🗞 Venture Chronicles - March 2022
Overlooked #109
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 March.
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 March!
Tuesday, Mar. 1st: Creandum raised a $500m sixth fund to invest into European seed (70% of deals) and series A startups. It invested into unicorns such as Spotify, Kry, Klarna, Pleo, Trade Republic or Kahoot. Creandum has offices in Stockholm, San Francisco, Berlin (opened 6y ago) and London (opened 2m ago). Its next fund will invest in at least 10 companies founded by female founders (out of 40 investments planned). Creandum plans to invest in sectors like sustainability, the creator economy and web 3. - Sifted, Creandum, Tech.eu
Wednesday, Mar. 2nd: GoPuff officially launched in France with locations in Paris, Marseille, Lille and Toulouse. It has 20 dark stores with 4k SKUs (groceries, household essentials, alcohol, etc.) and 600 FTEs. GoPuff’s offering is tailor made to the French cities with products coming from local brands (e.g. fresh baguettes from La Parisienne). It leveraged Dija's acquisition to launch the country. - Techcrunch
Yakir Gola (coCEO at GoPuff) on more GoPuff's more mature markets: “If you look at a market like Philadelphia, we have a double-digit penetration of the market — double-digit percentage of the people living there are GoPuff customers. But the market is also growing by double-digit rates year on year. We can take the profits from existing markets and reinvest them into new markets like Europe"
Thursday, Mar. 3rd: Weee! raised a $425m series E led by Softbank at a $4.1bn valuation. It sells ethnic grocery food in the US with 10k SKUs from countries like China, Japan, Korea, Vietnam, Philippines, India or Latam. Weee! grew its user-base by 150% YoY. It will use the funding to add products to serve other underserved communities, to digitize its operations (warehouse automation/IA for product recommendation) and to expand in other product categories besides grocery (e.g. beauty & household items). - Techcrunch
Friday, Mar. 4th: Seedcamp shared a survey on early stage founders compensation in Europe. - Seedcamp
Founders can expect their salary to increase by 28% between pre-seed and seed and by 35% between seed and series A.
Founders can expect their equity to decrease by 9% between pre-seed and seed and by 9% between seed and series A.
Saturday, Mar. 5th: I read a funny paper from The Hustle on Ikea's in-store techniques to make you buy more than what you had planned. - The Hustle
60% of Ikea's purchases are impulsive which seems crazy for an utilitarian store. In 2021, IKEA generated $47.7bn in sales from 458 stores in 61 markets. It had 775m store visits and 5bn web visits.
Ikea uses a one-way path store design in which consumers will go successively into 50 different rooms which has 3 objectives: (i) wider product exposure (forced to see the whole product catalogue), (ii) false sense of scarcity (incentive to put the item directly because it will take a long time to get back to the room where it was), (iii) sense of mystery (a new room every 50 meters).
"Ikea has mastered the use of a psychological principle called the Gruen effect — when the layout of a store is so bewildering that it makes you forget the original reason you came there, leading to impulse buys."
Ikea effect: "we place a higher value on items we build ourselves, regardless of the quality of the end result".
Ikea sells food in its stores (via a Swedish food market and a bistro) for several reasons: (i) people who consume food in store tend to spend more on furnitures, (ii) it reinforces the low-price positioning of the brand (because food items are sold at cost/at loss and are perceived as cheap compared to other food options).
Ikea uses decoy pricing. It "throws a less appealing option into the mix to make other products seem like a better deal".
Sunday, Mar. 6th: Suranga Chandratillake (general partner at Balderton) wrote a post on what VCs are looking for when they invest in seed or series A. - Balderton
VCs are looking for 3 components: market, founders & traction.
Market:
30-50% of startups backed by VCs at series A fail. As a result, a successful VC investment is an investment that can payback the fund and compensate for the other failures. It implies that by default, VCs will back companies in markets which have sufficient depth to support a multi-billion outcome.
"The market should be so large that despite the fact you may only ever own (a tiny) part of it, the value of what you do will allow you to create a very large business in revenue terms".
An attractive market is also a market that is competitive or will be competitive. You should think about how to build competitive advantages to win the market and defend your position.
A market may not yet exist and may become a multi-billion market in the upcoming decades (e.g. Uber, Dataiku).
Founders:
Qualities: "the ability to sell your company and its vision, the ability to hire great people, evidence of tenacity and energy, integrity and honesty, the ability to listen but also the ability to be decisive."
Traction:
Traction is proving that there is an appetite in the market for what you're building and that you've actually started to build something.
"The nature of the traction itself (the unit of its measurement, if you will) is really something you control. [...] This is also the realm of the ‘really clever stat that is unique to us’ game where a founder has to think hard about a measure that demonstrates something in line with how important their product is to their customer or user. [...] In the early days, another portfolio company, Vivino, talked as much about ‘scans’ (of wine bottle labels) as it did about users or revenue: users who scanned a lot and in a variety of contexts were clearly embedding Vivino into all of their wine buying, drink, sharing."
Monday, Mar. 7th: New Wave shared some portfolio highlights to celebrate its 1st anniversary. - New Wave
10 investments deploying €22m (€2.2m average ticket size). €265m raised in follow-on investments (500% IRR, 3x TVPI).
5 experienced repeat founders backed.
6 rounds announced: Sweep, Sunday, Blobr, Airbank, BeReal, Yavin.
"Every single venture firm is now doing seed deals.Very few have a clear view about it, they are more like oil companies testing grounds, and it will backfire for some of them. We’re very intentional about the fact that we only do seed and that it allows us to focus on a limited number of companies on the critical path between Seed and Series A, and help them write the best possible equity story. Ask our founders."
"A lot of former operators are raising large rounds, and a lot of hype is being formed around them, but unlike repeat entrepreneurs, they still have a lot to prove, so we’re very diligent about this growing trend and try not to take shortcuts too fast."
Tuesday, Mar. 8th: Epic Games acquired Bandcamp which is a marketplace and music community to give artists a more direct relationship with their audience. Epic will help Bandcamp to expand internationally and double down on product development. Epic and Bandcamp share the mindset of offering an open and fair ecosystem for creators (game developers or music artists). - Variety, The Verge, Epic, Bandcamp
Wednesday, Mar. 9th: Protocol wrote about Uber's strategy to become a super-app. - Protocol
Uber "has wanted to build the Amazon of transportation for a few years now, and is planning to be as ubiquitous for getting around as Amazon is for shopping".
Uber launched a feature called Explore to suggest rides to your usual destinations, food that you like to orders, activities that you can do, etc.
Uber is already generating more revenues from Uber Eats than Uber Rides. Uber is leveraging its Eats business to become a more general shopping destination.
"Uber needs to be ubiquitous to win the delivery wars, so it’s trying to train users to open its app many times a day. That’s why Uber Eats isn’t a separate app anymore, and why Explore is built in as well. Uber wants to be a habit, not a utility."
Thursday, Mar. 10th: Bessemer announced that it will invest $250m into crypto projects in 3 main areas which are consumer crypto, web3 infrastructure and DeFi. It also launched a DAO called BessemerDAO which is a community for founders, creators and operators in the space. - Bessemer
Friday, Mar. 11th: AiFi raised a $65m series B with Aldi, Zabka and Verizon. It's a tech company enabling retailers to convert their stores into autonomous stores with cameras tracking people and products’ movements. AiFi's technology has been deployed into 40 stores (grocery stores, convenience stores, stadium shops) with retailers like Aldi, Carrefour or Zabka. - Techcrunch
Saturday, Mar. 12th: Yuga Labs (the company behind Bored Apes) acquired the rights behind two famous NFT collections called CryptoPunks and Meebits NFT from its creator Larva Labs. CryptoPunks and Meebits NFTs were owned by the community but the IP was still owned by the Larva Labs. With the acquisition, Yuga Labs has also decided to transfer the commercial rights linked with the NFTs to the individual holders. - Techcrunch, Protocol
Sunday, Mar. 13th: Jason Lemkin wrote about how multiple compressions in public markets will impact valuation in private markets. Fundraising has become harder for everyone. It's better to have more than 24 months of runway because it gives you the time to meaningfully grow your top-line and the world will (hopefully) be extremely different in 24 months. To be conservative, founders can assume that current multiples are the new norms and that valuation has been divided by 2 between Q4-21 and today. - SaaStr
Monday, Mar. 14th: The Paris' mayor office is going after quick commerce players. It looked at 65 dark stores and concluded that 45 were illegal because declared as commercial real estate when they're actually warehouses. Political and popular complaints are recurring against quick commerce players which are accused of competing with local Parisian businesses. Quick commerce players could overcome this 1st accusation by transforming their dark stores into omni-channel locations adding a curbside pickup option. - LSA (in 🇫🇷), Le Monde (in 🇫🇷)
Tuesday, Mar. 15th: Our portfolio company Doctolib raised a €500m round at a €5.8bn valuation led by Eurazeo with the participation of Bpifrance and General Atlantic. It started as a SaaS-enabled marketplace for doctors to manage their bookings. It has expanded its product suite with (i) a tele-health product added during covid, (ii) a productivity product for doctors called Doctolib Médecin to centralise documents, follow patients and issue invoices and (iii) a secure instant messaging platform for healthcare professionals. Doctolib is being used by 60m people in France, Italy and Germany. 300k workers and 250 public hospitals are on Doctolib. It will used the funding to grow its team from 2.5k to 6k employees over the next 5y and to pursue its geographical expansion in Germany and Italy. - Techcrunch, Tech.eu
Wednesday, Mar. 16th: Instacart launched a Shoppable Recipes feature. Its vision is to make shoppable every recipe on the internet. It's another great proof point that our portfolio company Jow is on to something with its shoppable recipe app to make your weekly grocery purchase from your favorite retailer in France (and now also in the US). Instacart is starting with a pilot with TikTok (food creators can share shopping lists) and Hearst Magazines (cooking books and online websites). - Techcrunch
Thursday, Mar. 17th: UK-based seed fund Hoxton raised a $215m fund III (fund I launched 8y ago and $100m fund II raised 2y ago). It invests at seed stage in European category creators that plan to expand in the US. It invests tickets between $500k and $5m to get an ownership between 10 and 15% and to build a portfolio of 20-25 companies. In fund I, Hoxton has 3 unicorns (Deliveroo, Darktrace, Babylon Health) and should deliver a 5-15x multiple return. It made 63 investments in total - inc. 19 in fund III. 1/3 of Hoxton's portfolio is located in Eastern Europe. - Hoxton, Fortune, Tech.eu
Friday, Mar. 18th: Getir raised a $770m series E at a $11.8bn valuation led by Mudabala with the participation of Sequoia, Tiger, Abu Dhabi Growth Fund and Alpha Wave Capital (vs. $550m series D at $7.5bn valuation in Jun. 21). It has 30k workers, 40m downloads, 1m daily orders and 1.1k dark stores in 81 cities in 9 countries (the UK, France, Germany, Italy, Spain, Portugal, the Netherlands, Turkey and the US). It will use the funding to pursue its geographical expansion in Europe and in the US. - Getir, Techcrunch
Saturday, Mar. 19th: Linktree raised $110m at a $1.3bn valuation in a round co-led by Index and Coatue with the participation of investors like AirTree, Insight and Greenoaks. It has 24m users and 40k new signups per day. It will use the funding to expand the team from 230 people to 530 people and to increase monetization beyond monthly subscriptions paid by creators to access premium features. - Techcrunch, Protocol
Sunday, Mar. 20th: Yann Ranchère (partner at Anthemis) wrote about companies "manufacturing inevitability". He argues that most venture outliers manage to reach certain achievements disproportionally early in their journey (e.g. raising more funding than what their current metrics should imply, attracting world class talents before what you would expect, etc.) which makes their successes appear as inevitable. - Yann Ranchère
Monday, Mar. 21st: I listen to a Colossus's podcast with Garry Tan who is GP at Initialized Capital. - Colossus
Before starting Initialized, Garry Tan was employee n°10 at Palantir, cofounded a YC-backed blogging company called Posterous and was partner at YC.
"One of the things that I learned from being a partner at YC for 5y was that software can remake how investment is done. [Paul Graham got] a website online where anyone could apply and [wrote] software to let a group of smart former founders figure out who the next set of founders could be."
Two key elements in Initialized's decision making: extreme speed to complete a due diligence in order to make a decision in 48-72h and "two step process of actually disagree but commit” (2 rounds of blind voting, discussion between the 2 rounds, no consensus needed, people need to be true to themselves, once the decision is over, the whole team is 100% committed to making the company successful).
"From our experience, either the best things are generally meeting the bar for consensus and obvious or they're so controversial that someone has to use a silver bullet."
"Every startup that could be a billion dollar startup is actually a Schelling point for talent. Same at Initialized. I realize that when you build a brand in VC, you get to be a Schelling point of Schelling points. We want to attract founders who then want to attract the engineers and designers and product people to go and make the self-fulfilling prophecy of a startup actually working."
Tuesday, Mar. 22nd: Coatue hired Sarah Cannon from Index Ventures to open its London-office and invest into early stage and growth stage European companies. Sarah worked in the US at Index and invested into companies like Notion, Slack, Linear, Pitch and Instabase. Coatue is planning to add more people to its London team in the coming months. - Forbes
Wednesday, Mar. 23rd: Sequoia launched Arc which is a cohort based seed investment program. Sequoia will invest $1m upfront in 15 companies that will follow a 8-week program with company building sessions on themes like "what is an outlier?", "who are you building for?", or "what is the scale of your ambition?". Sequoia is starting this program in Europe but has the intention to replicate it in the US. Applications are open to anyone. You have to fill a form on Sequoia's website and applications will be reviewed with a mix of data science and manual review. Sequoia does this because there is an increasing decentralisation of tech and the best companies can be started from anywhere - esp. in places where founders are not well connected. It's an interesting move which proves that Sequoia: (i) is extremely serious about Europe as an investment hub, (ii) wants to back European entrepreneurs at the earliest stages of their journey and not only in growth and (iii) is ahead of the curve when it comes to bringing product innovations to the venture market. - Sequoia, Techcrunch, 20VC
Thursday, Mar. 24th: Thoma Bravo announced its intention to take Anaplan private at a $10.7bn valuation. Anaplan is a financial planning SaaS and reporting tool aimed at replacing Excel spreadsheets. Thoma Bravo is one of the best PE fund focused on tech. Like most tech stocks, Anaplan's stock price has suffered during the past 6 months making it affordable for PE funds. I believe that we'll see more similar acquisitions in the next 6 months. Anaplan went public in 2018. It has customers like Coca-Cola, Shell and VMware. - Techcrunch, Protocol
Friday, Mar. 25th: Yuga Labs raised a $450m round led by a16z at a $4bn valuation with the participation from Animoca, LionTree, Sound Ventures, MoonPay, FTX and Thrive Capital. Yuga Labs is managing several popular NFT collections such as Bored Ape, CryptoPunks and Meebits. Yuga Labs wants to build a metaverse around its IP. It has released a token called ApeCoin and it's working on a game called Otherside which will be a MMORPG and which will be opened to many NFT projects. - Techcrunch, The Verge, Yuga Labs's Deck
Saturday, Mar. 26th: WeGlot raised a €45m series A round from Partech's growth fund. It's a SaaS that helps businesses make their websites multilingual by managing both the translation and the display from one language to another. WeGlot works with 60k B2C and B2B brands including Microsoft, Spotify or Steve Madden. WeGlot started in 2016. It raised a €450k seed round in 2017 with Side Capital and managed to reach €10m in ARR without additional funding which is super impressive. - Tech.eu, Techcrunch
Sunday, Mar. 27th: IFPI published its annual global music report and Spotify published its royalty report for 2021. - IFPI, The Verge, Spotify
60k songs are uploaded everyday on Spotify.
Spotify paid out $7bn to the music industry (vs. $5bn in 2020). 203k artists are generating more than $1k in recording and publishing royalties on Spotify. 53k artists generated more than $10k. 9.5k artists generated more than $100k. 1k artists generated more than $1m. Spotify considers that if you're generating more than $10k in royalties from its platform, it means that you may make a living out of your music with royalties from other platforms (est. at $40k) as well as with other revenue streams.
Over 28% of artists who generated over $10k self distribute on Spotify and over 34% of artists who generated over $10k live in a country which is not one of the top 10 music markets.
The top 10 global recording artists are: BTS, Taylor Swift, Adele, Drake, Ed Sheeran, The Weeknd, Billie Eilish, Justin Bieber, Seventeen and Olivia Rodrigo.
The global recorded music market grew by 18.5% in 2021 (vs. 7.2% growth in 2020) to $25.9bn mainly driven by the streaming segment which represents 65% of the market and which is growing at 24.5% YoY. 520m people are now paying for a music streaming service. The physical segment also grew for the 1st time in 20y. It grew by 16.1% to reach $5bn partly driven by a post-covid recovery of retail sales and the attachement to the CD/Vinyles physical object more as a collection object than a consumption object.
Monday, Mar. 28th: Instacart's top management and investors decided to self-reprice the company to make it more attractive for employees, for new private investors and for the public market. Instacart has slashed its valuation by 40% from $39bn to $20bn. It's a reaction to the stock market crash which has been especially harsh on tech stocks. It's also a reaction to difficulties that top tech companies have to recruit new employees when they appear overpriced causing stock option plans to be unattractive. Instacart is still well-funded with $1bn in cash and generated $1.8bn in sales in 2021 (20% growth YoY). - Bloomberg, Tom Tunguz
Tuesday, Mar. 29th: The Information reported that one-click checkout e-commerce startup Fast is struggling. It started in 2020. It raised $125m in total from investors like Stripe, Index, Susa Ventures and Addition. It failed to raise a $100m series C at around $1bn valuation because of a disappointing commercial traction (only $30m processed and $600k generated in revenues in 2021) and a massive cash burn (a 500-people team, $10m monthly burn). Fast is evolving in a category created by Amazon when its one-click button patent felt into the public domain in 2017 and is competing with established giants such as Shopify and PayPal as well as Bolt (which is focusing on large merchants). Fast started by targeting the mid market. It seems that Fast is now fighting for survival evaluating options such as layoffs, a down-round or an exit. We must be prepared to hear many similar stories in the next couple of months. If a startup's execution is not flawless and if raised at an unsustainable valuation in its previous rounds, it can quickly crumble when trying to raise capital at growth stage because of current market conditions. - The Information I, The Information II, The Information III
Wednesday, Mar. 30th: I rediscovered Patrick Collison's blog. Patrick is the founder and CEO at Stripe. He has a page called Fast which is listing "some examples of people quickly accomplishing ambitious things together". - Patrick Collison
"BankAmericard. Dee Hock was given 90 days to launch the BankAmericard card (which became the Visa card), starting from scratch. He did. In that period, he signed up more than 100,000 customers."
"The Empire State Building. Construction was started and finished in 410 days."
"The Eiffel Tower. The Eiffel Tower was built in 2 years and 2 months; that is, in 793 days. When completed in 1889, it became the tallest building in the world, a record it held for more than 40 years. It cost about $40 million in 2019 dollars"
"iPod. Tony Fadell was hired to create the iPod in late January 2001. Steve Jobs green lit the project in March 2001. They hired a contract manufacturer in April 2001, announced the product in October 2001, and shipped the first production iPod to customers in November 2001, around 290 days after getting started."
Thursday, Mar. 31st: Yokoy raised a $80m series B led by Sequoia with the participation of new investors Speedinvest and Visionaries Club as well as with the participation of existing investors Balderton and Leftlane. Yokoy is a spend management platform targeting mid market and entreprise companies. "The tool uses a combination of AI tools and API integrations to automate expense management, supplier invoice management, and corporate credit cards, with the ultimate goal of reducing clients’ overall costs." It has 500 customers (inc. DPD, ASK Chemicals, Bitpanda) and 100 employees. It will use the funding to double down on product development and expand into new geographies. - Tech.eu, Speedinvest
Thanks to Julia for the feedback! 🦒 Thanks for reading! See you next week for another issue! 👋