What is happening?

As of May 9, 2020, there are over 276,000+ dead people worldwide from the Cornavirus / Covid-19, 78,000+ of those deaths are in the US and numbers are still climbing with no end in sight.

Unemployment in the US is over 20% and increasing, with over 30M people out of work.

There isn’t a vaccine for the virus, there is a lack of rapid testing, a shortage of masks/PPE and continuing shortage of Lysol/disinfectant on store shelves .  There is no clear picture as to what the new normal will look like or a real plan on how we deal with the virus in the US.

Despite all the horrific news that is impacting millions of people, the US stock market (Dow and Nasdaq) have rebounded (for now) and many companies are performing well.  It has been challenging for me to reconcile what is occurring in the public markets with what is happening to Americans (and global population), it just doesn’t make sense to me.  How can the stock market go up with all this carnage?

Over the past week, it has become more clear to me why there is a disconnect between the reality we are living and why many stocks have rebounded quickly.  I’m not a public markets expert at all but I do know that a driver of the market has been digital acceleration across many facets of our lives.  I arranged a presentation, primarily to gather my thoughts and it is more of storyboard for personal consumption, so it isn’t perfectly formatted but wanted to share with others as I think some will find it interesting.  This is a working document for me, so will likely be adding data/charts/quotes as time goes on.  If there are other quotes, stats, charts that are relevant to this presentation, please let me know via comments below, twitter and/or email.

Plaid, the non-obvious unicorn

If you follow the fintech/VC scene, there was a huge exit announced yesterday evening, Plaid was purchased for $5.3B by Visa.  There are some really interesting facts about Plaid that should be pointed out.

The Founders, Zach Perret and William Hockey, didn’t go to Stanford/Harvard/MIT/etc or worked at Facebook/Google/etc.  People love to do pattern recognition when picking Founders, but the Founders went to Duke/Emory and were consultants at Bain, great places but not what many VCs consider “top tier”.   If you talk to folks in the Bay Area, consultants is like a four letter word, eeck.

They only have 450 employees.  Much of the headcount was added over the past two years, see below.  You don’t need to have bloated company to create enterprise value, more isn’t better.

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When the Founders started the company in 2013, fintech was NOT a hot sector, see funding history below.  The fintech startups that were considered “hot”, were mainly consumer facing, not those that were B2B and working with banks, which is what Plaid does.

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It was great to see Spark Capital, the first firm to lead a round in the company, give recognition to their departed colleagues, Mo Koyfman and David Haber.  You don’t always see firms doing this.

Kudos to the early investors for making a contrarian bet and returning a lot of money to their LPs.  Per Pitchbook:

“The company raised $2.8 million of Seed funding led by Spark Capital on July 31, 2013, putting the company’s pre-money valuation at $10 million. Amit Avner, Benjamin Cirlin, David Tisch, Nat Turner, Spark Capital, Google Ventures, New Enterprise Associates, Felicis Ventures, Homebrew Capital, Box Group and Zachary Weinberg also participated in the round.”

I don’t know the Founders, but folks say a lot of great things about them and while I take Glassdoor ranking with grain of salt, the employee feedback has been very positive, maybe you don’t have to be an @$$hole to be successful.

The success of Plaid is a boom for the fintech startup scene, which has been yearning for some exits, I expect to see more large exits in this space in 2020.

Side note, I had Plaid speak at a fintech conference I hosted in 2015 in NYC, the lineup was pretty killer IMHO

Bushwick > DUMBO

On Friday, I went out to visit Bushwick, which is a neighborhood in Brooklyn, NY.  Since moving to NYC nine years ago, I’ve only been to Bushwick three times, so I’m definitely not an expert on what is happening there but I am more excited about the opportunity after this visit.

I sent out a tweet on Friday, which essentially said that Bushwick is going to be a better startup scene than DUBMO, another neighborhood in Brooklyn.  When I moved to NYC,  DUMBO had a lot of energy, buzz and momentum as a emerging startup hub.  A lot of folks were very bullish on how the startup community would play out there, I didn’t think it has met the expectations for a few reasons.

One, DUMBO has become very expensive to live, so if you are looking to attract startup talent, it is hard to reside there (2 bedroom condo starts at $1.8M).  The surrounding neighborhoods are getting expensive too.

As Jay-Z said :

“Wish I could take it back to the beginnin’
I coulda bought a place in Dumbo before it was Dumbo
For like two million
That same building today is worth twenty-five million
Guess how I’m feelin’? Dumbo”

DUMBO is a great neighborhood, partly given the spectacular views as it is perched on top of the East River;  the views of the sunset, various bridges, Manhattan, New Jersey, Statue of Liberty, etc are amazing.  This leads to the second point, DUMBO is limited on how it can expand from a real estate perspective given the river, the bridges and parks nearby.  Third, access to the neighborhood is a bit limited given its location and available subway lines, served primarily via the F line.  DUMBO has had a lot of success, so not a knock on them, it just didn’t deliver on the hype that many built up.

Lets me highlight why I’m excited about Bushwick.

One, it has some nice wind in the sails on the tech side, which is primarily driven by crypto related ConsenSys being HQ’d there, they have 150 people working there and a lot of tech people have visited the neighborhood to visit them specifically.  The jury is out on what ultimately happens with ConsenSys, as they betting on Etherum ($ETH) blockchain, but that is separate topic and blog post.  In addition, there is a lot of potential on what the Bushwick Generator is working on, check it out.  A big driver is that Netflix is building a huge production studio, over 161,000 square feet, in the neighborhood, which is going to be a boost for media startups or for startups selling technology to studios.   Bushwick has a ton of manufactures, many of which will likely move or close, which will provide a lot of available commercial real estate, especially if more rezoning is completed.  Similar, on the residential front, there is a lot of development happening and is a lot more affordable than DUMBO.  Access to the neighborhood via the L line makes it a lot more accessible for people coming from Manhattan or deeper in East Brooklyn (L line serves 300K people every day).   The surrounding neighborhoods are a good feeder for creative talent, primarily Willamsburg and Bed-Stuy.  There are lot of great ingredients in the neighborhood, lets see if they can cook up something special.

A side note, Bushwick might be the best location to get people from other neighborhoods that don’t know about the thriving tech community in Manhattan.   Would love to see marginalized , low-income, minority community integrated to what is brewing on the tech front in the neighborhood.  If the Bushwich tech can deliver on this, they build something really special.

 

Fast Fashion, all in on SHEIN

I’m not the most knowledgeable person regarding fast fashion, it helps to be married , as I get to get a peak on some brands that are new to me but might be well known to some already.

H&M is really that only fast fashion brand that I’ve personally shopped at,  I’ve gotten a a bunch of items at their physical retail shops and have been pleased with the quality relative to the their price points.  They always have new products and I feel “cool” shopping there, makes me a little more hip..I think 🙂  As a side bar, the only clothing I buy online are Cole Haan shoes, Nike shoes and Bonobos.  I have yet to get into a fast fashion site…

On the women’s side, there seems to be a lot more happening, which makes sense, given most women are more into fashion than the typical male.  Fashion Nova is one that many folks know about, but I only became aware of them earlier in 2019, given my wife has gotten some pieces there and also helps the Cardi B is reppin them as well, she has her own collection there.   My Wife also bought some items for me, I wasn’t aware they have a men’s line but they do but the focus of the company seems to be on women.

The newest brand that I’ve come across is SHEIN (again, thanks to my Wife), which is known for women’s clothing but they have men’s & kids clothing as well.  I took a look at their mobile app and it well done and bought something on there to understand the flow of the app, user experience, notification and delivery.  I’ve also looked in the company a bit more, in terms of where they are based on who owns them.  They are based in China , although the CEO , Chris Xu, seems to be based in the UK.  Company was started in 2008 and did a Series A round in 2015, led by IDG Capital and Jafco, I think both investors are going to do really well on this company.    Thanks to data from Pitchbook, they have a “signals” area on company profiles, see below, I think that I’m on the right track here:

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From a user experience, the mobile experience is well done, in terms of search and size filtering.  The order flow is great, love that they integrate with Apple Pay, which is my favorite and fastest method to purchase items.   Side note, the Nike SNKRS app was the first time I used Apple Pay to pay for something on an app, super slick.  One of my favorite items with the SHEIN app is the tracking of your purchases, it is integrated into the app.  Typically, when you want to track a shipment, it hyperlinks you to another site such at UPS, to see where the product is, that isn’t the case here, see screenshot of an example, very granular.

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If you are developing a mobile shopping product , you should definitely check out SHEIN for ideas.

I’m long fast fashion, I’m long SHEIN, I’m long Apple Pay and long mobile shopping apps. (This is more figurative than literal, as I don’t own shares in any SHEIN)

 

Peloton Social $PTON

If you follow me on Twitter, you know that I’m a big fan of Peloton and share screenshots after my rides and give a shout out to the instructors as well.

 

I’m also a big fan as they are NYC based and I’m a huge cheerleader for what is happening in the local tech community and their IPO in 2019 was a major milestone.  BTW, stock is trading really well right now and at a $8B+ market cap $PTON

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The one area where Peloton could generate more value and customer lock-in is via social.

First, lets discuss customer lock-in.  Peloton is facing competition from legacy players, who also want to put a tablet on a stationary bike, I mean, how hard can that be?  “tablet on a bike” is how many Peloton doubters would describe the company and in some ways they are right.  However, they have a few things going for them that is creating a bit of customer lock-in.  They have done a good job on gamification, in term of badges, primarily on milestone rides, such as your 50th or 100th ride.  Many hard core Peloton fans, will actually fly to NYC, just to take their milestone ride in person at the Peloton studio and the instruction will give them a public shout out to the rider for the milestone ride.  This goes a long way for riders and provide some lock-in as you are going to lose your milestone badges if you hop to one of their competitors.  Another lock-in for now, is the specific instructors that have a big following, it is sticky for many riders as they are loyal to that instructor.  I say for lock-in for now in that instructors could jump to a Peloton competitor but we haven’t seen that as of yet, from I understand the high profile instructors have some financial incentives built in to stay a Peloton.   Anyhow, the milestone badges and instructors have created some lock-in.

The other area where lock-in could be created and might be the most sticky is social.  As of now social has been a major afterthought for Peloton, at least that is how I feel as customer, I don’t know their roadmap.   The social aspect is very basic, there is the ability to follow people and for others to follow you.  You can look people up their Peloton username but the interface is clunky and searching by name doesn’t provide good results.  The upside of following or having followers is that if you are taking a Peloton class, you can see who else is in the class with you but the odds of that happening is pretty slim as people I know live in different timezone and I’m almost never riding at the same time as someone I know.  Perhaps if I followed more people, the chances of serendipity would increase but again, adding people to follow isn’t that easy.  If I’m riding at the same time as someone I know, we can do a virtual high five, that really is the only interesting thing about the social component of Peloton as of now.

However, I believe Peloton can unlock several billion dollars of value and create higher customer lock-in by really focusing on some social components that are non-existent as of now.    Peloton users love talking about how they have a bike and also discuss specific instructors they like, it is a really a great conversation topic if you know someone that has one, there is a lot of passion around that.  The question is how you take the real world discussion and passion and put it online.  The opportunity is massive, no one has created a massive social network around working out, there are folks who have tried such as Fitocracy, Runkeeper and MapyMyFitness to name a few; they had some level of success but not at a massive scale.   I believe Peloton riders would want to get together IRL (in real life), so a geo based network is possible.  The riders could be single people, who want to find someone to date that is like minded, is into fitness and as mentioned earlier, Peloton is a real conversation starter.  As a Dad in the suburbs, I can see meeting other Dads who are into Peloton, same would go for Moms I believe.  Even if I don’t connect IRL with other Dads in the my local community, I do want to compete with them on rides, so a leaderboard for Dads in my town would be something that I would sign up for , I love competition and so do others.  I also want to be able to create a leaderboard around age, I’m 41 years old and want to see other people who are a similar age and see how hard they are working out, it’s a motivation #DadBod 🙂   There could be a benefit to Peloton for a geo based social network, as an example, if there is critical mass in a particular region/town of people are really engaged socially on Peloton, they could decide to put a studio in town, as their is a social element to sweating together with a friend IRL.

Now, I do want to acknowledge that adding social elements, is opening a can of worms around privacy (age, location, gender, etc) and could result in bad behavior by the company and its customers, see Facebook as an example.  Perhaps Peloton doesn’t want to open that can of worms, it could be a dilemma for them, I don’t know.

There is a massive financial opportunity for Peloton and benefit to their customers, if they do carefully unleash some interesting social features.  Long $PTON.

Long LinkedIn $MSFT

I took a look at my last blog post to see where the traffic was coming from, given that I shared the link on these three networks:  LinkedIn, Twitter and Facebook.

As you may know, I use WordPress for this blog and there is some great analytics in terms of which channel traffic is coming from, what countries your visitors are coming from, which hyperlinks are most popular, etc.

To my surprise, the majority of the traffic came from LinkedIn, responsible for 55% of the traffic.  A distant second was Twitter with 11% and lastly Facebook with 6% of the traffic.

Within the tech community, LinkedIn it is the butt of many jokes, I’m guilty of some of this myself 🙂 .  However, I know a lot of professionals who use LI to recruit, hire, perform diligence and source companies, many of the best feature are of those paying for their premium services.  I would add that if you are creating content, don’t overlook this channel for distribution.

I’ve been spending more time on LinkedIn feed, it’s really focused on business, so can see what my clients and tech folks are thinking about and sharing.  The other social networks can be very noisy, the focus on business provides some good signal, despite all the “influences” and “visionaries” on there 🙂

Reminder, Microsoft purchased Linkedin for $26B in 2016, thankfully, they haven’t screwed it up and actually, it has gotten better from a user perspective.  I hope MSFT  ($1.2T market cap) continues to put resources into this platform, there is still a lot of upside.  BTW, since MSFT purchased Linkedin , stock is up 217% !

One feature that I recently discovered is people that “follow” you on LinkedIn, it’s a bit buried on the site, here is a link to it, this is what it looks like.  There are mainly people who I’m not connected to but they want to see my content.

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9 years in NYC

My wife (and two dogs) moved to NYC from the Bay Area on Jan 4, 2011.  I remember arriving in NYC, after a large snow storm, the streets were will filled with several feet of tall snow banks, it was a very different living environment than the warm Bay Area.

In mid 2010, when working out of the offices on Sand Hill Road in Menlo Park, I convinced my boss at the time that NYC was going to have an exciting startup scene and that I wanted to be part of it and that is would be great for the organization as well.  At the time, the SVB NYC office had a small team on the ground, around 7 or 8 people, now there are over 120.

Nine year later, the data via CB Insights highlights the momentum of the local startup scene over the past nine years.

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I didn’t anticipate that the NYC would be THIS robust when I moved here, but I’m glad it is.  Moving here was a sound decision, both personally and professionally.   There continues to be a lot of upside for the local scene and I expected the numbers to continue to go up over time.

Why NYC?

The Primary NYC Summit has been a reminder to think about why NYC is a great and unique place to start a company, let me lay out seven reasons.

Diversity:  NYC is the most diverse city in the country.  I would argue it’s one of the most diverse cities in the world.  There are 8M+ people in NYC, 20M+ in the metro area and over 800 language spoken in NYC.  3.2M of the 8M people in NYC are born outside of the US.  Truly unique.  The exciting opportunity is that only a small sliver of people living here are involved with tech startups, a lot of upside in terms of building awareness, training people and cultivating entrepreneurs in communities that aren’t yet involved.

Customers:  Manhattan (a smaller part of NYC) has the highest concentration of Fortune 500 companies in the country.

Funding:  some of  the big investors in the world are HQ’d here:  Insight, Tiger, Goldman Sachs, Blackrock, KKR, Blackstone, General Atlantic, Coatue, Apollo, Warburg Pincus, Deerfield, Providence, etc.  The past few years, many outside firms have added people in NYC:  GGV Capital, NEA, Battery, General Catalyst, Wellington Management, NextView, Flybridge and soon to be named firm (to be announced soon).  There are more VC dollars being invested here than any of these cities:  Boston, Los Angeles, London, Paris, Berlin, Tel-Aviv, etc.; NYC is only behind the Bay Area and Beijing.  The best VC firm in the world, Sequoia Capital, is the most active non-NYC based firm investing here.

Healthcare:  there is a huge opportunity for healthcare related startups.  There are many customers to sell into:  patients, physicians, hospitals, medical schools, pharma companies, etc.  Flatiron Health was a massive $2.1B exit.  Oscar is getting a ton of momentum, $3B+ valuation and almost 1,000 employees.  Capsule just raised a $200M.  A sleeper company, Komodo Health, is a firm you should be tracking.  Wet/dry labs are being set up in Manhattan and Brooklyn, J&J , Alexandria , etc.  .  Deerfield and Columbia struck a big deal.  One of the best life science investors is HQ’d here, OrbiMed.  In addition, New Leaf, Versant, Lux, Aisling, Venrock, Canaan, Oak HC/FT are also in the metro area.

International magnet: Founders from Europe and Israel are moving their offices here , more so than other regions such as Boston and Bay Area, which is where they historically moved.

Industries: many of the largest industries have a large presence here:  retail, food, marketing, advertising, legal, healthcare, financial services, media, education, government, etc.

Most Active Bay Area VC in NYC ?

I sent out this tweet and poll, here are the responses per the crowd of 255 people:

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The crowd was wrong but all four are very active in NYC.

As you are likely aware, the NYC tech ecosystem is on fire and many Bay Area VC firms are actively investing in the region.  Many firms from outer regions have opened an office in NYC the past few years, including NEA, Battery, General Catalyst and most recently GGV Capital.  We are going to see more non NY HQ’d VCs opening offices here.

For the purpose of this exercise, I only researched firms without an office or full time person in NYC.  The time frame of the investments occurred between Jan 2018 and Sept 2019.  These include new investments and follow-on investments.

Below are the results per a query on Pitchbook.

I will caveat this that GGV Capital also had 17 investments during this period, I excluded them as they didn’t meet the criteria mentioned above as they recently had a team member move to NYC.

Sequoia led the pack with 17 investments, second was Forerunner with 14.  Both firms are HQ’d in the Bay Area.

In terms of firms from other regions that are active in NYC, they include F-Prime , which had 13 , followed by Accomplice and Polaris with 12.  All three of these firms are HQ’d in Boston.

Another caveat is that there are a lot of seed investors outside of NYC that are active here but on many occasions those rounds are not disclosed publicly or in regulatory filings, so there are firms that should be on this list but didn’t make the cut since Pitchbook doesn’t have their data.

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Bernie Sanders vs Elizabeth Warren – college forgivness plans

Today, June 24 2019, Bernie Sanders unveiled a new plan to eliminate college loans.  Elizabeth Warren unveiled her plan on April 22 2019.  The point of this post is to highlight the difference in their plans and also communicate my issues with them.

A few disclaimers:

  • I’m a Democrat
  • As of today, I’m favoring either Elizabeth Warren or Kamala Harris for the nomination for the 2020 Presidential Election.
  • I wouldn’t say I’m anti Bernie Sanders, but I don’t believe he should receive the Democratic nomination.
  • I graduated with $25,000 of college debt and made $37,500 in my first year out of undergraduate school.  I attended a private school, Santa Clara University and a public school, Foothill College.  I received grants and scholarships for both schools. I am a GenX white male.  I’m explicit with these facts as there could be biases to my argument and perspective.
  • I do believe in SOME college forgiveness and REDUCED tuition for public schools.  I don’t agree with wholesale forgiveness and completely free tuition for public schools.

Initially, I want to communicate my key issues with both their plans.  First, the corporations who have made the most money in the high education market are coming out unscathed and have no liability/accountability.  That is the core issue for me.  Private universities, financial institutions who lend money to students , textbook companies and loan servicing companies should all contribute a meaningful amount of money if we are to forgive some loans and make public schools more affordable.  The facts that both their plans totally skip these core players is either a lack of oversight , lack of imagination and/or they favorite these corporate players.  It is unacceptable and a non starter for me to support either plan.

Secondly, the ideas they propose don’t address MY core systemic issues with universities.  The curriculum is outdated and does not prepare most students for real world jobs.  There should be no tenure for professors, it enables laziness, lack of accountability and outright malpractice.  Our students today are not taught what they need to know to complete in a global economy and the professors who are teaching them are out of touch.  There are blanket statements that apply to the majority of universities and professors.

Third, there is no reason why schools should be structured as four year institutions.  You can learn core skills in two years or less.  Reducing the number of years of school, will also reduce the total costs that individuals and/or corporation will need to pay.  This point also ties to how schools are accredited, which is a topic that I’m not an expert on but I believe the process is flawed and needs to be restructured.

I can not take either of their plans seriously unless they address the three points outlined above.

Below is a google document that outlines their specific plans and how they compare:

I do favor Warren’s plan as it caps the amount of forgiveness and dictates who is eligible.   The cost is $640B compared to Sanders’ $1.6T plan. If you make a decent amount of income, you should be able to afford some of you tuition costs.

Would love to hear your feedback, comments are open.