✍️ WHAT CAUGHT OUR EYES
Dashing to IPO
Doordash dropped its S-1 this week. Very transparent & well-argued prospectus.
Highlights of a few compelling elements:
Doordash reveals incredible detail in its cohort data. Perhaps the most important chart in the entire S-1 is the cohorted contribution graph:
DASH defines contribution profit (CP) as gross profit less sales & marketing costs.
CP is negative in Y1 due to spend on customer acquisition. In subsequent cohort years, DASH levels out its re-engagement marketing spend to ~2% of gross order value (GOV). That implies gross profit (GP) rises to 10% of GOV as cohorts age.
DASH invests around 7-10% of GOV to acquire a customer in Y1. That customer then generates 5-8% of GOV of CP in each year thereafter. This implies a 12-18 month payback on customer acquisition, and 3-4x LTV/CAC over the first 3 years.
In addition, DASH gives us some insight into the compounding GOV growth of its cohorts with the following table:
The consequence of these stable cohorts and attractive marketing payback ratios is that DASH will be able to compound its growth for years to come. Over time, this dynamic can result in significant operating leverage.
DASH increased its take rate from 10% to 11% from 2018 to 2019, traded off improvements in COGS (-8% to -6%) for additional investments in sales & marketing (-5% to -7%), maintaining a constant CP of -2%: management is investing additional cash flows from operational improvements in growing the business faster.
Why this strategy? DASH boils down its business to 3 virtuous flywheels:
With this in mind, you can see why DASH would plough its margin gains into increased spending on growth. More growth drives the flywheel faster, which brings more future margin improvements.
The S-1 is also littered with little insights that show the distinctive way in which DASH operates. Here’s an excerpt from the cultures/value section: “Averages in our industry are meaningless, it’s the distribution that matters. No consumer cares if our average delivery time is 35 minutes if they received their food in 53 minutes (…) This is one reason why everyone at DoorDash, including me, tries to step out of our day-to-day roles once a month to do a delivery or engage in customer support, menu creation, or merchant support”
Getting obsessed with the tails of the curve, not the average, is a great way to encapsulate what’s necessary to succeed in consumer-facing businesses. Fans are earned or lost at the margin. It’s not the average performance that counts.
Live shopping isn’t coming — it’s already here
Singles Day in China is closely watched because of the record-setting sales volumes it generates.
In 2019, Alibaba alone sold over $38bn worth of merchandise on Singles Day. That was more than 4 times the volume that every company in the US generated on Cyber Monday combined (which added up to a comparatively meager $9.4bn in sales).
Last year’s Singles Day event was already a coming-out party for live shopping in China as Alibaba disclosed impressive stats from Taobao Live, which included: $2.8bn in total live shopping sales & 17k brands who live-streamed to more than 500M viewers.
COVID-19 has boosted live shopping to even new heights in 2020 as Alibaba reported a 7x increase in new merchants live streaming on their platform this year. At the current growth rate, we may see live shopping account for a full 25% of all Singles Day sales this year, up from zero just a few years ago.
As live shopping is poised to break out again during China’s biggest eCommerce event of the year, why hasn’t online live shopping broken out yet in the US?
What is it that makes live shopping special in the first place? The format has 3 important benefits: a) Storytelling: video itself, the combination of sight + sound + motion, has no peer in its ability to tell rich stories, b) Intimacy: personal feel that draws viewers in as if they are listening to a conversation with an enthusiastic and knowledgeable friend, c) Authenticity: it’s harder to fake things in video, compared to text and images. Video is simply more authentic than other media formats.
These 3 benefits match exactly to a traditional purchasing funnel:
You can argue that online live shopping hasn’t had a defining moment in the US yet, but if you break down online live shopping into its individual benefits, there are clear examples of breakout momentum already happening:
For storytelling, take Apple’s annual WWDC conference, which drew an online audience of 22M this past June. That’s 22M people that watched what was effectively a live commercial promoting Apple products through news and narrative.
For intimacy, take the unboxing video category on YouTube with charismatic social media influencers expertly playing the role of shopping host as they open, use, review, and opine on products. This has led to 68% of YouTube users reporting that they watch YouTube videos to help them make a purchase decision.
That brings us to authenticity. Only in China has the authenticity benefit proven invaluable because of the greater prevalence of counterfeit and fraud with online transactions. In the US, where there is buyer protection programs, credit card disputes, and other ways to safeguard the purchaser, shoppers don’t really need live shopping’s authenticity.
While online live shopping spans the full purchase funnel in China, it’s an upper-funnel experience in the US. That doesn’t mean that live shopping hasn’t seen big success in this country. It just means that success has been mostly within the awareness and consideration steps, instead of generating the kind of big sales numbers that China can tout.
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👏 WHERE THE MONEY WENT
🇪🇺 Notable EU early stage Consumer rounds :
Cooper, a Netherlands-based professional networking app, raises $2M with Comcast/LocalGlobe/468 - link
Stakester, a London/NYC-based venture that lets video-game players compete for money as they challenge each other in popular titles, raises $2M with RTP Global - link
Razor Group, a Germany-based acquirer and operator of Fulfillment by Amazon brands, raises €10M with Redalpine/468/Presight/GFC - link
🇺🇸 Notable US early-stage Consumer rounds :
A-Frame, a US-based accelerator of celebrity-led sustainable brands, raises $2M with Initialized - link
Maude, a US-based sex wellness essentials startup, raises $2.2M with Cassius/ True/RRE/Outbound/Vice - link
Didactic, a US-based cohorts-based education startup in pre-launch phase, raises $4.3M with First Round - link
Levels, a US-based maker of wearable metabolic sensors that monitor glucose levels, raises $12M with a16z - link
Eclipse Foods, a US-based non-dairy frozen dessert brand, raises $12M with Forerunner - link
Popshop Live, a US-based live-streaming app that enables individuals and businesses to sell products directly to customers, raises an undisclosed with Benchmark - link
Truebill, a US-based company helping users canceling subscriptions and negotiating bills, raises $17M with Bessemer - link
🔭 Notable later stage Consumer rounds :
Tibber, a Sweden-based digital energy company, raises $30M with Eight Roads/Balderton/Founders Fund - link
Yubo, a France-based social networking app to meet new people randomly, raises €40M with Gaia/Idinvest/Iris/Alven/Sweet - link
Strava, a US-based cycling and running social network, raises $110M with TCV/Sequoia - link
🍭 Notable Consumer Exits
Airbnb files for IPO. Airbnb is a US-based peer-to-peer home-rental company, with backers including Sequoia/a16z/TCV/ACE/Bracket/Capital IG/ Altimeter/FirstMark and more - link
DoorDash files for IPO. DoorDash is a US-based food delivery startup, with backers including T. Rowe Price/Fidelity/DST/Durable/Sands/Coatue/ Darsana/Dragoneer/Temasek and more - link
Much 🖤 from Heartcore