Former Econ-Math-Dance student and NYC transplant living as a tech nerd in San Francisco. Obsessed with all things food, travel, and/or shiny. This tumblog is a mix of off-the-cuff thoughts, interesting finds, and entrepreneurial pursuits.
My first reaction was skeptical. I’m not bullish on any startups who build their business model around unique market trends. This reminds me a bit of SecondMarket, who started their business in secondary transactions for private companies. As that market declined, it became necessary to pivot and today, SecondMarket is a provider of financial services for private market transaction (including fundraising.)
I’m also not sure if Exitround helps the startup ecosystem. If anything, it would increase the friction between founders and investors by further mis-aligning incentives. In doing so, Exitround would also be meaningfully increasing the noise to signal ratio.
That aside, here are a couple of areas I think Exitround can help:
I think where Exitround will really excel in a down-market, where small, talented startups will not have the revenues or the access to funding to keep afloat. And despite our best current efforts, the economy will remain cyclical and a down-market is in the cards.
@Oyster launched recently with lots of fanfare. I haven’t been able to test it myself, as I’m on Android, but what little I know of Eric Stromberg, I’m sure the product UI is fantastic.
However, I have some doubts about the TAM of an all-you-can-eat books subscription service. According to the Pew Research Center:
75 percent of Americans aged 16 and above read at least one book this year. Readers polished off an average 15 books apiece, a number that was clearly bumped up by voracious bookworms because the median number of books consumed was six.
Total annual spend for books from an average reader is approximately 6 x $15 = $90, which is below an Oyster subscription of ~$120 per year. From a rational agent point of view, the median reader in American wouldn’t pay for an Oyster subscription (assuming that this reader is purchasing all her books as new paperbacks and not borrowing / purchasing second-hand.)
I also believe that the book publishing business has a long-tail distribution. Of those 6 books that the median American reader is consuming, one is probably “The Da Vinci Code” or “50 Shades of Grey”, depending which year you’re polling. Essentially, there are only a handful of books that everyone is reading, in a given year, and if those best-sellers are not available on Oyster, then it is more difficult to serve that mainstream audience.
The compelling counter-argument is that if Oyster makes it so easy to discover and consume books, then it could actually change user behavior. The success of this product rests on how effectively it can convince the average American reader to read more and to read more long-tail books. Indeed, I’ve found myself reading a lot more ever since getting a Kindle Paperwhite.
For me, the most perplexing part about the launch of Oyster is why Amazon hasn’t yet attempted to start a book subscription business. My friends protested that such a product will only serve to cannibalize Amazon’s existing book sales — but this would be an incredibly short-sighted view for a company known for its long-term vision.
Actually, Amazon’s no stranger to the content subscription business. After failing to purchase Netflix for a measly $12M in the 1990’s, it resorted to launching its own Prime streaming service — which is still trailing Netflix, by a mile. Today, Netflix is a ~$20B market cap company.
Amazon is also no stranger to M&A transactions. The question for Oyster, then, is how much and at what price?
With all that’s been written about the Series A crunch, it’s no secret that series A investing has become more difficult. I would argue that it’s become more difficult because the definition of traction (a key decision factor in Series A investing) has changed dramatically over the past decade. In short, industry conditions have made it much harder to determine if a product is truly getting traction, or will only be a flash in the pan.
Increased Eyeballs: There are countless charts which show how new applications are acquiring millions of users in record time. It could be that today’s consumer startups have a high value prop and a better user acquisition strategy. But the underlying driver is that today’s populations are more plugged-in than ever, creating an easier climate to acquire those millions of users. Charts comparing such user acquisition rates are not apples-to-apples are don’t take into account macro conditions.
Ease of adoption: With increasingly better mobile infrastructure, downloading a new app has become effortless. With several services offering one-click sign-up (Facebook, Twitter, Google+ integration), user registration has become more frictionless as well. This is a double-edge sword — it’s never been easier to both acquire and lose users.
Duplicated Data: In the wake of social network proliferation, personal data is no longer a proprietary asset. A picture taken on mobile can be simultaneously sent/posted/shared to dozens of apps (Twitter, FB / Instagram, Tumblr, to name a few). For all pitch decks showing user data metrics, it’s helpful to keep in mind the Venn Diagram intersection of this user data with existing applications and platforms.
Network Effects as the New Norm: Social as a necessary feature has allowed most app to instantly on-board your entire network when you sign up. Even if you don’t like to use Facebook or Twitter sign-up, most mobile apps will also have access to your phone address book, making it easier to find friends and to invite other contacts to the service.
Which metrics should matter, then?
Google Wallet launched in May 2011. For a number of reasons — lack of NFC adoption, Sprint as the only initial carrier partner, limited to only USA — Google Wallet never caught on. In fact, the only person I know who uses Google Wallet is a friend of mine who works at Google (and as a result, I’m forced to use it too.)
Google Wallet recently announced integration with “leading Android apps and mobile sites.” With apps (like Airbnb and Priceline) and e-commerce destinations (such as Newegg.com and 1-800-Flowers), consumers can now check out using Google Wallet.
This new update deviates from Google’s original plan to replace traditional forms of payments at physical PoS, taking it away from competitors like Square and Paypal. Google addresses a more immediate pain point — transacting a purchase on a smartphone can often be confusing and cumbersome. Many e-commerce sites haven’t optimized their checkout process for mobile; the smaller screen makes it difficult to input my 16-digit credit card number, much less my billing and shipping address.
With a single sign-in button, Google Wallet may be best product positioned to decrease friction for smartphone purchases. It has the potential to streamline mobile purchases much in the same way that Amazon has perfected its checkout process.
Amazon uses some unique decision-making tools: Instead of PowerPoint, meetings begin with everyone reading a six-page memo outlining the issue to be discussed. They have an elaborate system to decide whether to promote people. Would these tools work well at other companies?
Probably not. They’re so highly tuned to the ways that Jeff Bezos processes information. Starting a meeting with 20 minutes of silence so everyone can read a memo just isn’t the way most businesses operate, and it’s hard to adjust to that.
I have a friend who likes to discuss everything. Each time an event occurred — say we were walking together, ran into a mutual acquaintance, and chatted for a while — she’d want to “talk about it”. In college, I’ve also been part of tons of organizations where debriefing was possibly even more of a main event than the thing we were debriefing.
At some point, i considered becoming a regular Yelp contributor, just so I’d have the opportunity to reflect on all the restaurants, coffee shops, and bars I’ve visited. And in doing so, hopefully to also reflect on the events and conversations that happened at these establishments.
Lately, I’ve had the pleasure of having tons of productive conversations — maybe it’s because I’ve been meeting so many new people, maybe it’s because the bay air is just different from the pollution in New York. These conversation tend to refer to things we’ve read previously and promised to share with the rest of group later, or something that we all couldn’t recall and agreed to look up afterwards.
In most cases, there’d also be some key take-aways, for lack of a better term. Things that I learned, things that we discovered together, things we laughed about, and things that kept us thinking after the conversation had long ended.
I’m looking for a way to properly do postmortems for everyday, but highly relevant, occurrences. Think about it — when’s the last time you re-read notes that you took during a meeting / talk / presentation?