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.

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.

Robo Advisors

As you may of heard, Goldman Sachs purchased United Capital, a wealth advisory firm, for $750M cash on May 16, 2019.  Goldman Sachs provided a visual of how this acquisition fits into their existing business, see below.

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In the press release , it was mentioned that United Capital had $25B in Assets Under Managements (AUM), which got me thinking on how the digital advisory shops are doing in comparison, such as Wealthfront, Personal Capital and Betterment.  It also led me to think if this acquisition is a valuation benchmark for these companies.

I did a query on CB Insights to compare all four.

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In order to really compare all four, you have to look at AUM and number of employees, to measure efficiency.

Wealthfront Personal Capital Betterment United Capital
Headquarters Redwood City Redwood City New York Newport Beach
California California New York California
Website wealthfront.com personalcapital.com betterment.com unitedcp.com
Status Alive / Active Alive / Active Alive / Active Acquired by GS
First Funding 2008 2010 2010 2009
VC Backed Yes Yes Yes Yes
# of Investors 62 11 14 5
Days Since Last Funding 501 105 668 615
Total Funding $204.5M $312.02M $275M $38M
Valuation $500M $950M $800M $750M
# of employees 194 843 271 615
2 year employee growth rate 24% 18% 18% 18%
AUM $11.4B $9B $16.4B $25B
Digital / Traditional Digital Digital Digital Traditional/Digital

A few things stood out to me.

United Capital raised the least amount of VC dollars but has the greatest AUM.  I do recognize the United Capital is not necessarily in the robo advisor category, but I’m sure they would argue they have real technology, although they aren’t really a self serve platform, perhaps they are more of a hybrid.

All four are growing headcount at an almost exact rate, 18% to 24%, that is really surprising how uniform that is, there has to be some explanation to this, don’t have the answer for you though.

In terms of the three actual digital / robo advisors, Betterment has the great amount of AUM and has not raised additional in the longest amount of time (668 days), I wonder if they are cash flow neutral / profitable at this point.

Personal Capital has the largest number of employees and substantially more than Betterment and Wealthfront.  Having the greatest number of employees isn’t a category you want to be leading when you have a digital offering.

I wonder what the exit opportunities for the remaining private companies, who buys them, do they IPO and at what valuations?

sources of data:

Visual comparing the four:  CB Insights (paid service)

Valuation:  Pitchbook (paid service)

AUM:  website, news outlets, press releases

Employees:  LinkedIn

2 years Employees Growth Rate:  LinkedIn Insights (a paid service)

 

 

NYC vs SF startup scene

I sent out this tweet survey and got a lot of responses , so this blog post is to provide the actual answer and the underlying data.

The tldr is that NY Metro tech scene is 50% the size of the Bay Area tech scene, I’m sure you might be surprised or skeptical, just hear me out.  18% of the twitter survey respondents got it right.

The correct answer to the survey really depends on what data you are analyzing and comparing, so really all the twitter survey responses COULD be accurate , it is all about how you slice & dice it.

For the data gathering, I used two publicly available (you need subscriptions) data sources , PitchBook and CB Insights, which are my favorite tools for startup/VC information.

Now this isn’t about NYC vs SF but a bit broader NY Metro vs Bay Area, is captures the full startup scene as comparing distinct cities isn’t comprehensive. Example , there are startups in Palo Alto, Oakland and Jersey City, these are examples of other cities need to be included in a comparison.

I looked at startups and VC firms to measure the tech community.   Both the startups and VC firms had to be HQ’d in the respective regions that I’m comparing.  I wanted to look at data that was more a leading indicator (early stage companies) as opposed to a lagging indicator (late stage / public companies).   I believe that looking at early stage companies will give us a better sense of where these respective markets are headed and the potential they hold.

For the startup side, I reviewed the number of deals, the number of rounds and the aggregate amount of the funding. The time period was Jan 1st 2017 to May 9th 2019. The rounds of financing for the comparison was Seed, Series A and Series B.  In terms of sectors, it was comprehensive, so life science, energy , consumer , enterprise , etc was included.

For the VC firms , I looked at funds that were raised between Jan 1st 2016 and May 9 2019. As you may have noticed , I used a slightly longer time period (one additional year) for VC funds, as some VC firms only raise capital once every three years, so wanted to capture all the relevant funds. The funds were both early and growth stage funds, similar to companies , included all funds regardless of sector focus (or geography focus). I also looked at the number of firms, which is distinct from the number of funds, although they are obviously related.

Here is the first piece of the data, which you can see includes some bonus data with expanded time horizons on the funds side.

Here is a visual on the number of VC firms, per PitchBook:

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Here is the data on the company side, are you can see there is discrepancy between CB Insights and Pitchbook on the aggregate amount of funding but in terms of number of companies, they are similar.

Here is a visual of number of VC funded companies via PitchBook.

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So to summarize, I believe the NYC Metro scene is about half the size of the Bay Area startup scene (18% of the respondents to the twitter survey got that question right).  I have never thought that the two metro regions would be equal in size but have mentioned before that I thought NY could be half the size, I’m really surprised it happened this quickly though.

If you have any comments or thoughts, please post or hit me up on twitter @shaig.  Thanks for reading this far……

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.