🗞 Venture Chronicles - July 2021
Overlooked #78
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 July.
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 July!
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.
Thursday, Jul. 1st: Tapcart raised a $50m series B led by Left Lane with the participation of SignalFire, Greycroft, Act One and Amplify. Tacpart is building the Shopify for mobile apps. Its main trick to acquire customers is to convert a Shopify website into a mobile app. - Techcrunch
Friday, Jul. 2nd: Accel raised 3 new funds for a total amount of $3.05bn: (i) $650m U.S. early stage venture fund (fund XV, seed/series A, $1-20m round), (ii) $650m European and Israeli early stage venture fund (fund VII, seed/series A, $1-20m round), (iii) $1.75bn global growth fund (fund VI, growth, $50-100m tickets). It plans to invest in 20-30 companies per fund. Accel will double down on being the best hands-on investor with a platform to support entrepreneurs on HR, business development and international. For its early stage strategy, Accel has scouts both in Europe and in the US. - Techcrunch, Accel, Sifted
Saturday, Jun. 3rd: Paul Graham wrote a paper on "how to work hard". - Paul Graham
"One thing I know is that if you want to do great things, you'll have to work very hard."
"There are three ingredients in great work: natural ability, practice, and effort. You can do pretty well with just two, but to do the best work you need all three: you need great natural ability and to have practiced a lot and to be trying very hard."
"It's straightforward to work hard if you have clearly defined, externally imposed goals, as you do in school. [...] What I've learned since I was a kid is how to work toward goals that are neither clearly defined nor externally imposed. You'll probably have to learn both if you want to do really great things."
"Once you know the shape of real work, you have to learn how many hours a day to spend on it. You can't solve this problem by simply working every waking hour, because in many kinds of work there's a point beyond which the quality of the result will start to decline."
"The more ambitious types of work will usually be harder, but although you should not be in denial about this, neither should you treat difficulty as an infallible guide in deciding what to do. If you discover some ambitious type of work that's a bargain in the sense of being easier for you than other people, either because of the abilities you happen to have, or because of some new way you've found to approach it, or simply because you're more excited about it, by all means work on that. Some of the best work is done by people who find an easy way to do something hard."
"Along with measuring both how hard you're working and how well you're doing, you have to think about whether you should keep working in this field or switch to another. If you're working hard but not getting good enough results, you should switch."
"The best test of whether it's worthwhile to work on something is whether you find it interesting."
"Working hard is not just a dial you turn up to 11. It's a complicated, dynamic system that has to be tuned just right at each point. You have to understand the shape of real work, see clearly what kind you're best suited for, aim as close to the true core of it as you can, accurately judge at each moment both what you're capable of and how you're doing, and put in as many hours each day as you can without harming the quality of the result. This network is too complicated to trick. But if you're consistently honest and clear-sighted, it will automatically assume an optimal shape, and you'll be productive in a way few people are."
Sunday, Jul. 4th: Duolingo released its S1 as it will go public in the upcoming weeks. - Techcrunch, S1
"Duolingo was founded to help build a future where high quality education is available to everyone, no matter where they live or how much money they have. And for the first time in history, this is possible - we can reach billions of people on their smartphones, with an app that's free and fun to use."
"According to a Zuora survey conducted by the Harris Poll, 78% of consumers globally paid for subscriptions in 2020, up from 71% in 2018. Even in Japan, the market with the lowest rate among surveyed countries, more than half of consumers pay for subscriptions, growing from 53% in 2018 to 59% in 2020. In the United States, the figure is 82%, and according to a 2020 survey by Adjust, the average US consumer spends $53 per month on digital subscriptions, including an average of four app subscriptions."
Key metrics: 400 people in the team including 170 engineers, 500m downloads, 40 languages, 40m MAUs (vs. 27m MAU in Dec. 2019 and 37m MAU in Dec. 2020), 5% of MAUs are paid subscribers, 73% of revenues from subscriptions in 2020 (17% from ads and 10% from DET) and 500 A/B tests run per quarter.
Monday, Jul. 5th: Rohlik raised a €100m series C led by Index at a €1bn valuation. The company is an online grocer operating large warehouses (17k SKUs, 7,000-15,000 m²), sourcing products from both international and local brands to deliver them to the end customer 2-3 hours after the order with a milkman distribution model. In 2020, Rohlik made €300m in revenue. It is profitable in Hungary and Czech Republic and it's close to profitability in Austria - its third market. It has 750k customers and delivers 650k orders per month. Rohlik also operates its own brand to enhance its unit economics. With the funding, it plans to expand into three new European markets (Germany, Italy and Romania). - Sifted
Tuesday, Jul. 6th: Juni raised a $21.5m series A co-led by Felix and DST for its verticalized neobank dedicated to e-commerce merchants. In 12 weeks following the product launch, Juni onboarded 250 businesses, has a waitlist of 3k merchants waiting to be onboarded and has a 85 Net Promoter Score. Juni integrates with the ecommerce stack to provide a 360° view of the business and to offer tailored financial services. The product has already features specific to ecommerce merchants such as a 1% cash back on all expenditures, free FX payments and multi currency accounts. - Felix, Techcrunch
Wednesday, Jul. 7th: Lenny Rachitsky wrote a paper on choosing the right North Star metrics for your business. - Future
There are 6 categories of metrics: revenues (the amount of money being generated), customer growth (number of users who are paying), consumption growth (the intensity usage of the product), engagement growth (the number of users active in the product), growth efficiency (the efficiency at which you spend vs. make money) and user experience (measure how enjoyable and easy to use is your product experience).
"Once you have your North Star Metric (an output), your next step is to break this metric down into its component parts and decide which metrics (the inputs) to invest in."
Thursday, Jul. 8th: A verticalised neobank for creators called Karat raised a $26m series A led by USV with the participation of GGV Capital and Signal Fire. Creators are completely misunderstood by traditional banks and struggle to get even the most common financial products like a banking account and a mortgage. Karat started with digital creators (2m creators making $100k+ per year) but will expand into adjacent populations like self employed, small business owners and gig workers. - Techcrunch
Friday, Jul. 9th: FT Partners published an extensive overview of the Buy Now Pay Later market. - FT Partners
Saturday, Jul. 10th: GoPuff started to hire 100+ people to add a ghost kitchen product line to its operations. It's noteworthy that digital food giants are all moving towards a multi-product food offering combining groceries and prepared meals from restaurants and/or dark kitchens. - The Spoon
Sunday, Jul. 11th: Anne-Laure Le Cunff wrote a nice interview in Ness Labs covering our portfolio company Hera (💙). - Ness Labs
Calendar tools are broken because they are centered around scheduling which is only of a small fraction of the meeting life cycle. Your calendar does not tell you if a meeting is important, what happened during a meeting and which meetings need follow-up.
Moreover, most meetings are not isolated events but are part of broader projects or occurrences. With a calendar tool, you cannot gather the broader context of a given meeting included in a broader scope.
"With Hera, users can prepare, join, and run meetings without the grunt work. Hera syncs with your existing calendar and lets you act on your meetings at each stage of the life cycle: no more separation between your calendar meetings and what has happened in these meetings. [...] By scanning your calendar, we also automate low-value repetitive tasks. [...] At the end of the meeting, users can export the outcomes or full notes to other tools such as Notion, Slack, or Todoist to feed a broader source of truth. This allows for seamless collaboration."
"Five to ten years from now, I believe many companies, especially tech companies, will be decentralized, or at least not physically bound. In these companies, written knowledge and efficient collaboration will be the two most important facets of the culture of the company. The major challenge is to bring the cost to collaborate with your teammates to zero."
Monday, Jul. 12nd: Protocol wrote a paper on hedge-fund Tiger Global's involvement in the venture market. - Protocol
Tiger has invested into 120+ startups in 2021. It raised a $6.5bn fund and is working on raising a $10bn fund.
It's investing as much money as it can in the private market because they see that the public market is reacting quite well to tech-unicorns going public.
Tiger started to invest into startups in 2001. It invested at different stages in companies like NetEase, Facebook, Amazon and Netflix.
The fund is known for its quick deal making as Tiger does a lot of due diligence before it approaches a company. Tiger's due diligence is based on two pillars: (i) leveraging its portfolio of 400+ tech companies, (ii) working continuously with Bain consultants.
Tiger is a passive investor. It does not take a board seat. It does not tell you how to run your company but it offers you access to its portfolio as well as to its army of consultants.
Tuesday, Jul. 13rd: Choco raised a $100m series B at a $600m post money valuation (vs. $64m series A at a $230m valuation in 2020) led by Left Lane Capital with the participation of Insight as a new investor and Coatue and Bessemer as existing investors. Choco is building a platform to digitalising ordering workflow and communications between restaurants and food suppliers. In 2020, orders quadrupled and GMV went from $230m annualized to $900m. The company will use the funding for tech/product as well as to expand in new geographies (Latin America, Middle East and Asia). - Techcrunch
Wednesday, Jul 14th: We are excited to participate into YuLife's $70m series B (💙) led by Target Global along with other great investors like Localglobe, Notion, Creandum and MMC. YuLife is a London-based startup reinventing life insurance with a gamified interface that incentives and rewards users who take care of their physical and mental health. YuLife distributes its product through corporations, (like Co-Op, Sodexo, Havas, etc.), has experienced a 10x growth in 2020 and provides a $15bn coverage (in a $2.2tn industry). Users are evolving into different levels in which they are incentivize to walk, cycle, meditate and do other healthy activities. You can compete with your colleagues. You move from one level to the other based on your engagement. YuLife is connected with 3P apps and devices like Calm, FitBit and Garmin. You also gain YuCoins that can be transformed into vouchers. - Techcrunch
Thursday, Jul. 15th: Revolut raised a $800m series E led by Softbank and Tiger Global at a $33bn valuation (vs. $580m series D at $5.5bn valuation closed last year). The UK-based neobank now has over 160m users, powers more than 150m transactions per year and wants to build "global financial superapp that enables customers to manage all their financial needs through a single platform". Revolut will use the funding to keep expanding in new geographies (esp. India and the United States) and to double down in product development (inc. investing, insurance and credit). - Techcrunch, Revolut
Friday, Jul. 16th: Our portfolio company ManoMano (💙) raised a $355m series F at a $2.6bn valuation (🦄) in a round led by Dragoneer. ManoMano is a verticalised marketplace present in 6 European countries with 7m customers and focused on DIY, home improvement and gardening products. In 2020, it doubled its GMV to reach €1.2bn. It will use the funding to double down on its geographical expansion in Germany and the UK as well as to grow its B2B offering for small businesses. - TechCrunch
Saturday, Jul. 17th: Rappi raised a $500m+ series F round at a $5.25bn valuation led by T. Rowe Price. Rappi is a multi-category delivery platform present in 9 countries and 250 cities in Latin America. It started with delivering beverages, has expanded into multiple categories (meals, groceries, tech goods, medicine) and is now becoming the Latam superapp (with financial services and gaming embedded into the app). - Techcrunch
Sunday, Jul. 18th: Loop Returns raised a $65m series B at a $340m post money valuation led by CRV with the participation of Shopify and Renegade Partners. It's an ecommerce solution in the Shopify ecosystem to reduce the cost and complexities associated with managing returns (20-30% of ecommerce sales). It has the following features: on demand return portal, a journey optimized for exchanges over refunds, logistics and insights on returns for merchants. It works with 700 brands and has helped them to retain $400m in revenues. Loop will use the funding for international expansion and product development. - Techcrunch, Loop
Monday, Jul. 19th: Apple is working on a buy now, pay later option for its Apple Pay users in partnership with Goldman Sachs - who also is Apple’s partner for its Apple Card. Apple Pay is a payment option that has become mainstream especially on mobile and offline. It means that Apple will instantly have a wide coverage for its BNPL product and will be able to compete head to head with Affirm, Klarna and Afterpay in the US. - Techcrunch
Tuesday, Jul. 20th: Remote raised $150m at a valuation of over $1bn, becoming Portugal’s fifth unicorn. It’s a series B round led by Accel with the participation of Index and Sequoia. Remote is a HR platform to hire and pay remote workers which also allows you to stay compliant with local regulations. It has opened legal entities in 50 countries and it plans to reach 80 countries by the end of 2022 and the whole world the year after. Founded in 2019 and launched in 2020, the company grew by 65x and its headcount jumped from 50 to 220 people. - Tech.eu
Wednesday, Jul 21st: Jokr raised a $170m series A (mix debt and equity) led by GGV Capital, Balderton Capital and Tiger Global. - Techcrunch, Sifted
Jokr has already deployed 100 stores in Latin America, North America and Europe (Poland and Austria). It offers 1k SKUs with a mix between multinational brands and local brands (60%-40% split).
"JOKR is the second generation of ecommerce — driving personalisation to a completely new degree and taking out all the middlemen. It’s a next gen Amazon." “We are true believers in the fact that the world needs a new Amazon, a better one, a more sustainable one, one that appreciates local areas and products.” says Ralf Wenzel (CEO and founder at Jokr)
Brands have a big interest in working with Jokr. 60% of the brands sold on Jokr asked to be listed on the platform. For local brands, Jokr is a distribution channel that can help them scale to the next level. For FMCG giants, Jokr is a way to gather direct data on consumer behavior - something they've never accessed with supermarkets.
Jokr started with groceries but is planning to offer any kind of products building the next gen. everything stores. In its most mature hubs (which are breakeven with gross margin above 40%), it already offers 5k SKUs. The company will also launch its private label brand.
Thursday, Jul. 22nd: Index raised $3.1bn to back entrepreneurs everywhere and at every stage through 3 different funds: a $900m early stage fund (Index Ventures XI), a $2bn growth fund (Index Ventures Growth VI) and a $200m seed fund (Index Origin). Index makes 80% of its investments in 5 areas which are enterprise software, SaaS, fintech, marketplaces and consumer. - Index, Sifted
Index is positioning itself as the anti-Tiger highlighting the value it can bring to entrepreneurs beyond capital. "Capital is a commodity, but the relationships it comes with can’t be commoditized. If you can get money anywhere, you'd rather take money that comes with a long term partner that has a transformational impact on your ability to build your business." (Mike Volpi)
“Tiger’s been a massive boon for us. We have a very different value proposition — they make it clear that they’re not going to do any work or be on the board. It’s ‘here’s the money, then ciao, bye bye’. We have a very different pitch; we like to come in earlier, if we can, and really partner with the founder, build a personal relationship, be on the board, work with them on hiring, internationalisation and customer development.” (Martin Mignot)
"At Index, these funds are invested by a single group of people from day one through IPO. There are no hand-offs across teams from seed, to venture, to growth. That's very different from the approach taken by other investors. Today’s entrepreneurs are looking for a more seed-to-IPO kind of a journey, and at Index, we want to support entrepreneurs from the moment they think of the business until the moment they stand on the podium at one of the world’s exchanges and ring the bell." (Mike Volpi)
Friday, Jul. 23rd: Eurazeo (💙) raised €1.6bn for its third growth fund to partner with the best European entrepreneurs. We will invest €25-100m tickets (initial ticket) into European growth stage companies (series C+). Our mother company seeded the fund with a €320m investment from its balance sheet and individuals invested €200m into the fund. Eurazeo has been a pioneer in growth stage investing in Europe with initial investments in 2014. - Eurazeo, Sifted
Saturday, Jul. 24th: The Generalist published a deep-dive on Robinhood ahead of its IPO. - The Generalist
Robinhood is attracting a new generation of retail investors. Between 2015 and 2021, 50% of the accounts created came from first timers. There is room for expansion as only 35% of Americans are holding stocks, bonds or mutual funds.
Robinhood's product is centered around commission free stock trading but has secondary product lines like crypto, gold and cash management.
Robinhood has 18m funded accounts (vs. 12.5m at the end of 2020 and 7.2m 12 months ago), 98.3% of funded accounts use the product on a monthly basis and the product has a 47% DAU/MAU ratio.
Robinhood is reserving 20-35% of the capital raise for its customers so that they can become stockholders at the IPO price.
Sunday, Jul. 25th: I read a paper from Nicolas Colin on Revenue Based Financing. - European Straits
Revenue-based financing is not a new idea. It was introduced by Goldman Sachs to convince "investors on the bond market to lend money to a retailer with their future revenue as a collateral."
What is new is that revenue based financing is coming in the tech industry especially for SaaS businesses which makes sense because (i) SaaS have a recurring and predictable cash-flow profile, and (ii) there is a category of investors which are happy with a hybrid financial product that combines some of the upside of traditional VCs while preserving some downside protection that you can have as traditional lender.
Nicolas makes the point that SaaS users can be considered as an asset that can serve as collateral. As users contributes to value creation (more user generated data, more P2P contributions, more auxiliary labour) they have the same nature as assets used in other industries to lend money.
It makes sense to start diversifying your source of funding away from equity at series B when the probability of failure has decreased and when the ropes of the business are well understood.
Monday, Jul. 26th: Not Boring and Chinese Characteristics wrote a collab article on Pinduoduo. - Chinese Characteristics
Pinduoduo's stock price had a bumpy ride for the past 18 months driven by covid 19, the departure of its founder, a strategic move towards a more full stack model, etc.
Pinduoduo built its success on customers in tier-3 and tier-4 cities which were completely underserved by leading e-commerce giants such as Alibaba and JD.
Pinduoduo's core value proposition is centered around three things: cheap products (not unusual to find products at a price 10-50% cheaper compared to other platforms), a gamified experience and a frictionless delivery (48h shipping, 7-day return policy).
Companies are trying to replicate the Pinduoduo's model partially or completely in other countries like Minimall (Europe), Zapt (Brasil) or Supermall (U.S.), Snackpass (U.S.), Italic (U.S.), Fevo (U.S.). But Pinduoduo is hard to copy-paste because it has three characteristics inherent to China: (i) distribution through WeChat to share deals without friction, (ii) social commerce and group buying as cultural habits, (iii) a logistic network and a payment system much more developed than what we see in the West.
Tuesday, Jul. 27th: Sproutl raised a €9m seed round led by Index with the participation of Ada Ventures. It's a UK-based marketplace for gardeners founded by former Farfetch executives. It provides items, inspiration and relevant advice to help democratizing gardening. Sproutl will help gardening shops with starting to sell online and will provide them with key services like logistics, packaging and delivery. - Techcrunch
Wednesday, Jul. 28th: Contentful raised a $175m round at a $3bn valuation led by Tiger. The company has 2k customers, 10k websites in production, 400k users and 300 integrations with third party apps. Contentful positions itself as a set of APIs to manage digital content online (image, words, videos). It allows developers to deliver content on their website super quickly without having to think about building a strong infrastructure with content delivery networks. - Techcrunch,
Thursday, Jul. 29th: Algolia raised a $150m series D at a $2.25bn post-money valuation (🦄) led by Lone Pine Capital. It's a search as a service product accessible for developers through API. Algolia has 10k+ customers (inc. Slack, Stripe, Medium, Zendesk and Lacoste), 400k developers, handles 1.5tn+ queries per year and experienced a 180% YoY growth. - Techcrunch, Algolia
Friday, Jul. 30th: Lenny Rachitsky wrote a paper to help entrepreneurs thinking about the "why now" question. You don't need to have a strong "why now" to build a great business but if you have one, it will increase your odds of success because (i) it unlocks the ability to provide a product 10x better than existing solutions on the market, and (ii) it can create a new untapped market need. - Lenny Rachitsky
Saturday, Jul. 31th: I read Bessemer's investment memorandum into Mindbody an investment done from Jeremy Levine in July 2010. - Bessemer
At the time of the investment, Mindbody demonstrated market dominance in certain sub-categories of the wellness industry (30% market share for yoga & pilates).
It was already a SaaS augmented by fintech with payment processing accounting for 25% of the revenues.
It had super strong unit economics with a 11% annual churn, 13 months to payback the gross margin and acquisition costs stable despite growth
The answer to the why now question at the time was just to build a SaaS solution when alternatives were pen & paper or on-premise solutions.
Bessemer highlighted the following key points on the team: metrics-driven, ability to build a scalable sales & marketing machine.
Market size was highlighted as the biggest risk associated with the investment. The thesis was based on the ability to achieve strong penetration rates in several sub-verticals like they did on yoga & pilates studios.
Thanks to Julia for the feedback! 🦒 Thanks for reading! See you next week for another issue! 👋
Ohh you missed one on July 29th : Fabric Ventures announces USD 130 Mio Venture Fund to back the founders of the Open Economy. Backed by the European Investment Fund. :-)