This Week in Startups - Best of This Week in Startups: Week of November 16th, 2020

Episode Date: November 21, 2020

E1139 featuring Loop's Brian Gannon: https://rb.gy/6cgsyn E1140 featuring Dishcraft Robotics' Linda Pouliot: https://rb.gy/17iftk E1141 featuring CircleUp's Ryan Caldbeck: https://rb.gy/9mntnq E1142 Emergency Pod!: https://rb.gy/mmmn7d

On episode 1139, Loup CEO Brian Gannon explained the secrets to success in a modern hardware company. It's one word, software. So I wouldn't advise anybody to get into a business that is a hardware product. As an example, Ring Doorbell, I know you could say this is an amazing brand, but it didn't start that way. They made a actual, it's a lot of software. You know, I could give somebody $100 million and they couldn't copy their software. You could copy the hardware in 10 minutes, right? But to create that sort of experience and that type of latency and it's incredible.

So that's how we looked at it from day one. I said, wow, this is really a software meets design. And if we do our jobs right, we're going to be using off-the-shelf commodity hardware components and wrapping it together in a beautiful design and applying a lot of software. And to be fair, I would even argue back in the early days, my inspiration was drop cam. You know, and I just thought... The predator sess it to the Nescam. Correct.

At Google bought the Ness cams were, yeah, really amazing product from day one. And in fact, they took it to an extreme. Their first product they didn't even make. They didn't even say, hey, this is commodity and I'll make it really cheap. They just literally bought something off of Amazon, put a sticker on it, loaded up their software. Oh, wow, I didn't know that. Yeah.

And it was an access camera that was on the market. Literally, they would buy it on Amazon and then ship it on Amazon. with a sticker and they would load up the software. And, you know, they even told me as well, they said, you know, one of the founders, Amir is an advisor to us. You know, by the way, it didn't happen overnight. It took a while for me to meet these folks, right? But, you know, one, they built a huge brand out of it.

You were like, oh, this is a drop cam. This isn't a, you know, web cam, whatever the hell they, you know, the broad majority, which is obviously what we're trying to do as well. But they just started from software from day one. And then the second one is they started from subscription. So, you know, I don't know if this is insider, you know, but they were very, very focused on if this better have a subscription that we can prove early on because that's, you know, essentially my team is all software, right? And I'm sure his team was same sort of thing. I'm sure they had a fraction, maybe 10 to 1, 10 to 1, 10 to 1 I would argue.

On episode 1140, DishCraft Robotics CEO Linda Puglio described how she conceived the idea behind her dish cleaning robots. Sure. So, you know, I believe you have to do the job yourself to really understand it. And so we just started to look at how did dishes get processed? How do the dirty dishes come in? How do they go through a traditional dish machine? How do they come out and then go back into service? And we broke that down into a number of steps. And, you know, and then at first rights for everyone at dishcraft is actually washing dishes themselves. And so we then broke into the first. And so we then broke into all this different steps and said, okay, let's do each part on its own and then stitch it together. Because again, with robotics, as long as you can simplify it, it just makes everything much, much

easier. So what we do is we, dishes come in, they go into a collection system that is nice and tidy and clean and saves a commercial food service place space. Those dishes are really going into carts. We take those carts and bring them over to the robot, and it almost acts as a cartridge. And when you push the cart in, then the robot takes over from there. It picks up every single item. It recognizes, is this a bowl or is a plate? Is there something on it that could harm me? And then it goes through, does a pre-w rinse cycle. And then it inspects it for cleanliness. If it's past inspection, it racks it, pushes that rack into a traditional dish machine. And then on the other side, we now have a robot that will pick it out of the rack and put it into clean carts.

On episode 1141, CircleUp's Ryan Caldbeck spoke about what steps could be taken to improve founder mental health. I wish that the incubators, I wish that the seed funds, I wish that the business schools or the engineering schools, anyone who is producing entrepreneurs, I wish they would talk about mental health. And I wish they would talk about ways to support your mental health, the entrepreneur's mental health. I wish that they would talk about it both for the entrepreneurs themselves and the investors that would back them to build empathy. It is by far the thing that I have seen be the most difficult for founders to deal with.

And those that are talking about it and talking about the struggle, in my experience have been the ones that have dealt with it in the healthiest way. The ones that you ask, you or anyone in this listening, ask and respond with, oh, things are great. I really, I just, I love my job. Things are great. The company's crushing. Crushing it. They're the ones that are struggling the most.

And this isn't a matter of like how successful the company is. I've talked to, I had multiple founders of unicorns reach out to me with stories, worse than mine that they don't feel comfortable talking about. Like, let's let that settle. Like, worse than mine that they don't feel comfortable talking about. And that loneliness compounds on itself. And in my case, it was too much. Or I didn't handle it well, I should say.

And I should have found help earlier. And I think that would have allowed me to stay in the seat and be more effective. On episode 1142, Jason compared Robin Hood. and Airbnb's 10-year outlook as public companies. It's going to be very, very hard to do these next two, because I believe the next two companies have a chance, and I know this sounds crazy here. We're sitting here and these companies are worth tens of billions.

I think these are trillion-dollar companies. I think these are companies that we will look at in a decade, like we look at Facebook, Google, Amazon, and Apple. these are the next generation of trillion-dollar companies. I am, in fact, certain of that myself. If I could only put my money into 20 companies in the market, both of these companies would be in those 20, because they are so loved and transformative.

And I can tell you they share something in addition to having the pandemic driving them, right? People did not want to stay in hotels because hotels have elevators, elevators contain coronavirus and staying in a single family home or a small apartment complex or a townhome that is much safer, much safer than staying in a hotel. And people are doing staycations and they want to do extended stay because they wanted to leave cities where the coronavirus where it was like New York or maybe Los Angeles and they wanted to go to the country. So, Airbnb

panicked when, I mean, they were terrified and rightfully so. Brian Chesky is a brilliant founder. I've been trying to get him on the pod for a decade. I don't think he likes me for some reason. Not sure why. I keep asking him. He keeps saying no. I don't know if it's personal or not, but the invitation's there anytime.

I'd love to tell the story of Airbnb on the pod. But putting that aside, this is a juggernaut of a business, and this had to be hard because Brian is, just clearly one of those guys who, you know, entrepreneurs who has all their emotions right on their sleeve, they had to lay off. Did they do a third of the staff, I think, 25% of the staff? It was, they gutted the joint and they had massive layoffs. And then they found out they probably didn't need to cut that many people, but they cut all of these high and expensive employees. And they treated them phenomenally on the way out, gave them huge.

exit packages. But here you go. They make these massive cuts and then revenue bounces back. I heard from many people, Q3 was looking like this juggernaut of a quarter. And in fact, according to all reports, they are crushing it. Bounce back in revenue from Q2 of 2020 to Q3. They went from $335 million to $1.3 billion. It is just insane. How lucky they got in this series of events. And a lot of times in business, luck is involved. And you set yourself up for luck by taking action. They took quick action. They were conservative. They cut all these expensive positions to be conservative. They cut all these extra projects they were doing. There's been talk about Brian wants to do an airline. Maybe they want to buy hotels. Maybe they want to start

building their own buildings. This is an ambitious company. And those projects will come back in the future. Congrats to my team, my squad at Sequoia. Congratulations to Sequoia for being the largest shareholders outside of the founders. They got 13% of this. You know, and Andreessen Harowitz going around like championing themselves as this incredible firm with their little 3% of Airbnb. I mean, that just tells you everything you need to know. They're banging the drum A16Z like they built Airbnb.

Like one quarter. I mean, when people talk about why does Andreessen Horowitz have, have bad returns. The information was talking about, oh, leaked stuff. Here's how bad their returns are. I mean, A16Z had less than Founders Fund, less than Greylock, and not even, you know, it's apparently not even a quarter of what Sequoia had. So sometimes you have people who make a lot of noise in the Valley, Mark Andreessen, Ben Horowitz, and they, you know, oh my God, they're the big investors in Airbnb. But maybe they're just making a lot of noise. And, the empty can makes the most noise. Sequoia, boom, 13% of this. Oh my lord, yum, yum. This is going to be

an unbelievable return for Sequoia Capital and obviously the founders. And you never hear a peep from Sequoia. You know, that's how you know the winners. You know, Michael Jordan, you know, he might take things personally, whatever, but, you know, he's not like dunking the ball and then screaming and yelling when he's down 50 points. Like, that's kind of the Andresen Horowitz move. here comes Robin Hood. I was lucky enough to be an angel investor in the firm before they launched. Vlad has been on the pod episode 736 back in 2017. He's spoken out of events. And now you start thinking about what happened during the pandemic. Well, no sports, no gambling. When he pitched me Robin Hood, he pitched me Robin Hood as a platform for millennials to get involved

in investing and educate themselves on investing for their futures. And I said, but millennials are still on their parents' Netflix accounts and they don't even have like, they don't want to sign leases. And they just seem to be the least of all the generations to go after. Like, my gosh, like, why would you go after this group? Like, they're, they're seriously commitment phobic. They don't get married. They don't buy homes. They just seem to be a little bit flighty. And they got a lot of feelings. And they stay. jobs for six months and, you know, they don't have a problem with that. And you know what? I give millennials a lot of credit for actually prioritizing the here and now and being present, but I didn't

think that millennials and all these people would say, you know what, I should download an app and maybe learn how to trade. Well, a couple of things happened during the pandemic. People couldn't bet on sports because sports wasn't happening. So some of that energy, according to reports, I don't have any inside information. Honestly, I don't. Went to. maybe people saying, I want to gamble on stocks. Maybe I want to buy some Apple at Uber. Maybe I want to buy Airbnb when it finally goes public. So they are not filed yet, but Vlad is now the official CEO, not co-CEO. That's a sign that they're dialing it in. About 40 to 55 percent of their revenues, according to sources, this is not from my information. I don't have actually the information.

I'm such a small investor that I don't have the details because I don't have information. rights as a small investor in a company. I'm not on the board either. But, you know, in Q2, maybe $200, $180 million, which is 40 to 55% of the total revenue. You know, wouldn't be surprised if they are between 15 and 20 million user accounts. And they added, according to sources, 3 million new users from January to May in the year of 2020, the great year of the pandemic, the median age of Robin Hood users is just 31 years old. So let's pause on that. Let's pause on that for a second. The average age is 31 years old. That means that these Robin Hood users, when you bet on Robin Hood, you're betting on a group of people who are

going to double their net worth every number of years, five years, ten years. 10 years. These are the people who are smart. They're educated. They are going to have massive amounts of discretionary income. Robin Hood could be a bank. Robin Hood could do mortgages. Robin Hood could buy other companies. I think Robin Hood becomes a brand that just becomes the bank trading, savings, everything of the future. I think literally, you know, the sky is the limit. there could be absolutely hundreds of millions of members for Robin Hood. Now, I am talking my own book because I own shares in Robin Hood. It's going to return if things go according to plan. It will probably return the entirety of my first fund, perhaps at a multiple. And that's what

you're looking for as an investor. So which one of these two companies would be the better investment for the next decade? This is a hard one because both of these companies, companies fit into a model I call startups that induce a market. In other words, they are so compelling in their product design. They're so good at what they do. They have such amazing brands with such amazing products. They induce a market. In other words, they, by their existence, get people to do an activity. This happens very rarely. Uber and Postmates got people to order food and lift and to take more rides. Airbnb got people to take more vacations and longer vacations and staycations and Robin Hood got more people to trade stocks more often because they made it

free. Airbnb did it because they made it super cheap because you could have eight people staying in an Airbnb instead of having four hotel rooms and the eight purse, the four bedroom Airbnb cost what two hotel rooms cost and it had a kitchen so you saved all that money on room service. You get the idea. These are just two transformational products. of this week in startups is brought to you by Clavio is the e-commerce marketing platform that helps brands build relationships with memorable email and SMS messages. Today, more than 50,000 brands like LivingProof, Hint, and Chubbies, choose Clavio to help

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