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  • jacquideegan 02:14:18 on 2021-04-13 Permalink
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    Discord in talks to sell to Microsoft for over $10B | E1190 


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    Top Insights


    Discord and Slack have had strangely similar journeys

    There is a correlation between gaming-focused founders and making great messaging products

    • Rahul Vohra (Runescape > Superhuman), Stewart Butterfield (Glitch > Slack), Jason Citron (OpenFeint > Discord)

    Microsoft is paying a premium (likely over 75x price to sales), but Discord fits perfectly into their “Netflix for gaming” ambitions

    $10B isn’t too steep considering their market cap is approaching $2T

    Background on Discord


    Recent history:

    Discord is a voice and text-based messaging app that is largely used by gamers for in-game communication, and it was founded by Jason Citron in 2012

    A “server” on Discord is the equivalent of a “workspace” on Slack: a dedicated space for people to communicate about a specific topic

    In June 2020 after COVID hit, Discord capitalized on the stay-at-home orders and changed their tagline to “Your place to talk.” – targeting fan communities of books, music, art, tv shows, and more to expand beyond just gamers

    In January of 2021, Discord ran into some controversy when they briefly banned the r/wallstreetbets server which now has around 600,000 members

    • Wall Street Bets is an infamous subreddit that set off the GameStop fiasco in January – and they use Discord to communicate in real-time via voice chat
    • WSB’s server was banned for one day, and after being reinstated, Discord offered to help WSB moderators due to the amount and intensity of their users
    • We covered the WSB/Robinhood fiasco on an emergency pod back in January

    Discord user metrics:

    Discord has 140M+ MAUs as of December 2020

    • Other MAU stats: (as of Feb. 2021 via Statista)
    • WhatsApp – 2B
    • FB messenger – 1.3B
    • We Chat – 1.2B
    • QQ – 617M
    • Telegram – 500M
    • Snap – 498M

    How they make money:

    • Discord makes money by selling a $100/year premium subscription called Nitro and also by taking fees from games sold on its servers
    • Benefits of Nitro: larger file uploads, HD video screen share, extra server support, personal profiles on servers
    • The core app remains free, so users only pay when trying to access premium features
    • Discord was rumored to be up for sale in 2018 – but did not proceed with buyers due to CEO Jason Citron allegedly opposing an ad-based model proposed by the would-be buyers

    Discord generated $130m in revenue in 2020 and has raised $480M since inception

    History of Discord and how it’s different but similar to Slack


    Discord and Jason Citron had a very similar founding story to Slack and Stewart Butterfield’s

    1. 2002: Launches an MMO (Massively multiplayer online game) called “Game Neverending” which eventually shuts down due to inability to fundraise
    2. Stewart then creates Flickr from the well-received photo-sharing features of “Game Neverending”
    3. 2005: Stewart sells Flicker to Yahoo and starts working there running Flickr
    4. 2008: Stewart leaves and starts a new game called “Glitch”
    5. Glitch eventually fails, so Stewart focuses on the internal chat app they built, which eventually becomes Slack
    1. 2011: Jason Citron sells his social gaming startup OpenFeint to GREE for $100M
    2. While working on his next gaming project, Citron noticed how awful the current voice messaging software was, making it hard to strategize with teammates while playing online
    3. 2012: When his next project showed signs of failing, Citron pivoted to create Discord to meet the needs of its users

    Interesting trend: Talented video game designers making amazing messaging products, for example:

    • Rahul Vohra worked on Runescape before Superhuman
    • Stewart Butterfield worked on Glitch before Slack
    • Jason Citron was a successful gaming entrepreneur before Discord
    • Theory: if you can make a game that engages users, you can make a product that engages customers

    Deal breakdown: Discord at $10B compared to Slack at $27.7B?

    • Slack 2021: ~$900M in revenue (43% YoY growth), sold for $27.7B (~30x revenue)
    • Slack is geared towards enterprise customers, startups and SMBs
    • Discord 2021: ~$130M in revenue, in talks to sell for over $10B (~75x+ revenue)
    • Discord is geared towards communities, social and gaming

    Microsoft is willing to pay a premium for Discord based on its revenue footprint… so what is their thesis?

    Microsoft’s major consumer play


    Every other FAANG company has a massive, industry-leading consumer business:

    • Facebook – social
    • Apple – hardware/app store
    • Amazon – marketplace
    • Netflix – streaming
    • Google – search

    Microsoft’s big consumer bet appears to be in gaming (they own Xbox, Minecraft, and 30+ game studios)

    • With a ~$1.9T market cap, they have the capital to take big swings in M&A

    Timeline for Microsoft’s recent gaming acquisition spree:

    • January 2019 – Microsoft CEO Satya Nadella explained his vision for their Xbox subscription:

    “We describe it as, ‘Netflix for games'” – Satya Nadella

    • December 2020 – The latest Xbox console release helped Microsoft surpass $5B in gaming revenue during their most recent December quarter (Q2 2021 on their fiscal calendar), up 51% year-over-year (via GeekWire)
    • Xbox content and services revenue increased to $3.5B due to Xbox Game Pass subscriptions
    • Game Pass hit 18 million subscribers in Jan. 2021
    • Game Pass costs $10/month for standard and $15/month for the ultimate package (Ultimate includes XCloud, allowing gamers to play cross-platform)

    In summary


    Microsoft (~1.9T market cap) sees every other big tech company with a major consumer business and understands that gaming is the clearest path to building its own

    $10B for Discord is a fair price to pay if Microsoft integrates Discord into their cloud-gaming subscription products ($10B is well under 0.05% of Microsoft’s market cap)

    Microsoft is building a quasi vertical monopoly in gaming – they now own:

    • the hardware (Xbox, Surface, PCs)
    • the software (Bethesda, Minecraft, Xbox Game Studios, dozens of original titles exclusive to Xbox)
    • the communication platform (Discord)

    The post Discord in talks to sell to Microsoft for over $10B | E1190 appeared first on Jason Calacanis.

     
  • Jason Calacanis 19:24:37 on 2021-04-09 Permalink
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    Insights from Giggster Co-founder Hank Leber on building a location marketplace for creators & content production | E1196 


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    Top Insights


    • Building a business on top of another platform is risky, as revenue can go to $0 overnight by no fault of your own
    • Adding simple and easy solutions to archaic industries and business processes can result in rapid adoption
    • Giggster filled their marketplace supply-side first: once there was a large volume of high-quality supply, demand generation was much faster and mostly organic
    • When all sources of revenue are on the line, even archaic industries like film production can adapt quickly
    • Since Giggster has been operating successfully before raising money, they know their unit economics and are comfortable putting together an aggressive growth plan

    Intro / Problems with building on other platforms


    Guest: Hank Leber | @hankleber

    • Co-Founder & Head of Growth, Giggster (April 2019-Present)
    • Website: https://giggster.com
    • Hank previously was CEO of GonnaBE a planning social media app (they presented at LAUNCH Festival). The concept of planning socially wasn’t embraced by users.
      • Lesson learned: if you put out your plans publicly and no one comes you look like a loser.

    “You have an idea that everybody thinks sounds great, then there’s an ugly cultural truth somewhere that makes it not a real thing.”

    Hank Leber
    • Hank also had a company called Vytmn which was a “growth as a service” tool built on top of Twitter
    • Twitter shut down one of their key features, the ability for to automate actions like DMs, which killed their revenue ($1M ARR at peak)

    “… do not build on the back of another platform, if they can kill you, they will, it’s not your money. That’s their money that you’re stealing.”

    Hank Leber

    Giggster’s founding story


    • Hank and his Co-Founder Yuri Baranov were not from the film industry, they are tech entrepreneurs
    • How they discovered the market opportunity with Giggster:
      • Yuri is LA-based and lives in a nice house near the water
      • One day, a production scout knocked on his door and offered him $70K to shoot at his house over two days for CSI: Miami
      • The process included door knocking, clipboards, paper contracts and excel spreadsheets
        • this “business flow” was terrible for a $70K transaction, so Yuri told Hank about it and they started doing some research on the production location industry
        • After realizing the location industry had been run this way for decades, they started Giggster
    • Giggster is a two-sided marketplace for video production, meetings, weddings & events. Think Airbnb for production locations and events.
      • Larger clients would be Netflix, HBO, Hulu, large production companies, etc.
      • Smaller clients would be TikTokers, YouTubers, Vloggers, etc.
    • How Giggster differs from Airbnb and VRBO:
      • Short-term rental platforms do not allow production shoots because they require more overhead: insurance, more people per location then allowed, production parking, waivers, etc.
    • Giggster added a services element because some film production teams need higher-touch support (above $2500-$3000 a day) these services include:
      • Logistics
      • Permiting
      • Power
    • In California, you can rent your home for up to 14 days per year tax free
      • Giggster has some client who shut down their listing after being booked for 14 days for this reason

    Creating the marketplace supply-side first


    “What we’ve found is, chicken and the egg, locations matter first. As long as we have the supply we can generate the demand.”

    Hank Leber on starting a marketplace

    Giggster has almost 10,000 locations on the platform

    • In the early days, they filled the supply-side inventory by:
      • partnering with Hollywood agencies, who already had direct relationships with private property owners
      • they also knocked on doors for early customers
      • filling the supply-side first turned out to be a good decision, as it created an immediate flywheels with renters
    • Customers needed a lot of education, so Giggster built out detailed FAQs and comprehensive signup flows
    • Demand has been strong and scouts are now loading their locations onto Giggster
    • If a major client (Netflix, HBO, etc.) needs a location that does not exist on Giggster, they will hire location scouts to go find and matching location and on-board them
    • Giggster saw an opportunity to expand with cheap inventory from pandemic disruption (commercial real estate, restaurants, etc.)

    Pitching at Remote Demo Day, raising via Jason’s Syndicate


    ” (Regarding Jason’s Syndicate), the money is actually secondary to the quality of the network.”

    Hank Leber
    • Self-funded for 3.5 years while they figured out the business
      • Took ~3 years to build a solid base and infrastructure, and now they are seeing rapid growth
    • Yuri (Hank’s Co-Founder) told him to go try and land Jason Calacanis as an investor, so Hank started reaching out to mutual contacts and eventually got a slot in a Remote Demo Day session over the summer
    • Remote Demo Day format:
      • Seven founders pitch thousands of investors over Zoom
      • Pitches are three minutes each, with a two minute Q&A with judges after
      • After all pitches are finished, the judges vote on their top three and the audience members (accredited investors) vote for their #1 company in a poll
      • One day later, all 7000+ members of Jason’s Syndicate get an email with the recording and a sheet where they can pre-commit a dollar amount to invest
      • Any companies that receive over $200K in interest are syndicated!
    • Giggster was The Syndicate’s largest investment ever
      • According to Hank, the quality of the network of investors created additional value beyond the capital invested

    Giggster’s use cases and emerging content business models


    • Giggster collects 15% from the final host payout as a service fee
    • Daily rates for a shoot range $2-30K per day depending on how high-end the location is
      • the average is around $8-10K
      • Larger long-term deals will hit 7 figures
        • example: ABC renting a mansion for The Bachelor for three months
    • Production came back online quickly during the pandemic, the film industry was really aggressive and inventive about their protocols
      • Even in an industry resistant to change, all of the money drying up overnight caused people to change their minds FAST
    • Giggster holds production companies accountable and cares a lot about reputation.
      • Location marketplaces need to maintain a good relationship with cities & neighborhoods so they can continue to operate
      • Typically the professional production companies have outstanding reputations for taking care of properties, however, a new potential business model is more uncertain…

    TikTok content houses are a new media business model

    • Sway & Hypehouse are the most famous TikTok houses
      • These are new media operations that have very different needs and filming styles than traditional production.
      • They don’t have big camera crews but are also notoriously crazier than a film studio.
      • It’s not cut and dry how to service these creators yet, so that’s where Giggster is attacking the opportunity:
        • They are working to pick the right locations (areas with more space and fewer neighbors), and figuring out the insurance needs to service these new smaller-scale customers

    Scaling Giggster


    • The importance of network relationships and trust is key for B2B. Cold emails work worse in this category.
    • Since Giggster has been operating successfully before raising money, they know their unit economics and are comfortable putting together an aggressive growth plan

    ” [once] you get dollars in the door and deliver real value with product-market fit, adding money to scale is a math equation instead of trying to paint a picture and tricking people into buying your vision of the future.”

    Hank Leber

    The post Insights from Giggster Co-founder Hank Leber on building a location marketplace for creators & content production | E1196 appeared first on Jason Calacanis.

     
  • jacquideegan 18:21:16 on 2021-04-08 Permalink
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    Joanne Wilson’s Top Insights | Angel S5 E10 


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    Top Insights


    • Raising at a juiced valuation can have devastating downstream consequences for a startup.
    • Recent momentum in funding underestimated founders has helped firms realize the opportunity of having a diverse team of investors.
    • It is harder than ever to be a “generalist” investor. To succeed in today’s market you need a thesis.
    • Portfolio management near the peak is key to thriving in a down market.

    Background / Intro


    • Joanne Wilson is a blogger, businesswoman and angel investor with 130+ investments.
      • She mostly invests in women and underestimated founders.
    • Back in the 1990’s, Joanne was Jason’s top sales executive at Silicon Alley Reporter and taught him a very important lesson: sales solves everything. “If you have a great person who can sell, everything goes in the right direction.” – Jason Calacanis

    Spotting a bubble, impact of juiced valuations on startups


    “… we’ve seen it so many times over the past 20 years. (Founders) end up with a down round even though (they’ve) done a good job.”

    “(After raising a down round) that company is damaged. And then institutional investors have moved on into something new and something else and you’re f****d.” – Joanne Wilson

    • How raising during a bubble can create downstream issues:
      • Founders raise at an inflated valuation, and then have to put up crazy numbers to justify a higher valuation in their next round of funding
      • So, even really good companies can “get ahead of their skis” and fail to justify their mid-bubble valuations
      • If a company then raises a down round, that puts a black mark on their resume that is hard to erase, especially if VC money starts drying up
        • or, as Joanne puts it: “You’re f****d.”
    • There is a direct correlation between media sales and the strength of the overall economy
      • According to Joanne, you can check the thickness of each issue of her four decade Vogue collection to see how the economy was doing that year
    • Ad-based companies should bank as much revenue as possible (and even create new inventory if necessary), because high demand won’t last forever

    Positive changes to diversity in venture capital over the past 15 years


    “There is a whole group of amazing black founders that no one who is a white investor has ever seen. It was the same thing when I started investing in women, there were all these amazing women out there but no one wanted to meet them…” – Joanne Wilson

    • More women and people of color are starting companies and becoming venture capitalists, so the industry is being changed from both sides
    • It’s been 15 years in the making, but the venture industry is finally starting to see real change with funding dollars moving in the right direction
    • Seeing a team page with a bunch of white males on it is an immediate red flag for some investors
    • Investors are funding and hiring people of color for different reasons:
      • some are doing it because they care about making real change
      • others are ashamed at the lack of diversity in their portfolio and on their team
        • both reasons are helping drive change

    Difficulty of being a “generalist” investor in 2021, portfolio management in a bubble


    “…as an angel you need to take money off the table when it has gotten silly.” – Joanne Wilson

    • Being a generalist investor was great 15 years ago when there were fewer startups overall
    • To be a generalist investor in 2021 you need a team of people around you for market research, diligence, etc. since there are so many startups doing similar things
    • Portfolio management in a bubble:
      • Some greener VCs have never seen a down market
      • Selling a percentage of your winners at or near the peak is a great way to hedge against a rapid downturn
      • For example, Joanne’s husband Fred Wilson lived through this during the dot-com crash of 2000

    Watch/Listen to the full episode:

    The post Joanne Wilson’s Top Insights | Angel S5 E10 appeared first on Jason Calacanis.

     
  • Jason Calacanis 19:41:44 on 2021-04-06 Permalink
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    Snack’s Kim Kaplan PLUS 3 key metrics for consumer, enterprise SaaS & marketplace startups | E1195 


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    Top Insights


    • “Match has done a phenomenal job at working with different companies, acquiring different companies.”
    • It has been significantly easier to raise capital for Snack post-Bumble’s IPO. A sector can become stale to investors, especially after being burned repeatedly. Proof of a publicly traded challenger company makes picturing a success easier.
    • “Every 8 to 10 years there’s a new dating app that kind of enters into the space and Tinder’s now nine years old. So it is the right time for that next dating out to come in and usurp them. And I fundamentally believe that’s what Snack is doing with a video-first approach.”

    The post Snack’s Kim Kaplan PLUS 3 key metrics for consumer, enterprise SaaS & marketplace startups | E1195 appeared first on Jason Calacanis.

     
  • Jason Calacanis 06:19:47 on 2021-03-26 Permalink
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    Paul Judge on helping lead SoftBank’s $100M Opportunity Fund, the future of VC & more | This Week in Startups Blog 


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    Top Insights


    • Investing over zoom expands the top of the funnel and lowers the barrier to entry for all founders
      • Investors can take 2-5x more meetings with founders from anywhere in the world
    • Paul’s thesis: Investing in overlooked founders will likely generate outsized returns
      • The American Southeast and Midwest include 44% of the US population but only receive 14% of VC funding
      • Despite this, 36% of last year’s Inc. 5000 reside in these regions with a median growth rate of 161% year-over-year
    • The “either or” debate between making existing firms invest in underrepresented founders from their main funds OR raising “opportunity” funds that are specifically focused on underrepresented founders isn’t helpful, both are necessary to make VC funding more equitable
    • Jay-Z had the best Q1 2021 of any entrepreneur or investor
      • Tidal was acquired by Square for $297M, he sold 50% of Ace of Spades to LVMH for ~$300M, launched $10M cannabis-focused fund to back black founders, Oatly filed for IPO

    Intro


    • Paul Judge, Ph.D. is Managing Partner of Panoramic Ventures, a VC fund that invests in “underserved geographies and overlooked founders” prioritizing the American Southeast and Midwest. Paul is also Co-Founder & Executive Chairman of Pindrop, an information security company that provides risk scoring for phone calls to detect fraud and authenticate callers). Pindrop’s most recent valuation was $900m in 2018.
    • Paul also serves on the investment committee for SoftBank’s $100m+ Opportunity Growth Fund to invest in Black, Latinx and Native American founders
    • Paul is based in Atlanta, but has become a Miami regular.
    • Atlanta’s startup scene is heating up:
      • Airbnb just located it’s East Coast engineering team there
      • Local Unicorns: Calendly ($3B), Greenlight ($1.2B, consumer fintech), Rubicon ($1B, recycling technology), SalesLoft ($1B, sales software)
      • Strong talent pipeline from Georgia Tech

    The virtual-first investing paradigm shift


    “I see more companies than I would have seen otherwise, the top of funnel is wider. From the entrepreneur’s standpoint, it’s easier to get a meeting with an investor than it was traditionally. That means a whole new generation of entrepreneurs that wouldn’t have had access, now have more access to venture capital funds & angel investors.”

    Paul Judge
    • Paul has made 25 investments in 2020, all over Zoom. He has met 2 founders in person, but only after investing.
    • Being an active investor in 2020 required going virtual. Most investors never considered this a viable method prior to the pandemic. Both Paul & Jason discovered that virtual investing offered a new set of benefits:
      1. Investors can take 2-5x more meetings because intro meeting times went from 2-3 hours to 20-30 minutes. How?
        • Commutes and pleasantries are eliminated, and everyone gets down to business ASAP.
        • Conversations now start with hard numbers. Entrepreneurs have become more direct in their approach, making the information needed to diligence an investment up-front in their first email.
      2. Investors now have much greater access to founders outside their city. Travel and cost of living in the Bay Area are high and are no longer an obstacle for founders.
        • By taking more meetings from broader geography, investors are able to reduce their bias.
        • With more meeting slots available, it’s easier to take a chance on a founder you wouldn’t have met with pre-COVID.
      3. Virtually, the pattern-matching necessary to be a great VC becomes more about assessing the founder based on their performance, rather than by charisma or presentation skills.

    How Paul Judge invests


    • Paul’s Techsquare Labs was focused on backing top talent (students & professors) from local universities like Georgia Tech, funding founders at the pre-seed and seed stages.
    • He is now expanding to be involved at Series A & B both at SoftBank and Panoramic Ventures, which just launched a $300M fund.
    • Paul knew 2/4 other members of the Softbank Opportunity fund’s investment committee from being a part of the 2016 class of Aspen Institute’s Henry Crown Fellow Program.
    • Panoramic’s thesis: investing in overlooked founders will generate outsized returns.
      • The American Southeast and Midwest receive only 14% of VC funding even though they include 44% of the country’s population.
      • 36% of last year’s Inc. 5000 reside in these regions with a median growth rate of 161% year-over-year.

    How to make investing more equitable


    “Black founders are not just solving black problems, they are solving some of the most meaningful problems that exist.”

    Paul Judge
    • The “either or” debate between making existing firms invest in underrepresented founders out of their main funds OR raising “opportunity” funds that are specifically focused on underrepresented founders isn’t helpful, we need both to make venture capital more equitable.
    • VC firms typically don’t change their partners often (turnover typically occurs with a new fund every 3-7 years), so adding new diverse partners to existing firms is a slow process.
      • The industry needs to evolve in this way, while also meeting fiduciary responsibility to limited partners who invested in the fund.
    • Purpose-built investment vehicles like SoftBank’s Opportunity Fund have a clear mission and can make an impact right away.
      • Another benefit is creating an ecosystem where some of the top underrepresented entrepreneurs can support & inspire each other.

    Jay-Z’s groundbreaking Q1 2021


    “I was just talking with somebody about who had the best quarter, Chamath or some other venture capitalist and I was was like, ‘No, I think Jay Z had the best, he just sold half Ace of Spades to LVMH.'”

    Jason

    “I love that love Jay-Z’s going after industries that have traditionally been unfair to the people that have been creating value. The music industry is traditionally unfair to the creators, so he did Tidal. In food and beverage, the Crystal CEO got shot himself in the foot, so [Jay-Z] went after that. Then if you look at the cannabis industry, I mean, it’s not exactly tech, but it’s creating tens of billions of dollars of value. It’s one of the most valuable crops that this country’s ever seen. But if you look at everyone that’s going public, there’s no diversity, but we all know this country was built on the backs of blacks tending to crops.”

    Paul Judge

    Companies Paul Shouted Out


    The post Paul Judge on helping lead SoftBank’s $100M Opportunity Fund, the future of VC & more | This Week in Startups Blog appeared first on Jason Calacanis.

     
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