Podcast Summary
Absence of venture-backed tech IPOs in 2022: The upcoming Instacart and Clavio IPOs are crucial for the market and for VCs looking to exit investments. LPs now focus on metrics like customer base and churn rates.
The IPO market for venture-backed tech companies has been largely absent in the past year, with the last venture-backed tech IPO taking place in late 2021. This has led to a significant build-up of anticipation for upcoming IPOs from companies like Instacart and Clavio. The absence of venture-backed tech IPOs in 2022 resulted in poor performances for those that did go public via Special Purpose Acquisition Companies (SPACs). Notable failures include Getaround, Grove Collaborative, and Dave. As a result, the upcoming Instacart and Clavio IPOs are crucial for the market and for venture capitalists looking to exit their investments. The pressure is on for these companies to perform well and provide a return for investors. Additionally, the focus on performance and results has shifted in the investment world, with Limited Partners (LPs) being more interested in metrics such as customer base and churn rates. This shift is likely to continue as the market recovers from the prolonged absence of successful venture-backed tech IPOs.
Venture capital market downturn and its causes: The venture capital market is experiencing a downturn due to fewer IPOs, public markets unwilling to buy shares, and founders reluctant to sell for less. Compliance with regulations like SOC 2 is crucial for securing deals in the cloud industry. Tools like Vanta can help streamline and automate the compliance process.
The venture capital market has seen a significant downturn, with both exit values and the number of exits reaching all-time lows over the past two years. This trend is due to a combination of factors, including a decrease in IPOs, public markets unwilling to buy shares, and founders reluctant to sell their companies for less than they're worth. Additionally, regulatory environments and compliance requirements can also impact the frequency of acquisitions. For businesses dealing with customer data in the cloud, ensuring compliance with regulations like SOC 2 is crucial for securing major deals. Tools like Vanta can help streamline and automate the compliance process, saving time and money. Overall, the current market conditions present challenges for both investors and founders, but also opportunities for those who can navigate the landscape effectively.
Venture Capital Shift: Fewer Funds, More Rejections: In the current market, persistence and a strong value proposition are crucial for entrepreneurs seeking venture capital funding. With fewer funds available and increased competition, it's essential to stay focused on your strategy and keep working hard.
The venture capital industry is facing a period of reduced funding due to large pools of capital tightening and LPs deploying less capital in fewer funds. This means that venture capitalists must fight for every dollar and only a small percentage of applicants will get to the deep diligence stage. Entrepreneurs, like investors, need to hunker down and be prepared for more rejections and less funding availability. The speaker, who has a large following and reaches a significant number of investors, emphasizes the importance of believing in one's strategy and continuing to work hard despite the challenges. The venture capital industry is experiencing a significant shift, and only those who are persistent and have a strong value proposition will be successful.
Venture Capital Shakeup: Focus on Performance: Amidst industry challenges, VCs must prove their worth through performance to LPs, demonstrating value and resilience.
The venture capital industry is undergoing a significant shakeup, with many founders and fund managers quitting due to market pressures. This is leading to a test of everyone's resolve, as the industry moves away from funding based on pitches and promises towards a focus on performance. The industry may have funded twice as many companies as necessary in recent years, leading to a surplus of VCs and startups. However, there is still a need for great ideas and entrepreneurs, and the game on the field for venture funds is now survival. Newer funds, in particular, need to prove their worth to Limited Partners (LPs) and show that they are here to stay. The industry's focus on performance is likely an overreaction, but it's important for venture capitalists to play the game on the field and demonstrate their value to LPs. Instacart is an example of a company that didn't disappear despite challenges, and venture capitalists need to have the same level of resilience and commitment.
Instacart's Shift from Party Atmosphere to Substance: Instacart made tough decisions to clean up operations, prepare for public markets, and shift focus from party atmosphere to substance and real numbers.
Instacart, after going through a period of significant challenges, has emerged as a company of substance, ready to go public with real numbers. The company made tough decisions, such as cutting its valuation and changing leadership, to clean up its operations and prepare for the public markets. This emphasis on substance and real numbers is a shift from the wild party atmosphere of the past five years, where things got out of control. The speaker, who is currently on a retreat and trying out a new sport, encourages everyone to embrace challenges and get "prison strong," just as Instacart has done. The tech industry can learn from Instacart's example, as CARTA, a leading venture capital and equity management platform, prepares to share news about weekend startups and the importance of building strong, viable companies.
Simplify investment process for angel investors with Carta's SPV: Carta's SPV simplifies investment process for angel investors by consolidating multiple investments into one entity, offering international SPVs, automated back-off solutions, and supporting funds at every stage.
Creating a Special Purpose Vehicle (SPV) through Carta can simplify the investment process for angel investors by consolidating multiple investments into one entity, making fundraising more efficient and effective. Carta, an investment management platform, offers international SPVs, automated back-off solutions, and supports funds at every stage of their journey. Meanwhile, Instacart, an on-demand grocery delivery company, has a valuation of $13 billion and a 2023 run rate of $2.9 billion. Instacart's revenue comes from fees captured on transactions, not the value of the groceries themselves. Instacart's shoppers, who are responsible for picking and delivering orders, are a crucial part of their business model. While the name "Carta" may not feel unique, the platform's offerings and benefits make it a valuable tool for angel investors.
Instacart's user base shops more frequently, leading to increased revenue: Instacart's monthly active users spend $317 per month, resulting in three orders and generating $740M ad revenue in 2022, despite flat gross transaction volume since COVID.
Instacart's user base is shopping more frequently, leading to increased order sizes and revenue from both users and advertisers. Instacart's monthly active users spend an average of $317 per month, resulting in about three orders per month per user. This trend is driven by the convenience of the service, especially for busy families and individuals in metro areas. Instacart's advertising revenue has also seen significant growth, with advertisers increasing from around 1,000 to 5,700 and ad revenue growing from $67 million in 2019 to $740 million in 2022, making up nearly 28% of Instacart's total revenue. However, Instacart's gross transaction volume has remained relatively flat since COVID, raising concerns about the sustainability of the business model. Overall, Instacart is capitalizing on the shift to e-commerce and advertising, but it remains to be seen if this growth can continue as competition increases and user behavior normalizes post-pandemic.
Leveraging Point of Sale for Targeted Advertising in Commerce Industry: Companies like Uber Eats and Instacart use customer data to offer personalized recommendations during checkout, increasing sales and profits through targeted advertising. Dynamic pricing or offers account for over 80% of Instacart's profits.
Companies in the commerce industry, such as Uber Eats and Instacart, are leveraging the point of sale to upsell customers and generate significant profits through targeted advertising. By analyzing a customer's purchasing history and offering relevant recommendations during checkout, these companies can increase sales and create a more personalized shopping experience. This strategy, which is often referred to as dynamic pricing or dynamic offers, has become a valuable revenue stream for these businesses, with Instacart's ad revenue accounting for over 80% of its profits. The ability to quantify the impact of these ads and offer highly targeted promotions has transformed the way advertising is conducted in the commerce industry, potentially leading to a shift away from traditional broadcast advertising methods. Ultimately, this trend towards personalized, data-driven advertising at the point of sale is set to continue shaping the future of commerce and media.
Future of Grocery Shopping: Cloud Kitchens and Direct Brand Stores: The future of grocery shopping may involve cloud kitchens and direct brand stores, increasing efficiency, lowering costs, and providing societal benefits.
The future of grocery shopping and delivery may see a shift towards cloud kitchens and direct brand stores, potentially disrupting traditional grocery stores. This model could lead to increased grocery delivery efficiency, lower costs, and a better societal impact. Additionally, entrepreneurship is shifting from retailers to brands, leading to more product innovation. Root, a real estate investing platform, stands out by building wealth for both investors and residents through a unique win-win model, allowing residents to invest their security deposits into the REIT instead.
Building meaningful relationships leads to business success: Personalized marketing efforts based on customer data can help businesses build stronger relationships, increase sales, and create a win-win-win situation for all parties involved.
Building meaningful relationships with customers and partners can lead to greater success in business, as opposed to just offering superficial incentives. The Roots program, for instance, focuses on partnering with residents from day one and helping them work towards home ownership, rather than just offering rent-to-own options with low conversion rates. Another lesson comes from Clavio, a marketing automation platform that helps businesses reach customers effectively through email, SMS, and push notifications. Founded in 2012, Clavio didn't raise any capital until its seed round in 2015, and went on to raise $778 million and become valued at $9.5 billion. The company's name, inspired by the Spanish word for a mountain spike, reflects the idea that businesses need the right tools to succeed in their growth journey. Clavio's success lies in its ability to provide personalized marketing efforts based on customer data, which sets it apart from generic email providers. By tailoring emails and SMSs to individual customers' interests and purchasing patterns, businesses can build stronger relationships and increase sales. This win-win-win approach, where businesses, customers, and partners all benefit, is a key aspect of entrepreneurship.
Tools for business growth: A win-win situation: Companies offering business tools generate revenue while customers save resources and enjoy better experiences. Founders' significant ownership stakes enable continued investment and fair negotiations.
Companies like Clavio, which provide tools to help businesses grow, offer mutual benefits for all parties involved. Clavio, for instance, generates revenue by selling its tool, while customers enjoy a better experience. Brands or businesses using the tool save resources by not having to build it themselves. Companies like Clavio, Atlassian, and Qualtrics, with high founder ownership percentages, can continue to invest in their products and keep prices the same, resulting in a win-win situation for everyone. The founders' significant ownership stakes highlight the importance of retaining equity early on, emphasizing the value of founders' equity and the need for fair negotiations when it comes to giving away equity.
Focusing on building the biggest company possible while retaining significant ownership: Founders should aim for large ownership in valuable companies but also prioritize growth, customer lock-in, and high margins to maximize value.
Building a large ownership percentage in a company, especially one with a big potential valuation, is important for founders, but they should also focus on building the biggest company possible while avoiding dilution of the cap table. Software businesses like email marketing platforms and website builders are efficient and can grow into multi-billion dollar businesses while allowing founders to retain significant ownership due to their low costs, high customer lock-in, and high margins. Negotiating prices and considering the cost of switching can also help founders maximize their value. When deciding between two companies, consider the level of competition, differentiation, and customer preference for each. In this specific context, the speaker prefers Clavio over Instacart due to its higher differentiation, customer lock-in, and potentially higher margins.
Technology Companies Expanding Same-Day Delivery Services and Copyright Infringement in the Literary World: Amazon and other tech firms build large warehouses for quick order fulfillment while authors sue over unauthorized use of their works to train language models, highlighting the complexities of tech, IP, and the open internet.
Technology companies like Amazon, which owns Whole Foods, are expanding their same-day delivery services by building large warehouses and stocking popular items to quickly fulfill orders. Meanwhile, in the literary world, authors like Sarah Silverman are suing companies like Open AI and Meta for copyright infringement, claiming their works were used without permission to train language models. These models, which can generate human-like text, have access to vast amounts of data on the web, including pirated books. While most people won't steal books, the open nature of the web and the availability of pirated content can unintentionally provide valuable training data for these models. The discovery of this data could lead to legal issues for the companies involved. It's a reminder of the complex relationship between technology, intellectual property, and the open internet.
Using Data and Technology to Create New Content: Fair Use and Authors' Rights: The use of data and technology to create new content raises questions about fair use and potential infringement on authors' rights. Some argue that analysis and creation of new products from existing works is fair use, while others suggest licensing fees could be a solution for the book industry.
The use of data and technology to analyze and create new content, such as fan fiction or book analysis, raises questions about fair use and potential infringement on authors' rights. The discussion revolves around the case of Sarah Silverman and her book, with some arguing that there's no harm if the data is not used to directly harm the author. However, others argue that new products and business models could emerge from this data, such as an AI that generates new stories based on existing works or a curator who works with the AI to create interesting fan fiction. A case was mentioned of a writer who analyzed books to improve his writing skills, and it was argued that this analysis was fair use as it did not interfere with the author's ability to make a living. However, it was also acknowledged that these fair use tests are subject to interpretation and that publishers may try to have their content removed from these platforms. It was suggested that a licensing fee could be a potential solution for the book industry, allowing access to their corpus of books in exchange for a fee. Overall, the conversation highlights the complexities and potential opportunities of using data and technology to create new content, and the need for ongoing discussions and solutions regarding fair use and licensing.
Monetizing Art in the Digital Age: A Complex Issue: Creators, consumers, and technology are evolving, work together to find mutually beneficial solutions for monetizing art in the digital age, with fair compensation and open dialogue being key.
Artists and creators are finding new ways to monetize their work, particularly in the digital age. This was discussed in relation to the use of music in commercials and marketing, specifically on platforms like TikTok. The negotiation of fair compensation for the use of music is a complex issue, with some artists seeing it as a form of legacy and inspiration, while others see it as a matter of fair value and compensation. The speaker also touched upon the importance of open dialogue and reasonable negotiation in determining the value of intellectual property. However, it was noted that not all parties involved may have a clear understanding of the ramifications of their actions, and that technologists have a role to play in facilitating fair and equitable business models. Ultimately, the key takeaway is that the relationship between creators, consumers, and technology is evolving, and it's important for all parties to be aware of the potential implications and work together to find mutually beneficial solutions.
