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  • Jacqui 02:30:26 on 2016-08-09 Permalink  

    Splashy Cashy: Deep Stack M&A in Silicon Valley 

    [ Disclaimer: This piece is pure speculation on my part, with just a little input from folks who voted on and responded to this tweet storm. I obviously haven’t spoken to the founders of any of these companies, nor would they tell me if they were considering selling (obviously). ]

    If you’ve ever played poker you know that a player’s ‘stack size’ — the value of the chips they have in front of them — can deeply impact their behavior in a hand.

    [ Click to Tweet (can edit before sending): http://ctt.ec/0Z7xR ]

    When playing poker at the $1-$2 game, where the bet sizes are very small, you’re going to play differently depending on if you have $5,000 or $50 in front of you.

    Every hand matters when you’re short stacked, but very few hands are material when you’re deep stacked, as you have the luxury of playing a lot of hands or waiting on the sidelines.

    Tech companies that are wildly deep-stacked right now:

    1. Apple $200b+ in cash/equivalents, $593B valuation
    2. Google $75b+ in cash/equivalents, $551B valuation
    3. Amazon $16b+ in cash/equivalents, $366B valuation
    4. Facebook $23b+ in cash/equivalents, $362B valuation
    5. Microsoft $105b+ in cash/equivalents, $457B valuation
    6. Cisco $60b+ in cash/equivalents, $157B valuation

    Those six companies have $470b+ in cash/equivalents and $2.5t in market cap.

    Zuckerberg has been the master of acquisitions in the past couple of years, having the audacity to pay $22b for WhatsApp and $2b for a *pre-customer* Oculus. Think about that for a moment. Zuck paid $2b for a company without a market, and that may take a decade to have 100m users — if that ever happens!

    And look what just happened. Unilever, GM and Walmart just sat down at the big game and shot the locks off their wallets:

    1. Unilever bought Dollar Shave Club for $1b
    2. GM bought Cruise for a rumored $1b+
    3. Walmart is buying Jet.com for $3b
    4. Verizon is buying Yahoo for $4.83b

    … and let’s not forget that Bob Iger is absolutely the greatest acquirer in the business, with Disney buying Star Wars, Marvel & Pixar for a paltry $15.45b — combined! He also bought MAKER, which was probably worth the $500m for the education.

    Who’s Next?

    In looking at the market, I made two lists: the most desirable companies for the deep stack players to own, as well as the startups that I hear (publicly and privately) are most likely to sell over the next two years.

    A smart person told me one time, “great companies are bought, bad companies are sold.”

    The Six Most desirable companies for big stack players to buy, but who are not likely to sell:

    1. Netflix ($42b market cap, ~$8b in 2016 revenue)
    $8b in subscription revenue, a growing library of quality IP & international ambitions make Netflix a no-brainer for Apple, Amazon and Google. Given Disney sells into Netflix, and they own the best IP in the world, it doesn’t make much sense for them to overpay.

    2. Uber ($68b valuation)
    As an Uber shareholder I shouldn’t — and wouldn’t — speculate, but according to my Twitter poll y’all thought that Google should buy them (27%).

    3. Tesla ($33b market cap, ~$4.8b in 2016 revenue)
    I speculated back in February 2015 that Apple should grab Tesla for a host of reasons. That being said, I think Apple might have missed their window, with Tesla getting “escape velocity” with the pre-sale of 375,000+ Model 3 cars.
    Who should buy: Apple, Google.

    4. Snapchat ($22b valuation, rumored ~$300m in 2016 revenue)
    Facebook is the logical buyer for Snapchat, but that’s not going to happen — ever. Facebook tried to buy Snapchat back in 2013, and when they couldn’t, Zuck tried to kill Snapchat with a pathetic knockoff called “Poke.” His PR team made a big deal about how involved Zuck was in this completely embarrassing knock-off, which candidly felt beneath someone with Zuck’s level of success.
    Of course, Mark has gotten his revenge by getting the killer team at Instagram to launch a blatant ripoff of Evan Spiegel’s brilliant “stories format,” in what I think could be legally actionable (I don’t know SC’s patents and trademarks, but making a pixel-by-pixel knockoff with the same exact *name* feels actionable).
    Who should buy: Facebook, Google.

    5. Airbnb ($30b valuation)
    Given Airbnb’s massive valuation, which is greater than Wyndham ($7.69b), Marriott ($18.58b), Starwood ($13.35b) and Hilton ($23.95b), it’s unlikely to find a buyer in the hospitality space. Like Uber, Airbnb has a created a new market, which means there isn’t a natural “buyer.” Not having a natural buyer, like social networks have in Facebook and ad-based businesses have with Google, makes companies like Facebook, Google, Uber and Airbnb less likely to sell (they simply get fewer offers).
    Who should buy: Amazon, Google, EBAY (more likely a merger).

    6. Slack ($3.8B valuation, rumored >$60m in 2016 revenue)
    No enterprise software company has ever grown as fast as Slack, which has a deceptively powerful network effect that makes it hard to displace: API integrations. Once a company gets the Slack bug, they start piping all kinds of data from around their organization into chat rooms. Ripping out that plumbing and rebuilding it in a competitor, from say Google or Microsoft, wouldn’t be impossible, but it wouldn’t be easy.
    Who should buy: Google, Microsoft, Facebook.

    Probably looking, or at least willing, to be sold:

    1. Jawbone: Hardware is hard and Jawbone’s innovations have been copied long ago. Perhaps Amazon could make Jawbone their house brand (think, a better AmazonBasics), or Google could absorb them into their phone and watch teams.

    2. Instacart: Amazon has probably figured this business out better than Instacart, so that leaves a buyer like Whole Foods, Alibaba, FedEx, UPS or someone looking to solve the last mile.

    3. Twitter: Going sideways in a time of explosive growth with a half-time CEO is no way to live. Twitter should have been sold by now, which leaves one to wonder why it hasn’t been snapped up.

    4. Zenefits: The massive clean up project David Sacks took on seems to be reaching an end game that would realistically value the company at $2b. At that level a company like Intuit or ADP would be crazy to not pick it up. [ Note: I’m an LP in a Fund that has a small stake in Zenefits. It’s not material, but I always like to disclose. ]

    5. Dropbox: Apple tried to buy them when their cloud efforts were a mess. I’m sure Microsoft and Google kicked the tires as well, but they too have robust cloud products that, well, work just as good. This former high-flyer is less strategic now than it was, so it’s gonna need to sell on the quality of its revenue — not plugging a hole for a buyer.

    Anyway, I’m going to talk about all this on CNBC tomorrow at 8:20AM (Pacific), so I thought I would get my thoughts together in an essay, which I haven’t been doing since going on paternity leave.

    Yeah, we had identical twin girls four months ago — mom and babies are amazing and I’m back at work (on the book, podcast, TV show and incubator).

    Best, @jason

    PS – We filmed two interesting podcasts for founders called “Jam Sessions” during which seven different speakers shared the following strategies for how to grow your business:

    1. Melody McCloskey, StyleSeat: Leveraging data to drive growth and engagement.

     

    2. David Temple, Hello Scout: Thinking beyond digital and using offline acquisition to create trust.

     

    3. Edgar Blazona, BenchMade Modern: Micro-conversions to a big ticket sale and optimizing paid acquisition.

     

    4. Jill Bourque, RushTix: Net Promoter Score and the difference among promoters, passives, and detractors.

     

    5. David Hassell, 15Five: Why customer success is a top priority in his company.

     

    6. Craig Zingerline, Votion: Customer-driven development and prioritizing items based on feedback.

     

    7. Mei Siauw, LeadIQ: How to increase customer satisfaction and three simple rules for anyone in her company who faces customers.

    Episode 662 – http://thisweekinstartups.com/jam-session-styleseat-benchmade-scout/

    Episode 650 – http://thisweekinstartups.com/jam-session-customer-management/

    PPS – We’ve launched two new newsletters at Inside.com:

    1. Inside VR & AR: vr.inside.com
    2. Inside Security: security.inside.com

    PPPS – our SCALE event is November 14th & 15th here in San Francisco. Buy a ticket at launchscale.net and suggest a speaker here: launchscale.net/speakers

     
  • Jacqui 23:08:13 on 2016-04-06 Permalink  

    Ask Jason webinar this Friday 4/8: “How do I get into a great incubator?” 

    Hi everyone, Producer Jacqui here.

    A question that Jason and our entire team hear repeatedly is:

    “How do I get into a great incubator like 500 Startups, Y Combinator, Techstars, or the LAUNCH Incubator?”

    Well, this Friday we’re hosting a special “Ask Jason” webinar for 50 founders in an exclusive session, so that Jason can answer this in detail!

    The webinar is Friday 4/8 at 3:00PM PT. Care to join us? Reserve one of the 50 slots by filling out this form.

    Hope to see you there!

    [ Click to Tweet (can edit before sending: http://ctt.ec/jWuw0 ]

     
  • Jacqui 17:14:55 on 2016-03-22 Permalink  

    100-day social media break 

    I’ve decided to take a 100-day break from social media in order to focus on some important projects I have brewing.

    From March 21st until July 1st I’m going to attempt to focus on medium- and long-form content on my blog and Inside.com’s Daily Brief email. Oh yeah, Brockman sold my book, and I’m going to spend the next year writing it, so it’s time to get off the social media crack pipe.

    [ Click to Tweet (can edit before sending): http://ctt.ec/2Bd4A ]

    I love social media. It’s given me a huge megaphone, but I’ve found myself starting and ending my days on Twitter, Snapchat, Facebook, and Instagram for at least 20 minutes combined. Those minutes add up to around 1,200 a month and I need those hours back. Also, sometimes that 20 minutes at night turned into an hour, and it simply feels unhealthy to get wound up debating stuff at midnight.

    Like many of you, I go into defensive mode during the day, constantly responding to notifications on my desktop, iPad, and iPhone — as well as important emails. I’ve turned all notifications off and I’m staying off social during the day unless it’s to share a medium- or long-form piece of writing.

    No social during the day should save another hour — that’s about two hours saved per day.

    If I get back 50 hours per month combined, that’s an extra week. What am I going to lose? Well, I’m going to miss interacting with everyone consistently, getting breaking news and staying up-to-date on culture.

    My hope is that the Inside.com Daily Brief gets me enough culture and content during this 100 day test that I don’t miss that aspect of social media.

    Right now, I’m not sure how I’m going to execute on this plan technically. I could have my EA change all my social passwords and not let me into them no matter what — but I think that would quickly turn into that classic scene from Young Frankenstein, where Gene Wilder locks himself in the cell with his monstrous creation.

    For now, I’ve put my social apps in a folder in the back of my iPhone and I’m logging out of them in my browsers, so there are at least some extra steps required to access them.

    I will keep BufferApp logged in so I can share content about my events, products, startups, and blog posts. I’m going to try and automate some percentage of this (i.e., WordPress can automatically Tweet the latest posts from Calacanis.com).

    Yesterday, I was 80% less active on social media and I was massively productive, writing two blog posts, an Editor’s Note for Inside.com, three long emails of note, most of the board deck for Inside.com’s Wednesday meeting, and recording a podcast. Also, I was less distracted at home with the family — where we are expecting twin girls any day now. (Another major reason for this effort!)

    The most challenging moments today were in my Ubers to and from work, walking the dogs, waking up and going to bed — I was kind of Jonesing, to be honest. Instead of using social in my Ubers, I made phone calls, and I wrote this piece while letting the bulldogs do their business.

    Not sure how this will all work out, but I’m excited to see how my brain chemistry and productivity change as I get off the hamster wheel.

    Questions:

    1/ How much time do you spend on social a day?
    2/ Have you ever tried to cut back? How did it go?
    3/ What tips do you have for cutting the addiction?

    best @jason

     
  • Jacqui 18:31:39 on 2016-01-13 Permalink  

    The Controlled Deflation of the Bubble is Almost Complete 

    For the past three years, everyone has been kvetching about this fakakta bubble and, frankly, it’s annoying.

    Today, I announced on CNBC that the two major bubbles we’ve all been so worried about — the early- and late-stage private company bubbles — have been successfully deflated in a very controlled fashion.

    [ Click to Tweet (can edit before sending): http://ctt.ec/Pi22w ]

    Early Stage Comes Back to Earth

    In the early-stage space, I’ve seen the uncapped notes and “12-15m cap” notes for YCombinator companies with 10 weeks of growth go away completely — and that’s a good thing!

    In fact, I was laughing out loud with a founder about the uncapped note in 2015 at the Golden Globes on Sunday night. (Event drop is the new Name Drop!) The only thing funnier than the fact that serious investors gave him a mountain of cash without knowing how much they paid for their shares was Ricky Gervais taking apart Mel Gibson.

    In the past couple of months, I’ve seen the early-stage pull back in a major way. Here are some common events I’ve witnessed (with specific startup names/details anonymized):

    1. Startups that are doing well having to meet with over 50 investors to close a flat round.
    1. Startups doing bridge rounds with a 2-3x liquidation preferences (this means those recent investors get a guaranteed return of 2-3x their money before any other shareholders get paid).
    1. Early-stage investors telling me they are “taking a pause” on investing in new companies for the next six months. In fact, two non-traditional, authors-turned-angels, Tim Ferris and Tucker Max, have both announced they’re hanging it up.
    1. Startups coming out of elite incubators that can’t hit their target valuations or raise amounts coming back to me six months after graduation with “rebooted” valuations.

    Late-Stage Tide Going Out

    In the later stage, we’ve seen mega-rounds replaced with press coverage of “dying unicorns,” and elder statesmen Bill Gurley and Marc Benioff chastising folks who have chosen to stay private.

    As the easy money tide has receded, we’ve seen which businesses are sustainable and thriving and which are, well, ready to fold.

    1. Instacart (and dozens of others) have laid off some staff. Instacart also raised their prices, a savvy move considering folks are addicted to the product and their margin on groceries is … ummm, what’s the word? Low? Horrible? Bad? Either way, savvy move to “get there on what you got,” and prove to the investment community that you’ve got positive unit economics.
    1. The ecommerce category has continued to unwind, with Fab.com collapsing, Gilt Group having a short sale and One Kings Lane reportedly going up for sale soon.
    1. We’re hearing a lot of speculation about how Dropbox and Evernote should react to massive competition and significant private market valuations. It’s possible both of those companies will be snapped up by savvy, cash-rich players like Microsoft, Google, Apple, or Facebook.
    1. The extraordinary pressure on Theranos to prove they have the goods certainly being driven in part by their huge, $9b valuation. (If they weren’t a unicorn, folks wouldn’t care so much.)
    Public Markets & Global Risk

    In the additional “good news” bucket, the public markets are taking a pause, bouncing off the all-time highs. The seven-year run up, from 2008-2015 has everyone on high-alert — there has to be a crash right? This couldn’t possibly be a bull market for 10 or 15 or even 20 years, right?

    The truth is, no one really knows.

    What I do know is, if there is a huge, macro event that sends the world spiraling into a financial crisis again — and, sure, there will be one eventually — it will not be the tech industry’s fault. This time, for two reasons:

    1. Startups today are generating real revenues off of a massive customer base (thanks to mobile and broadband saturation).
    1. Startups with money in the bank or even — gasp! — profits, don’t go out of business! Founders are aware of this and are watching the deflation I mention above and, largely, taking measures to control their burn.   

    The next financial collapse will probably be caused by Putin (rebuild the empire!), China (who’s in charge?), Pakistan (nukes for sale! favorite vacation spot of Osama!) or some black swan we haven’t seen (pandemic, terrorists get nuclear secrets from Pakistan, asteroid hits earth, etc.).

    Bottom line: the private and public markets are being super cautious, and the “free money and uncapped notes party” is over– and that’s a good thing.

    Slow and steady wins the race.   

    best @jason

    1/Thanks for feedback: Geoffrey Clapp, Lon Harris, Joshua Sortino, Nick Baily and Jon Shumate.

    2/China is the wild card in all of this. No one knows what an economic collapse, or revolution, does to the global economy. If Greece and Spain are not able to pay their bills, can you imagine what ten million people rioting in the streets of China — and being run over by tanks (real possibility) — will cause?

    3/Hosting an Angel Summit on March 1st, right before the LAUNCH Festival. Format is 20 angel investors, who are very active, talk about their portfolios, investing strategy and one other thing. Everyone gets 12 minutes on stage. Should be fun.

    4/We have 8,000 (of 15,000) registered for the LAUNCH Festival. We did a quick survey of 6,491 of them and asked what services they were looking for. If you’re in the Cloud Computing, Advertising, Data Analytics, Legal, Email, Design, etc., space we’ve got thousands of folks who want to meet you. Join us as a partner by emailing me jason@launch.co — we could use your support throwing the party!

     
  • Jacqui 21:49:14 on 2015-11-02 Permalink  

    Don’t bring a knife to a gun fight 

    Just like a @#$ to bring a knife to a gun fight
    – Sean Connery, The Untouchables

    We are living in an age of excellence, where the science of product design is churning out wave after wave of exceptionally well-conceived delights for consumers. Product is so important, in fact, that distribution is often drowned out by the popping of champagne corks, as founders watch their babies hit number one on Product Hunt and Hacker News.

    [ Click to Tweet (can edit before sending): http://goo.gl/RK2GgR ]

    What a thrill it is to hit the top of the charts, a perfect peak, only to humble founders with the eventual and brutal pit of despair they will face in the coming days and weeks, as other products replace them at the top of the App Store.  

    Lasting distribution, created by growth-driven teams that have exceptional products, are the big winners today. Airbnb built a killer tool for Craigslist, Uber mastered the referral system and ‘over the shoulder virality’, while Wealthfront took the referral system and content marketing strategies deployed by others to the next level. WhatsApp crushed it using the “phonebook social network” combined with relentless localization.

    I’ve been looking through the 400 applications, and still growing, that have come into this year’s LAUNCH Incubator class, and I’m stunned by how many have exceptionally well-created products — with no consideration for distribution.

    Great moves all, but with no marketing budget, target audience, titles, or tag lines.

    Standing out today with investors requires great products, but that’s table stakes. To really stand out from the pack, bring a killer distribution hack that you refined and can speak about first-hand.

    For some startups, I’ve had 20-minute conversations not about their products, but about their clever use of street teams. With other startups I’ve invested in, the conversations are around a killer tool they’ve made that helps their customers for free … while building their database of emails.

    Perhaps if the bubble bursts, and there are 80% fewer startups, we’ll go back to the days where a great product was enough to get investor and consumer attention — but I doubt it.

    Feels like the stakes are constantly raising in this game, where showing up without an MVP in 2016 makes you look foolish, and my guess is that in 2017, showing up without a unfair competitive distribution strategy will look like showing up to a gunfight with a knife.  

    One competitive advantage I heard with a startup that I invested in recently, was their approach to infiltrating college markets by having “power hours.” They basically invite folks for donuts or burritos and have a party that is co-ran by influential groups on campus; those folks who use the app invite their friends to the party, and the cost of the food is much less, and the users much higher quality, than paying for App installs on Facebook. Will it work long term? Will it scale? Who knows, but it shows me they are thinking about how to do something other folks are not doing — and are fearless.

    Another company I recently invested in, without saying their name or revealing too much, was going to industry events for their vertical and signing up folks for trials and having product review sessions. That’s not super unique, but they had really connected that piece of the prospecting to their SDRs (sales development reps), trials, and eventually, subscriptions. They could have showed me more product features, but they focused me in on their sales process, and I’m a sucker for that because “sales solves everything.”

    The point here is that coming to your investor meetings with a distribution story dialed in will set you apart from your competition — it will also help you grow your business and perhaps not need to meet with investors in the first place. :-)

    best @jason

    PS – Some things I’m working on I could use your feedback on:

    1. My own little growth hack: Inside launched a simple chrome extension called TLDR and it’s just awesome at keeping you informed and entertained. How does it work? Every time you open a new tab we show you a dozen hand-curated headlines that are either fascinating, important, or funny. Download it and let @lons and I know what you think!
    2. LAUNCH Incubator is closing applications on November 10th; read about how we created the greatest startup incubator on the planet.  
    3. LAUNCH Festival is March 2-4th and founders can come as our guests. Sign up quickly, as the first 5,000 founders come for free and the next 10,000 pay $75 each.

     
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