🌼 Spring / Sprang / Sprung!
The plethora of content creating during Lockdown 2020 will be analysed by students of pop culture, culture culture and yeast culture for years to come. No doubt, they’ll be most excited by the tidbits we dig up in this newsletter. This month, we throw a spotlight on Indian e-commerce x Facebook, party vibes on the interweb and everyone’s favourite topic: supermarket logistics!
Call me maybe,
Rob & the FI Team
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What's grabbed our attention this month:
Pie in the sky (with diamonds) – KKR led a $43m mid-pandemic Series C in Slice, a platform for mom and pop pizza shops. Slice previously raised $30m for what they call a ‘reverse franchise’ model, giving the OS and vertical-specific economies of scale of Domino’s to small businesses (and they don’t have their own driver network). Their ‘Pizza vs Pandemic’ initiative has so far fed 140k frontline workers since March 18 and helped keep small businesses alive, while getting some anti-carb beef in the twittersphere (identity politics rule!).Â
So what? 1) This round kicked off as the early signs of the pandemic came into play in Feb and got a term sheet in mid-March: the right businesses are still raising - albeit from long-standing relationships; 2) Talk about knowing your customer: the CEO has 34 family members who own pizza joints (interview here); 3) 3rd party on-demand delivery unit economics don’t work (aka why digital-first Domino’s - whose shares are at record highs - still has their own drivers): uniformly unprofitable, Grubhub et al’s pricey commission structure is killing small business’ meagre margins - and now NY, DC and Seattle are introducing commission caps; 4) Pizza is great - never before has it been so easy to eat restaurant food at home (well done, humanity) but carbs and cheese are pretty unbeatable, huh.
You game? – Fortnite just hit 350 million users - and had 3.2B hours of gameplay in April alone. They celebrated with very super famous DJs doing back-to-back sets on it’s new weapon-free game ‘Party Royale’ (a virtual social space for live events, not a fiesta with smoked salmon). Nintendo Switch sales are up 34%, powered by record sales of its new game ‘Animal Crossing - New Horizons’, on track to become one of Japan’s best selling video games of all time. South Korean’s Zepeto, an app that renders selfies into animated avatars and allows users to interact on a social network, just hit 150m users and is now going after the Chinese market.
So what? Is gaming the new social? Was social ever anything other than a game? One thing is clear - going where the eyeballs are is taking brands away to new places: Facebook just launched a new gaming app to take on Twitch and YouTube, and with shopping malls and flagship stores closed, brands like Marc Jacobs and Valentino are moving into virtual worlds like Animal Crossing where people absolutely love to dress up their avatars. Recently launched fashion gaming / social shopping app Drest launches daily styling challenges and partners with 160 brands so that users will ultimately shop items they’ve liked on Farfetch - with brands paying good money for real engagement with actual fans rather than simple likes from potential bots.
Distantly social – A 9-hour DJ set by DJ D-Nice attracted 100,000 party animals on Instagram; 43,000 problem solvers in Germany nearly brought down Slack during one of the biggest hackathons ever; Tinder saw record usage in March, with the use of dating apps up 20%; and Houseparty had 50m sign-ups in just one month. Whoever came up with the term ‘social distance’ was oblivious to the fact that we’re social beings and tech has long helped us overcome physical boundaries to connect - the WHO is now calling it ‘physical distancing’, while presumably Tinder just calls it ‘phone sex’.Â
So what? Anyone who spent the last few weeks on back-to-back video calls will know that working from home doesn't mean working alone. As social habits change, the question is twofold: 1) how will online habits evolve to fill the social hole in our lives and 2) what aspects of IRL experiences will need to change for people to re-adopt them happily in some future post-COVID world? The best solutions will be here for the longrun (and first dates might never quite be the same). It seems likely that digital social tools may become more fully integrated with other leisure and entertainment services - giving companies like Facebook an even more complete view of their users. Questions remain around how to engineer positive serendipity, curtail Zoombombings and tackle online bullying when more of existence is lived remotely.
Grocery store’s the supermart uh-huh – The beat goes on at supermarkets, who’ve seen huge e-commerce growth – and well-documented supply chain, staffing and experience design challenges from the COVID crisis. Americans are now panic buying freezers to store panic bought meat; at least electricity prices are down.. Until recently, 3% of groceries were bought online but in March, Instacart’s order volume shot up 150% vs a year prior, Kroger transitioned a normal store to a dedicated online-order pick-up hub and Amazon and Whole Foods are also trialling ‘dark stores’; it’s now expected that online will account for a double-digit share of the US grocery market going forward. Texas-based H-E-B was ahead of the curve in its preparedness and management of the situation, listened to the data and kicked its plans into action when N95 masks and sanitizer started selling out.
So what? Small-scale (aka bougie) butchers are seeing an increased uptick, accelerating a trend seen prior to lock-down for speciality shopping experiences to complement your online toilet paper purchases – recent YC-grad Vori wants to build a business as their OS and one nice vision of the future includes grocery getters potentially acting as shopkeepers themselves, picking and selecting produce across multiple vendors. But this speaks only to a small part of the market: big box retailers are likely to be the winners from this transformation, especially for more cost-conscious consumers who choose retailers based on coupons, which could drive in-site ad revenue opportunities and ecosystem rewards. The individual consumer data these guys used to dream of will now help them fight back against Amazon – the winners will be defined by how they use it to define their UX, supply chain and logistics.  Â
Love thy neighbour – Facebook invested $5.7bn for a 10% stake in India’s telecommunications behemoth Reliance Jio Platform and plans to integrate with their recently launched e-commerce subsidiary JioMart to allow users to find and communicate with local stores on WhatsApp (in 2019, FB invested $15m in social commerce and YC-alum Meesho, focused on the doubly overlooked female, smalltown ‘India 2’ market). Amazon took less than 24 hours to respond, launching ‘Local on Amazon’ (Amazon committed to investing an additional $1bn to bring SME’s in India online earlier this year). With just 3% of retail being e-commerce, Big Tech’s been salivating over India’s huge neighborhood-shop-economy for a while; now that they also have the second biggest population under strict lockdown, expect (much) more rapid adoption.Â
So what? As the search continues for any remaining untapped profit pools, Big Tech has long hustled to become the e-commerce platform for local shops. Forward located inventory means a lot when delivery time expectations are low - and without strong brands, India’s highly fragmented market of 30m independent stores’ seems ripe for the picking (plus they don’t advertise, so how else are you going to monetise them). Facebook’s other win, of course, is getting deeper integrated with a major telecom that can further grow usage of Facebook’s business and the political clout it brings on the subcontinent. With Facebook Pay about to kick-off in Indonesia - plus Libra - it doesn’t take a rocket scientist to work out where they see the business developing (oh hi, WeChat).
In focus: Orna NiChionna, Chair of Founders Intelligence
Our chair, Orna NiChionna, shared a few thoughts on the current situation, the economic impact and the corporate response.
Orna spent 18 years at McKinsey’s London office, where she was the first woman to be elected partner. Since leaving McKinsey, she has served on boards including Bupa, HMV and Royal Mail. She has been an advisor to Apax LLP and EdenMcCallum LLP and is currently on the boards of Burberry and Saga.
When not on Zoom, we Slack about:
Need for speed: The Economist rightly points out the astonishing speed of response from large organisations that typically spend years to (sort of) make decisions - we’re doing some research on this too, so please reach out with insight and examples.
Imagine there’s no crisis (it’s easy if you try):  This great guide to developing your organisation’s capacity for imagination is one way to get out of the reactive / fetal position (‘how do I deal with this mess?’) and get into more proactive thinking about the future of your business (‘what do we need once this is over?’).
Can I get an encore? VC investor Mary Meeker is famous for her annual internet trend report - some think it’s better than Christmas. She’s now released a special coronavirus edition that looks at the impact of the pandemic on the internet economy. Enjoy!
What we’ve been up to:
Our partner, firstminute capital is hosting a series of webinars with leading entrepreneurs to talk about their first minute - we summarised a few key takeaways from the conversation with Nico Rosberg, Niklas Zennström and Hermann Hauser. If you’re interested in joining some of the next sessions let us know!
We hosted an online panel around corporate <> start-up partnerships to fight the challenges resulting from the epidemic, heard some great examples of collaboration and saw some fantastic start-up responses. Missed it? Watch here.
Some of us participated in the #EUvsVirus hackathon and thought about how small businesses can recover from the shutdown by building community and experimenting with new business models. Watch the 2 minute pitch here
A huge number of amazing events keeps us busy while we can’t go out. We’ve put together this epic list of the best online events in tech & innovation.
PS: We’re also contributing insights to Founders News, a new personalised tech newsletter with info on your network and lots of this content too hatched out of Founders Forum - subscribe here!