privacy at the expense of Facebook's ad platform).
Monday, Aug. 23rd: Auren Hoffman (CEO at Safegraph) published a paper on startup mafias explaining that some startups like Paypal and Youtube are more suited to create mafias than others. It highlighted 3 criteria: (i) a successful but not gigantic outcome ($300m-$2bn exit), (ii) several iterations before experimenting success (with near-death experiences), (iii) the mindset of building an enduring business even post exit. - Auren Hoffman
Tuesday, Aug. 24th: TikTok is expanding its partnering with Shopify getting another step closer to launching e-commerce livestreaming on TikTok. It started last October to let Shopify merchants launch and manage their TikTok campaigns from their Shopify dashboards. Now, TikTok wants to implement in-app-shopping from Shopify's merchants. It will start pilots in several geographies (US, UK and Canada) in the coming weeks enabling merchants to create digital storefront importing their product catalogs from Shopify. - Pingwest
Wednesday, Aug. 25th: Several noteworthy European vertical SaaS raised a new funding round in August.
Capmo (Germany) raised a $30m series B from Bessemer for its all-in-one construction management platform. Brian Feinstein is leading the deal at Bessemer and was an early investor at Procore in the U.S., which has a similar value proposition and which recently went public. Founded in 2018, Capmo has several hundreds customers, has managed 10k construction projects and has registered 80k sub-contractors on its platform. It will use the funding to triple its team to 200 FTEs, expand all over Europe and add product features to its platform. - Tech.eu, Capmo
Plentific (U.K.) raised a $100m series C from Highland and Brookfield for its SaaS-enabled-marketplace for the property management industry. It provides a platform for landlords, property managers, facility managers and service contractors to better manage repairs and maintenance services. Founded in 2013, it has a presence in 3 countries (UK, Germany, US), manages 350 properties, has 100 enterprise customers and 16k contractors on its platform. Plentific will use the funding to expand in the US and add features to the platform (enhanced CRM, ESG management). - Techcrunch
Salonkee (Luxembourg) raised a €6.2m series A from Fortino and Newion to build a SaaS-enabled marketplace for the European beauty industry (mainly hairdressers at the moment). Salonkee has 1.2k customers in Luxembourg, Switzerland and Belgium which is impressive when you know that geographical expansion is a hard topic to tackle for European SaaS for local businesses. Founded in 2017, It's both an all-in-one platform for beauty professionals to manage their business (booking management, CRM, digital marketing, workshift management, payment) as well as a booking platform for customers (Salonkee does not take a commission but it makes its SaaS even more sticky). In terms of market size, there are 800k beauty salons in Europe and only 12% have digitalized their operations. Salonkee will use the funding to expand in other European countries (10k customers targeted in the next 2y) and to quadruple the team size (from 25 to 100 FTEs). - Fortino, Silicon Luxembourg
Thursday, Aug. 26th: Zeal (ex. Puzzl) raised a $13m series A from Spark. Zeal is a payroll API. More precisely, it allows companies to embed payroll into their product either as API or white label product. Zeal was started in 2018 as a payment processing company for the gig economy and pivoted into a payroll API. - Techcrunch, Spark
Friday, Aug. 27th: a16z raised a $400m seed fund. a16z has always invested at seed stage but has now three different funds based on stage: seed, venture and growth. a16z will extend its platform to serve specific needs for seed companies like finding its first customers or hiring its first employees. a16z will invest seed tickets between $1m and $4m in rounds up to $6m and won't take board seats.- Techcrunch, Protocol
Saturday, Aug. 28th: Amazon is planing to expand its presence in offline retail by launching 2,800 square metre department stores in which it will sell many its private label products. The company is following a path that ecommerce giant Alibaba has already taken with Freshippo which is a retail-chain exploring new retail formats powered by technology. So far, Amazon has opened 24 bookshops in the US, has opened 30 "4-star" shops (with highly rated items on Amazon), acquired Whole Foods in 2017 and has been testing Amazon Fresh & Amazon Go stores. Amazon is investing in retail because (i) competition from traditional retailers is heating up in ecommerce, (ii) ecommerce sales growth was slowing down on Amazon before covid, (iii) customers wants an omnichannel experience. - The Economist
Sunday, Aug. 29th: Meditation app Headspace is merging with on-demand mental health service provider Ginger into a new entity called Headspace Health valued at $3bn and with more than 800 employees. Both companies are mobile-first experience. Moreover, they combine a B2C (70m for Headspace, 25m for Ginger) and a B2B (2.2 k companies for Headspace and 500 for Ginger) sales motion. Meditation and mental health are adjacent product categories and it makes a lot of sense to combine them into a unique experience. - Techcrunch, Business Wire
Toast is generating $494m in ARR with 48k restaurants/29k customers, a 118% annual growth rate (super impressive knowing that they were selling to restaurants in the middle of covid) and a 110% annual retention rate.
Toast has become an all-in-one platform for restaurants to manage their business starting with a PoS and expanding progressively into other key areas such as online ordering, inventory, workforce management, payroll, capital, customer review management and marketing. "Our vision was to build a highly scalable, end-to-end, cloud-based restaurant management platform that would improve the odds of success for the hard-working people who fuel this community."
"Our restaurant-specific platform is fully integrated across point of sale, operations, digital ordering and delivery, marketing and loyalty, team management, financial technology solutions, and platform services to provide restaurant operators everything they need to run their businesses successfully."
2/3 of Toast employees have previously worked in restaurants highlighting the importance of industry knowledge when you are building a vertical SaaS.
With 48k restaurants on its platform, Toast has only a 6% market share in the US (800k restaurants).
Tuesday, Aug. 31st: McKinsey published a report on common patterns amongst top European startups (1k startups founded after 2000 in 33 countries). - McKinsey
McKinsey distinguishes 4 different growth strategies: (i) building a business driven by network effects, (ii) scale quickly to achieve critical size and economies of scale, (iii) develop superior products giving you competitive advantage, (iv) commercialize scientific breakthroughs.
Startups relying on scale or network tend to be more acquisitive than their peers either to enter into a new geography or to consolidate a market.
Top European startups reach unicorn valuation in less than 10 years and need €100-200m in funding to reach this milestone.
Thanks to Julia for the feedback! 🦒 Thanks for reading! See you next week for another issue! 👋