✋ Heartcore Consumer Insights

Edition #61

Hi there,

Welcome to the 61st edition of Heartcore Consumer Insights. Curated with 🖤 every week by the Heartcore Team.

If you missed the past newsletters, you can catch up here. Now, let’s dive in!

How to Monetize Culture - Rex Woodbury (Index)

  • The top-earning YouTuber for the last three years running is a 9-year-old boy. His name is Ryan Kaji, he lives in Texas, and he took home $30M last year.

  • But Ryan has also expanded well beyond YouTube: he now has his own product line and merchandising deals with Walmart. Ryan’s income is shifting from advertising to commerce, embodying a broader shift happening across the internet.

  • Ad revenue often isn’t enough to support creators. One study found that reaching the top 3.5% of YouTube channels - which means about 1M views/month—only gets you $12k-$16k a year.

  • A musician on Spotify makes $0.00437 per stream, meaning an artist needs ~3,5M streams just to earn the minimum wage of $15,000 per year.

  • The internet is the driving force of culture: it’s how ideas spread, how content is consumed, how people connect and communicate. Monetizing through ads leaves value on the table; to properly monetize culture, we need more complex, diversified, and innovative models that better capture and transfer value.

  • If YouTube, TikTok, and Instagram are at the top of the funnel for discovery, new tools and platforms will help creators better transact with their communities:

  • Subscription: Discord is perhaps the first horizontal social platform to eschew ads. Instead, power users pay a subscription ($10/month) to Nitro, which unlocks premium features like custom profiles, new emojis, and better video quality. Discord started monetizing in January 2017 and has grown rapidly to $130M in 2020 revenue (up 300% YoY).

  • Microtransactions: A decade ago, microtransactions made up 20% of gaming revenue; today, they make up 75%. As is often the case, the broader consumer internet will follow in gaming’s example. More and more internet companies are offering micro-purchases: Cameo for shoutouts, Superpeer for 1:1 video calls, Jemi for personalized interactions, Looped for virtual events; Streamloots for gaming streamers. Even more traditional social networks are opting for this path: Yubo, a French social network with 40M users, has monetized with in-app purchases and subscriptions from the start. One of the most interesting examples is OnlyFans.

  • Ultimately, it is also clear that advertising has less room to run. The global advertising market was $647bn in 2020, about 50% of which is already online. The global commerce market is $25 trillion, and only about 20% online.

  • The last generation of internet companies was built on advertising, and the next generation will be built on commerce.

Distribution and Conversion models for consumer startups - Bessemer

  • The best consumer companies employ an efficient customer acquisition strategy that enables them to drive growth without jumping onto a treadmill of paid marketing spend.

  • Distribution alone does not define consumer breakouts. Distribution has to be combined with efficient conversion to drive the long-term engagement that creates enduring consumer companies.

  • Popular recent conversion mechanisms:

    1. Auctions: As commerce increasingly moves online, many companies look to replicate the highly engaging behavior of live auctions on their platforms. Auctions play into the human desire to compete for scarce goods with the incentive for users to constantly observe the behavior of others in order to make buy/not buy decisions. Collectibles marketplaces like Whatnot and Loupe generate the majority of their GMV through synchronous online auctions.

    2. Entertainment: live-streaming is one example of how companies can leverage entertainment as conversion. When consumer platforms adopt live-streaming that complements the experience, businesses are able to drive much higher conversion by creating entertaining synchronous experiences. Examples include ShopShops and NTWRK, which both leverage QVC-style live shopping experiences that provide a “lean back” shopping experience through live interactive events.

    3. Community: Monthly is a platform that offers interactive one-month courses with the world’s best creators. Monthly users are grouped into small cohorts that work through course materials together in a month-long experience, sharing updates, feedback, and support with one another. This cohort provides accountability for students and drives much higher course completion rates than almost any other comparable offering.

    4. Gamification: Pinduoduo, China’s $150bn+ social commerce platform, famously leveraged gamification techniques to drive repeat behavior. The app promotes a daily check-in feature where users are rewarded points they can redeem and credit towards in-app purchases. While the level of gamification seen in Chinese consumer apps is not yet prevalent in the Western world, companies are beginning to see the power of gamification. While controversial, Robinhood has gamified aspects of the investing experience, such as the confetti that appears after purchasing a stock. Companies like Duolingo gamify language learning, too, as users earn experience points and have streaks of lesson completion.

🇪🇺 Notable European early-stage Consumer rounds :

  • Gro, a UK-based blockchain finance company, raises $7.1M with Galaxy Digital/Framework/Northzonelink

  • Craft Docs, a Hungary-based collaborative note-taking app, raises $8M with Creandum - link

  • Manual, a UK-based provider of men’s wellness products, raises $30M with Sonoma Brands/Waldencast/Cherry/Felix - link

🇺🇸 Notable US early-stage Consumer rounds :

  • Gloria, a U.S -based online platform for soccer fans, raises $3M with Seven Seven Six /Initializedlink

  • Ensemble, an L.A-based platform designed to help co-parents manage shared expenses for their children more easily, raises $3M with Lerer Hippeau/Citi/TTVlink

  • Lowkey, an S.F-based startup developing a hub for both creating and viewing short gaming clips, raises $7M with a16zlink

  • StarStock, an NYC-based sports cards marketplace, raises $8M with a16z - link

  • SuperRare, a Delaware-based NFT art platform, raises $9M with Velvet Sea/1confirmation/Collaborative/Shruglink

  • Price.com, an S.F-based money savings platform used for comparison shopping, cashback &coupons raises $10M with Founders Fundlink

  • Substack, an S.F-based platform that invites writers to author their own subscription-based newsletters, raises $65M with a16z - link

🔭 Notable later stage Consumer rounds :

  • GoStudent, an Austria-based tutoring marketplace, raises €70M with Coatue/Left Lane/DN – link

  • Zapp, a UK-based on-demand delivery and dark store operator, raises $100M with Lightspeed/Atomico - link

  • Everli, an Italy-based online grocery marketplace, raises $100 million with Verlinvest/Luxor/DN - link

  • Cameo, a Chicago-based startup that lets fans pay for personalized videos from celebrities, raises $100M with e.ventures /GV/Amazon - link

  • Manticore Games, a San Mateo-based platform that invites game makers to build, share, and play online games, raises $100M with XN/SoftBank/LVP – link

  • Tonal, an S.F-based maker of connected home fitness equipment, raises $110M with Dragoneer/Cobalt - link

  • Otrium, a Netherlands-based startup that helps clothing brands sell end-of-season items, raises $120M with Bond/Index/Eight Roads – link

  • Harry’s, an N.Y.C-based D2C maker of shaving equipment and accessories for men, raises $155M with Bain/Macquarie - link

  • Cityblock Health, an N.Y.C-based healthcare provider for lower-income communities, raises $192M with Tiger/Maverick/General Catalyst – link

  • Fetch Rewards, a Wisconsin-based mobile rewards & cash-back shopping platform, raises $210M with SoftBank - link

  • Dapper Labs, a Vancouver-based maker of blockchain-based digital collectibles CryptoKitties and NBA Top ShotNFT, raises $305M with Coatue – link

  • Glovo, a Spain-based on-demand delivery company, raises €450M with Lugard Road/Luxor - link

🍭 Notable Consumer Exits

  • Robinhood files for IPO. Robinhood is Menlo Park-based stock brokerage company that allows customers to buy and sell stocks, options, ETFs, and cryptocurrencies with zero commission, with backers including Index/DST/Sequoia - link

  • Spotify acquires Betty Labs. Betty Labs is an L.A-based start-up focused on creating ground-breaking live audio experiences with backers including Lightspeed/Amazon/Google - link

Heartcore Consumer Insights is a weekly newsletter, covering notable consumer rounds and exits, as well as top content in the B2C space.