Alvin's Newsletter: No. 24
Weekly newsletter on what I saw interesting in tech, venture capital and business.
📰 News
Jack Ma brought into line - Ant IPO suspended: Major news last week as Jack Ma was summoned by the Chinese days before the biggest IPO the world has seen. Xi flexed, reportedly as a response to Jack Ma’s comments at a conference a week earlier criticising the government’s approach to financial regulation. [Bloomberg] Link Link1
Many analysts saw the move as sensible, even if the timing was disruptive. Chinese regulators said Ant’s business model effectively allowed it to charge higher fees for transactions while state-run banks took on most of the risk. At the same time Ant sought to list, authorities were racing to develop rules that would subject financial holding companies to higher capital requirements. It’s also planning to create a digital yuan, which is part of its push to maintain control over the stability of its payment system.
Uber and Lyft won Prop 22: In the latest saga of how gig-workers are classified, Uber and Lyft won a significant vote last week, overturning a Californian law that would have required them to classify drivers as employees. Uber and Lyft spent $200M on their campaign to win what was a public campaign and vote. Well worth the money considering California is one of their top markets and would have meant huge ramifications both in California but potentially setting a precedent for other states in the US and countries around the world.
This isn’t the way to make or overturn laws. Allows the biggest spender to effectively buy the outcome. On the outcome itself - there should be more protections for gig-workers, not the full protections that a traditional employee receives however. Employee classification and protections model needs updating. Link
Morning Brew newsletter valued at $75M: In a sign of what the ‘new media’ landscape may look like in a few years, one of the largest newsletters, Morning Brew, sold a majority stake. Total subscriber base is 3 million giving each subscriber a value of $25. Not bad. For comparisons sake, Joe Rogans deal (multi-year licensing as opposed to equity) with Spotify gave each listener a value of $9. Link
This year, Morning Brew expects to bring in over $20 million in revenue, and $6 million in profit. The company has been profitable since 2018, which is rare for media upstarts.
$1Bn worth of crypto from Silk Road moved: After laying dormant for seven years, $1Bn worth of crypto was being moved last week. The crypto world lit up on speculation of who could be moving the funds - especially since the original owner of Silk Road sits in jail. A couple of days later it was revealed the US Fed was behind the move after seizing it. The funds where actually in the control of a hacker who had hacked Silk Road in 2012 and sat on the loot. For 8 years. $1Bn. Crae.
The transfer fee for the move of $1B? $12. 😬 Link
📚 Reading
Part 2 of Andreessens’ defence of IPOs, this time, delving into the details behind IPO pops. Good insights into the motivations behind the IPO bankers and the economics at play. It’s not as simple as it may seem. Link
Bankers get paid for an IPO based upon a percentage of the amount of money raised by the company. Traditionally, that’s been a 7% fee, but as the size of IPOs has increased, many companies pay materially less. While it may seem that bankers want to price the IPO as high as possible to maximize the proceeds to the company and thus maximize the underwriting fees to the bank, then why do we still have IPO pops? Are bankers simply economically irrational?
Doug Shapiro on traditional TV/Cable media turning transitioning towards streaming and what the realities of that looks like. In-depth so grab some coffee (or tea if you are like me).
For context, the cable networks business is one of the most profitable industries in the U.S.; it represents the vast majority of major media companies’ profits; traditional TV networks revenue growth is, for the first time, stagnating; and traditional TV is far larger than the streaming market — roughly $100 billion in TV network affiliate fees and national TV advertising last year, compared to only $19 billion in streaming subscription and ad revenue.
Everyone knows (if you don’t know - now you know) that hardware startups are brutal. Ask Fitbit, GoPro and a multitude of others. The new kids on the block - think Peloton and co - have changed the model and it’s the right way to think about starting a hardware company. Use the hardware to sell a subscription service.
With that, lot’s of options start to open up and the deficiencies in pure-play hardware become glaring. Link
The fundamental difficulty with hardware is that an upfront purchase represents the capitalized value of all the future uses of the product. This constrains hardware companies' ability to price-discriminate. A $200 TV or a $400 treadmill might represent thousands of dollars worth of enjoyment. Or it might just gather dust. The products are necessarily mispriced for almost every buyer, and it’s hard to capture the difference in value between what consumers pay and what they ultimately get.
A framework for hiring. People are the most important component of company building. Worth some time working out how to get the right people. Link
🦖 Entertaining & Interesting things
There is a lot of ambiguity around how Coronavirus spreads - especially indoors as businesses and governments around the world try and stay open. This explains it with beautiful visuals. Link
At some point in ones life, the thought of packing it all in and moving to the country on a farm will cross your mind. Here is how that plays out. Link
How Sierra, a games publisher in the 90’s, got acquired and killed due to accounting fraud. Link
The Raspberry Foundation announced last week the Pi-400, a Commodore 64 like clone (the C64 was my first ever computer). And it is beautifully nostalgic. Link
More advances in robotics with Disney making a realistic gazing robot. Interesting on the minute details that go into ‘looking’. Link
Big waves in the Pokemon collecting world. A team live-streamed themselves opening up a $375K box of Pokemon cards. Only to find they were fake. Link
🎧 Podcasts
The best podcast episodes last week according to Bosco Tan:
The history of Dropbox (How I built this) - 50 mins: The founding story of one of the biggest recent tech successes. Drew Houston, founder of Dropbox tells his story from when he started programming at 5 years old, his first programming job at 14, going to MIT, discovering the Dropbox problem, Y-Combinator, and all the way to building a US$7.5b listed company. Link
Recounting Bush vs Gore 2000 (Throughline) - 31 mins: Lots of election content this week. The standout is the rundown of the Bush vs Gore election of 2000 - probably the most controversial election till last week. Included is the story of ballot issues, Gore’s missteps, the Florida recount and the Supreme Court involvement. Link
Blueprint for SaaS Growth (Venture Stories) - 51 mins: This is the best podcast I’ve heard - runs through (quickly) all the fundamental building blocks - including metrics, front-end of the funnel, retention and discussion on flywheels. Perfect episode for growth and product guys to nerd out and take notes. Link
Phil Knight and the Nike story (Masters of Scale) - 42 mins: Classic episode repeated. Phil Knight tells of his personal history and how he found success with Nike. From selling encyclopaedias in Hawaii, selling Japanese shoes, building his own shoes, to pioneering the athlete sponsorship model. Link
📹 TikToks
She won’t bite. Steve Irwin style. Link
Tarantino on what your job is. Link
Here’s how you prepare fish for cooking. Link
Bezos in ‘97. Link