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

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.

shein

 

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

pton

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.

Startup Feeders

Which companies have the generated the greatest number of Founders as of today? 

If you want the tldr, scroll to the bottom, but would advise you read the post as it explains how the data was gathered and methodology around that.

The above question came to mind during the current debate as to why Amazon left NYC for their HQ2 and what the impact will be (that topic requires a whole separate blog post).  Many folks in the NYC tech community wanted Amazon to open an office here, partially as there would be a side benefit in that startups could be created by ex-Amazon employees (Amazon planned to hire 25K+ people in NYC, they have 8K+ currently based in NYC).   This perspective led to me to dig into some data to see if Amazon does generate startup Founders and if so, how many and what scale?

All the data came via Linkedin, through their advanced query.  In the query, I created a few filers:

Title: Co-Founder or Founder.  I wanted to know which individuals indicate that they are CURRENTLY Founders.  This doesn’t include people who were Founders at some point and are now doing something different.  It also doesn’t specifically filter for if they are a Founder of a tech startup or not.  While most of the people who are captured are likely tech Founders, some might be Founders of VC firms, consulting firms, non tech companies, etc.  I specifically didn’t want to search for the title “CEO”, as some CEOs are not the Founders of the companies they are currently leading.

Relationship: 1st Degree Connections and 2nd Degree Connections. Majority of my LinkedIn connections are VCs, Founders and tech operators.  I only captured people in my more immediate network.  If you are a startup Founder, the odds that my 1st and 2nd Degree connections having not connected with a tech Founder via LinkedIn is pretty low.

Geography:  San Francisco Bay Area, Greater Seattle Area and Greater New York City Area.  I only wanted to look at three geographies.  The only reason I included Seattle, is that I wanted to understand what impact Amazon has had in terms of generating Founders in Seattle, as a way to benchmark Amazon vs other large tech companies that are HQ’d in SF Area and NYC Area.

Company:  I only looked at PAST companies.  Obviously, it is hard to be a Founder of startup and work at another company.  I looked mainly at some of the large tech companies out there, I feel like it is pretty inclusive of most of the companies that have generated startup Founders.  I didn’t query the most recent past company (not sure if that is possible), meaning this data captured people who most recently worked at Facebook or worked at Facebook several jobs ago.

A few disclaimers:

  1.  I realize that the data doesn’t look at “successful” startups.  I understand why that is interesting but it is less relevant for what I wanted to accomplish.  I would add the word successful can be interpreted in various ways.  In addition, if you did look at successful Founders, it is a lagging indicator of which companies used to generate successful Founders and doesn’t necessarily mean they will create successful Founders going forward.  That being said, if you decide to pull this data, it would be an interesting blog post, so encourage you to do so.
  2. These large companies didn’t necessarily “generate” these Founders.  “Generate” was a word that best fit what I’m trying to accomplish, but please don’t get hung up on it.  These individuals simply worked for these companies in the past.  That being said, there could be some credit given to these companies for helping create Founders.
  3. To reiterate, some of these Founders are not necessarily working on tech related startups.

A few key observations (I have a bunch but wanted to limit it for the sake of brevity):

  1. regarding Amazon.  If you look at the Seattle column data, they grossly underperform Microsoft in terms of startups Founders, 812 vs 223.  I assumed the two would be pretty close.  On a more positive note, Amazon faired decently in NYC, which was surprising.  Between Seattle, SF and NYC, they only had 475 Founders in total, that seems really low relative to how large that company is and how long they have been around.
  2. Goldman Sachs!!!  Wow, I didn’t expect them to have that many Founders.  There were #1 in NYC and did well in SF too.
  3. IBM did surprisingly well in SF , NYC and Seattle.  Didn’t see that coming but they do have over 500K employees, so the odds they generate startup Founders is high.
  4. Seattle is really a two company town when it comes to Founder creation.  Microsoft and Amazon.  I didn’t expect anything different.  Over time there will likely be more balance as there are some interesting late stage startups that will generate Founders in the next decade.
  5.  SF has a strong concentration with 10 companies that really outperform in terms of startup generation.  In comparison, NYC seems to have a longer tail of companies that generate Founders, I think that is more healthy for a tech ecosystem.  This partially supports my argument that Amazon leaving NYC isn’t going to make a big impact in terms of future startup formation.
  6. Facebook??  I really expected a much higher number from them, that was quite the shock.  I can foresee people making the argument that Facebook Founders are better than other tech company Founders, maybe, don’t have that data but from an absolute number, that is really low.

 

Slack $7B valuation

As you may of heard, Slack is supposedly raising a $400M equity round at  a$7B valuation.

I wrote a blog post about Slack’s last announced valuation in 2016, when it was $3.8B.  The tldr was that if Slack was a public company, it would be trading a 42x revenue run rate.  In that blog post, I referenced the Bessemer Cloud Index, which provides perspective on what enterprise saas public companies are being traded at.  The median revenue rate for these companies is 8.5x, but those public companies are growing at a much slower pace, so it was expected that Slack would earn a large multiple.  That being said, I thought 42x was a bit rich.

In the article mentioned in the first sentence, the had a chart: Slack has indicated they have 3M+ paid users, see below.

slack-growth-2018-stacked (1)

Per Slack pricing page,  they charge between $6.67 and $15 per paying user per month.

So, based on 3M paying users, they are between $240M  ($6.67/user/month x 12 months x 3M paid users) in annualized revenue run rate and $540M revenue run rate.  If you split the difference, lets assume they are a $390M annualized revenue run rate.

If you take the valuation of $7B and divide it by $390M, they would be trading at 18x annualized revenue run rate.

I think 18x is a fair valuation given their grow rate, although Slack paid user growth is slowing, which is expected as the company gets larger.  The closest public saas comparison I would find is Shopify, which is trading at 17x annualized revenue run rate.

THE END.

 

Top 10 Startups in NYC , Q1 2017 edition

“who are the best startups in NYC?”….I get this question a lot.

It is very hard to quantify an answer, usually is based on some anecdotes but rarely is it a data driven answer.  One way to quantify this is by utilizing information via Glassdoor  If a company is highly ranked on Glassdoor, it should indicate that the employees overall are happy campers.  If you have happy employees, there is a strong likelihood that customers are happy, which usually means $$$.   I have not researched whether or not, there is a strong correlation between happy employees and company success, but intuitively I think it makes sense, if you disagree, please let me know.

In any case, here are my top 10 startups in NYC, would love to get your thoughts.

In no particular order:

  • Seatgeek
  • Apprenda
  • CB Insights
  • Boxed
  • Datadog
  • Hightower (now VTS)
  • InVision
  • Kemp
  • Justworks
  • BounceExchange

These companies met ALL of the parameters below, again the data is from Glassdoor:

  • HQ’d in NYC
  • At least 20 reviews provided by current/previous employees
  • At least a score of 4.7 (out of 5)

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Make America Great Again ?!

As you know, this is Trump’s slogan.  What does he mean exactly when he says this?  When was America great?  When did we lose our greatness?

Make America Great Again…like when we took the land (& killed) of the indigenous population?

Make America Great Again….like when we enslaved (& killed) Africans?

Make America Great Again…like when the South was willing to lose the lives of over a million people in the Confederacy to protect the slave economy?

Make America Great Again…like when we dropped nuclear bombs on Japan?

Make America Great Again…like when our schools were segregated?

Make America Great Again…like when over a million people were killed in the Vietnam war?

Make America Great Again…like when civil rights leaders were being assassinated?

Make America Great Again…like when women weren’t allowed to vote?

Make America Great Again…like when we went to war with Iraq?

Make America Great Again…like when police killed over 1,000 people in 2015?

There are a lot of great things about America, but we are not great (yet) but are getting better over time.  We continue to iterate as a country, which is the greatest thing going for us.  Our past is painful, let’s never forget it but learn from it and build towards a better country. 

 

 

 

Summer Internship 2016

Update on 1/29/2016:  I am currently reviewing the submitted emails and will respond by Feb 15th if we want to move forward with an interview.

 

We (SVB) are seeking an amazing intern for the Summer of 2016.

The past interns that I’ve hired have gone to do some interesting things in the startup/venture community:

  • Kevin Carter, who subsequently joined SV Angel as an Associate and is now a Partner
  • Chaz Flexman, who subsequently joined SVB full-time, then worked for A16Z and now is VP of Strategic Relationship at PCH International
  • Thomas Knowles, who subsequently joined the SVB venture arm and is now a Partner at Gratitude Railroad (a VC fund in Utah)
  • Dimitris Kouvaros who subsequently and recently became a Director at Newark Venture Partners (a new VC fund / Accelerator)

Here are the characteristics that she or he must possess:

  • PASSION for the startup community
  • Articulate (both in writing and presenting)
  • Takes initiative
  • Hard worker
  • Have an opinion (let me know which sector(s) you are excited about)

If this sounds like you and can clearly demonstrate the above characteristics, please send me an email at sgoldman at svb.com.  In the subject line, use: 2016 Internship.

A few key points to highlight:

  • This is a paid position (~$15 / hour)
  • Ideally, the candidate is currently a Freshman, Sophomore or Junior
  • Start date would be around June, flexible depending on your class schedule
  • Could be either full-time or part-time
  • Position is based in NYC
  • Ideally, the candidate lives in NYC, in case we would like to extend the internship beyond the summer
  • You get to work directly with me 🙂
  • All the work you will be doing is squarely focused on data/metrics regarding the startup/vc community.  A lot of ad hoc projects around venture funding/activity, sector analysis, portfolio reviews, assisting with blog posts, working with CRM, etc.
  • I will review applicants emails in January and will make a final hiring decision by the end of February

 

About SVB:

In short, we are the leading global commercial bank for entrepreneurs and investors.  A more detailed overview is provided below.

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Start Small

A little more background on my recent tweets, see below.

I recently had a conversation with a VC who is in the process of raising his 1st fund.  My suggestion was to start small, acknowledging that management fees would likely be minimal or close to nothing.  The benefit of starting small is that the fundraising process will likely be slightly shorter and slightly easier (although it is never SHORT or EASY).  Institutional LPs want to see how you can manage a fund, so that faster you get started and show a track record, the faster you can have a chance of raising from those big LPs.  Many funds have shown the ability to start small and then raise significantly larger funds in a handful of years.

I also threw out the idea of…hold you breath…not charging any management fees on the first fund (i.e. no salary) but with a pre-negotiated amount of draw to cover non-salary costs.  I know this is shocker for some, but several managers have done this.  The trick obviously is how do you pay your bills with no salary?  Some had savings that carried them over for a few years, some had a significant other that helped them cover their living costs and some did consulting on the side.  Hard to pull off, but can make the fundraising process even faster if you are looking to optimize for speed.

Related, here is a post by a Charlie O’Donnell of Brooklyn Bridge Ventures, who raised an inaugural $8.3M fund and outlines the economics of his fund  http://www.thisisgoingtobebig.com/blog/2014/5/12/the-economics-of-a-small-vc-fund.html

Also a post by Notation Capital, which raised a sub $10M inaugural fund and how they capped their fees https://medium.com/@NotationCapital/a-million-dollars-in-fees-762009db0cc8#.uh0xauv93

 

How Do I Rebuild My Twitter Feed ?

One of my new year resolutions was to nuke my twitter feed.  I was following about 500 people and I unfollowed all of them.

Rebuilding you twitter list takes some time, but here are the steps that I took to rebuild my list:

  1. Go through my DMs, which is any easy way to refollow people who are important for me.
  2. There are about ~50 people that I can easily remember to follow again.
  3. Use SocialRank – this awesome service gives you insights on which of your followers you should follow and who you interact with the most
  4. I go through my mentions area to see if there are some people that I should follow that I recently engaged with.
  5. I ask people who I should follow.   See this as an example.

Within a few days, I rebuilt my feed with about 250 people.  About 50 of those are people I didn’t follow before.

If you have any tips on this, please let me know.