Interview with an LP: Building (And Evolving) A Generational Fund Returns Platform

This post is curated by Keith Teare. It was written by Welly Sculley. The original is [linked here]


  • VenCap International, a UK-based fund-of-funds, has been investing successfully in VC funds since the late 1980s with a “generational fund returns” strategy

  • Chris Witherspoon was one of the LP experts in Oper8r’s first cohort, and now shares his perspectives on what makes an outstanding VC

  • For emerging VCs, specificity of strategy and focus is critical in the near-term. Also important is having a clear vision for the long-term trajectory of the firm

  • Develop strong relationships with LPs – even between funds – by showing proof-points that the original strategy is actually working… or show that a new and better one is taking shape

We welcome Chris Witherspoon from VenCap International, the Oxford-based, ~$2B fund-of-funds platform founded in 1987 that has made over 300 fund commitments into VC funds in the US, Europe, India, and China. VenCap has consequently built one of the most coveted portfolios in the world. 

Chris joined us in our summer cohort to share his perspective with its members. He joins us again to share his perspectives.

Chris, we’re delighted to have you again! To start, tell us a bit about yourself and your firm

Thanks Welly. Brief background. I hail from Gateshead in England – I share this honor with Brian Johnson, the lead singer of AC/DC. Needless to say, one of us took the more exciting career path (sorry, Brian!). I spent the early part of my career at KPMG – between the UK, Hong Kong, Middle East, and South Africa – before joining the British Business Bank to focus on emerging VC, then to VenCap, where I have spent the last four years.

VenCap is a VC-focused fund-of-funds based in the UK. We’ve been investing in VC funds since the late 1980s. During that time we’ve been incredibly lucky to have indirect, early-stage exposure to category-defining companies including Amazon, Google, LinkedIn, and – more recently – Zoom, Pinduoduo and Snowflake.

Who are your LPs? What are your LPs trying to optimize for?

Our LPs are a mixture of pension funds, family offices, and endowments primarily based in Europe. Across this group, there are different investment strategies being executed. However, one prevalent theme is that they are looking for exposure to the next generation of market-leading businesses, and believe that the vast majority of these will emerge from the VC industry.

Our current strategy (linking back to your recent article looking at LP motivation for investing in Emerging VCs) is most similar to “generational fund returns” in that we back a concentrated group of firms that have demonstrated an ability to identify and access those outlier companies that drive returns for the entire industry, and show potential to do so across multiple funds. These funds invest primarily in the US, but also China, India, and Europe – reflecting the global nature of VC in 2020.

What does success for a “generational fund returns” strategy look like for you?  

We’re fortunate to have a relatively large data-set covering 322 funds and more than 12,000 companies. 

One of things we’ve observed over that length of time is that VC is a pretty tough business! As an example, more than half of all underlying portfolio company investments lose money. Our data shows that even the very best funds lose money on north of 40% of deals. 

What separates great funds from the crowd is less the ability to avoid losses, and much more to find a company, or companies, that return 10x cost or more.

Source: VenCap International, 2001-2014

This chart, which shows where the value in a fund has been created across our early-stage portfolio from 2001-2014, brings this point into focus. More than 70% of ALL of the value created by 3.0x net funds comes from individual companies that returned 10x cost or more.

What do you normally look for in an established VC? 

Our aim is to construct portfolios of funds run by investors that operate with a “fund returner” mindset. We’ve found this to be a successful formula for delivering consistently strong returns to our LPs, vintage in, vintage out.

However, it is important to note that whilst having a fund returner in the portfolio is essentially a prerequisite for outperformance at the fund level when it comes to early stage investing, fund returners come in many shapes and sizes, particularly as it relates to portfolio construction:

  • Single digit initial ownerships through to north of 20%

  • Less than 1% of committed capital invested in a fund returner up to 17%

  • Exit ownerships ranging from less than 2% to 50%

In other words, we’re looking for early stage funds to swing for the fences, and recognize that these swings can look very different, so are agnostic as to which technique is pursued to achieve that.

Over and above the potential for outperformance, we expect to commit to VCs over the course of multiple funds – a “generational” relationship – so we want to back firms that are building for the long-term.

Our strategy is not suited to backing managers that are looking to capitalise on a short-term opportunity over building a long-term franchise. It’s one of the reasons we’ve tended to steer clear of funds that expect to focus only on a single sector or technology over the long-term. Given that trends have a habit of fading, we need confidence that the VC will have a strategy that will outlast the trend.

What do you look for in emerging VCs that’s different from established VCs?

We typically think of any firm that is on its first three funds as emerging. We also expect that the managers have sufficient investing experience to let them weather various market conditions, or at least a team around them (e.g. advisors) that can help them with this. 

We apply the same set of criteria to the assessment of an emerging manager as compared to an established group. The difference lies in the availability of data, both qualitative and quantitative, upon which to base an assessment. Therefore, we’re looking for proxies that would point to an ability to identify and access future fund returners. This is a likely to be some combination of:

  • Evidence of a network with the potential to produce exceptionally high quality deal-flow. Some of the types of individual who tend to be best placed to demonstrate this include: 

    • Former tech entrepreneurs

    • Early employees of breakout tech companies

    • Individuals who have carved out a reputation at more established VC firms

  • Positive “off-list” references from others in the relevant ecosystem including GPs and LPs – especially within our network

  • Track record from Angel investing and/or prior firms with an emphasis on quality over quantity, i.e. letting your schedule of investments demonstrate that you are able to recognize actual or potential fund returners

  • Regarding potential fund returners, these may be companies in the existing portfolio that, whilst they may not yet be stone cold winners, carry the hallmarks of becoming a category-defining business (e.g. established VCs with long histories of capturing fund returns are consistently following your deals)

One area we over-index on relative to an established firm is vision with respect to how the firm will evolve. We’ve had some very positive experiences with firms that have started small but had a strong view on where they wanted to be in the medium to long-term. There are many examples of firms- now considered amongst the strongest Silicon Valley early-stage investors – that started with a very narrow focus, but had a clear vision for how to expand on it.

What should emerging VCs be doing differently? 

As you highlighted in your previous article, LPs have different motivations, goals and strategies that drive their attitude to VC. 

Putting the time in to understand what motivates LPs you believe would be a good fit for your strategy and catering your message to your audience will pay dividends, which is why I think the data that you are collating and sharing at Oper8r is incredibly useful – it helps both VCs and LPs execute their roles more efficiently.

Also try to build relationships with LPs when you are not fundraising. 

Mark Suster wrote a blog post several years ago talking about investing in lines, not dots. We think that principle can also be applied to LPs. Part of my job is to demonstrate that a firm has made real progress against its strategy and vision, and should belong in our portfolio. As an emerging VC, you can help me with this by sharing those proof-points along the way.  

Chris, thank you again for sharing your expertise! 

My pleasure!

RT @villi: Tell you one thing I have noticed about Alfred Lin (whom I don’t know). At demo day, all investors gather to see each other, han…

This post is curated by Keith Teare. It was written by Villi 🇺🇸 (@villi). The original is [linked here]

Quoted Tweet:

Ranking Asset Classes by Historical Returns (1985-2020)

This post is curated by Keith Teare. It was written by Jenna Ross. The original is [linked here]

Historical Returns by Asset Class

Historical Returns by Asset Class (1985-2020)

Mirror, mirror, on the wall, is there one asset class to rule them all?

From stocks to bonds to alternatives, investors can choose from a wide variety of investment types. The choices can be overwhelming—leaving people to wonder if there’s one investment that consistently outperforms, or if there’s a predictable pattern of performance.

This graphic, which is inspired by and uses data from The Measure of a Plan, shows historical returns by asset class for the last 36 years.

Asset Class Returns by Year

This analysis includes assets of various types, geographies, and risk levels. It uses real total returns, meaning that they account for inflation and the reinvestment of dividends.

Here’s how the data breaks down, this time organized by asset class rather than year:

  U.S. Large Cap Stocks U.S. Small Cap Stocks Int’l Dev Stocks Emerging Stocks All U.S. Bonds High-Yield U.S. Bonds Int’l Bonds Cash (T-Bill) REIT Gold
2020* 1.5% -5.5% -10.3% -0.7% 4.9% -0.5% 2.6% -0.7% -16.4% 21.9%
2019 28.5% 24.5% 19.3% 17.6% 6.3% 13.3% 5.5% -0.1% 26.1% 15.9%
2018 -6.2% -11.0% -16.1% -16.2% -1.9% -4.7% 1.0% -0.1% -7.7% -3.2%
2017 19.3% 13.8% 23.8% 28.7% 1.4% 4.9% 0.3% -1.3% 2.8% 9.3%
2016 9.7% 15.9% 0.4% 9.5% 0.5% 9.0% 2.5% -1.8% 6.3% 6.6%
2015 0.6% -4.3% -0.9% -16.0% -0.3% -2.0% 0.3% -0.7% 1.6% -12.3%
2014 12.8% 6.7% -6.4% -0.2% 5.1% 3.9% 8.0% -0.7% 29.3% -1.2%
2013 30.4% 35.8% 20.3% -6.4% -3.6% 3.1% -0.4% -1.5% 0.9% -29.0%
2012 14.0% 16.2% 16.5% 16.8% 2.4% 12.5% 4.5% -1.7% 15.7% 6.5%
2011 -0.9% -5.5% -15.0% -21.0% 4.6% 4.2% 0.8% -2.9% 5.5% 5.5%
2010 13.4% 26.0% 6.8% 17.2% 5.0% 10.9% 1.7% -1.5% 26.6% 26.0%
2009 23.3% 32.7% 24.9% 71.5% 3.2% 35.6% 1.6% -2.4% 26.3% 20.2%
2008 -37.0% -36.1% -41.3% -52.8% 5.1% -21.3% 5.5% 2.0% -37.0% 5.4%
2007 1.3% -2.7% 6.8% 33.6% 2.8% -1.8% 0.1% 0.7% -19.7% 25.8%
2006 12.9% 12.9% 23.1% 26.3% 1.8% 5.7% 0.5% 2.1% 31.8% 19.3%
2005 1.4% 3.9% 9.8% 27.7% -0.9% -0.5% 1.8% -0.5% 8.3% 13.0%
2004 7.3% 16.2% 16.5% 22.1% 1.0% 5.2% 1.8% -2.0% 26.7% 1.4%
2003 26.2% 43.1% 36.1% 54.7% 2.1% 15.1% 0.4% -0.9% 33.3% 19.2%
2002 -23.9% -21.8% -17.6% -9.6% 5.8% -0.6% 4.2% -0.7% 1.3% 20.8%
2001 -13.3% 1.6% -23.1% -4.4% 6.8% 1.3% 4.6% 2.6% 10.7% -0.4%
2000 -12.0% -5.8% -17.1% -29.9% 7.7% -4.1% 5.4% 2.5% 22.2% -9.6%
1999 17.9% 19.9% 23.6% 57.3% -3.4% -0.2% -0.6% 2.0% -6.5% -1.7%
1998 26.6% -4.2% 18.0% -19.4% 6.9% 3.9% 10.2% 3.5% -17.7% -2.4%
1997 31.0% 22.5% 0.0% -18.2% 7.6% 10.0% 8.9% 3.5% 16.8% -23.2%
1996 18.9% 14.3% 2.6% 12.1% 0.3% 6.0% 8.3% 1.9% 31.4% -7.7%
1995 34.0% 25.6% 8.4% -1.9% 15.3% 16.2% 14.3% 3.1% 10.0% -1.7%
1994 -1.5% -3.1% 4.9% -10.1% -5.2% -4.3% -7.3% 1.3% 0.4% -4.9%
1993 7.0% 15.5% 28.9% 69.4% 6.7% 15.1% 10.7% 0.2% 16.3% 13.9%
1992 4.4% 14.9% -14.7% 7.8% 4.1% 11.0% 3.3% 0.6% 11.2% -8.7%
1991 26.3% 40.9% 8.7% 54.5% 11.8% 25.2% 7.5% 2.5% 31.5% -12.5%
1990 -8.9% -22.8% -27.9% -16.1% 2.4% -11.3% -2.7% 1.6% -20.3% -8.3%
1989 25.5% 11.0% 5.6% 56.9% 8.6% -2.6% -0.6% 3.7% 3.9% -6.8%
1988 11.3% 19.7% 22.8% 33.9% 2.8% 8.8% 4.4% 2.1% 8.6% -19.6%
1987 0.3% -12.7% 19.3% 9.3% -2.8% -1.7% 4.5% 1.3% -7.8% 19.0%
1986 16.8% 4.5% 67.5% 10.4% 13.9% 15.6% 10.1% 5.0% 17.7% 17.9%
1985 26.4% 26.2% 50.3% 22.9% 17.6% 17.5% 7.0% 3.8% 14.6% 1.7%

*Data for 2020 is as of October 31

The top-performing asset class so far in 2020 is gold, with a return more than four times that of second-place U.S. bonds. On the other hand, real estate investment trusts (REITs) have been the worst-performing investments. Needless to say, economic shutdowns due to COVID-19 have had a devastating effect on commercial real estate.

Over time, the order is fairly random with asset classes moving up and down the ranks. For example, emerging market stocks plummeted to last place amid the global financial crisis in 2008, only to rise to the top the following year. International bonds were near the bottom of the barrel in 2017, but rose to the top during the 2018 market selloff.

There are also large swings in the returns investors can expect in any given year. While the best-performing asset class returned just 1% in 2018, it returned a whopping 71.5% in 2009.

Variation Within Asset Classes

Within individual asset classes, the range in returns can also be quite large. Here’s the minimum, maximum, and average returns for each asset class. We’ve also shown each investment’s standard deviation, which is a measure of volatility or risk.

Return Variation Within Asset Classes Over History

Although emerging market stocks have seen the highest average return, they have also seen the highest standard deviation. On the flip side, T-bills have seen returns lower than inflation since 2009, but have come with the lowest risk.

Investors should factor in risk when they are looking at the return potential of an asset class.

Variety is the Spice of Portfolios

Upon reviewing the historical returns by asset class, there’s no particular investment that has consistently outperformed. Rankings have changed over time depending on a number of economic variables.

However, having a variety of asset classes can ensure you are best positioned to take advantage of tailwinds in any particular year. For instance, bonds have a low correlation with stocks and can cushion against losses during market downturns.

If your mirror could talk, it would tell you there’s no one asset class to rule them all—but a mix of asset classes may be your best chance at success.

Subscribe to Visual Capitalist

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

The post Ranking Asset Classes by Historical Returns (1985-2020) appeared first on Visual Capitalist.

10 Characteristics Which Make A Truly Great Venture Capital Investor

This post is curated by Keith Teare. It was written by J. Skyler Fernandes. The original is [linked here]

10 Characteristics Which Make A Truly Great Venture Capital Investor

To VC, or not to VC, that is the question?

Article originally featured in ValueWalk

As a VC for the past 10+ years, I have had the pleasure of meeting thousands of investors at many stages of their journeys, from analysts to first time fund managers to VCs with 30+ years of investment experience. As such, I am often asked what are the key factors in becoming a top VC.

Research suggests that entrepreneurial experience separates top VCs from other investors. However, one needs to only look at the amazing careers of industry leaders without an entrepreneurial background like Michael Moritz, Fred Wilson, or John Doerr to debunk that theory. In fact, a recent TechCrunch study found that on average, only 27 percent of the partners at a randomly chosen sample of VC firms in the US had experience working as founders or senior executives at entrepreneurial companies.

While first-hand experience of growing a business is undoubtedly a plus, experience has taught me that when assessing investors, more often than not, the difference lies in character and quality investment experience more than anything else. It’s the point of nature (character) vs. nurture (relevant VC experience, which is rare and hard to acquire). You need both, but the challenge is that unfortunately going to a great undergrad or MBA, or working at a top investment bank or consulting firm, doesn’t prepare you with the skills needed to be a great VC.

With that in mind, here are the top ten characteristics I believe make a truly great venture capital investor:

  1. Intellectual curiosity

As an investor, you never know what pitch is coming through your door next. As such, effective VCs need to be constantly clued in about emerging technologies and product trends, which requires constant learning. The best VCs are both broad and deep in their knowledge bases and are open to new ideas, and ways of thinking. The level of intellectual curiosity an individual has in my experience has been a key indicator of whether they will initially enjoy doing VC and be any good at it.

If all you’ve been is an expert and founder of a company in one particular field, it increases the chance of missed opportunities you may see and be comfortable with.

2. Dynamic thinking

Great VCs are always thinking ten steps down the road, which can split into a variety of paths, and are able to be hyper-focused on business value and potential strengths, regardless of how ‘out there’ the pitch is. Many of today’s unicorns started off as a completely different product or service, so seeing various potential successful outcomes, and backing founders who can also think dynamically about their business to produce a successful pivot at a later stage is essential.

One of the interview questions I use to test this characteristic is ‘tell me ten or more things you can do with a brick?’ Potentially great VCs will have a lot of fun with this game, while those who get stressed might not be a great fit.

3. High degree of stamina

Being a VC is draining. Many people enjoy pretending to be a shark on Shark Tank from their couch, but could you actually meet 5–10 startups a day and still be excited about your job?

Regardless of whether it is your first or last pitch of the day, VCs need to stay focused and be able to differentiate between misleading ‘shiny objects’ and the true ‘diamonds in the rough’. Just because you have seen five bad blockchain pitches doesn’t mean the next one might not be a winner.

I have had lots of success in the retail subscription box space because I have seen so many pitches in that space and learned through osmosis. Great VCs are able to look past a boring pitch to find the real potential.

4. Networking abilities

Are you constantly networking both in the investment and startup communities and corporate industries? Your network is your toolbox, and the most powerful VCs know that by leveraging their networks correctly, they can create a network effect which can be used not only for deal sourcing but also to support their portfolio companies.

Being able to source proprietary deal flow through your network is probably the number one differentiator in top VCs, and is what keeps top VCs at the top with an unfair competitive advantage. Even if an individual investor that works at a top VC isn’t all that great compared to an average VC investor, they outperform because of their access to top quality and quantity of deal flow.

When assessing potential VC investor hires, I often look at how many mutual connections I have with a candidate on LinkedIn, as this shows how much effort someone has put into cultivating their network.

But remember, quality always beats quantity when it comes to networking, so it’s important to maintain contact with your network over time.

5. Calculated risk-taking

Being able to take calculated risks is an art form. The best VCs are constantly assessing risk vs reward to get the biggest return across a portfolio of companies.

VCs need to develop key metrics and qualities they look for which allow them to quickly highlight potential outperformers. Over time this will develop into a strong gut muscle for when things feel right, but being able to do this without taking on too much risk means being extremely clear on what metrics or qualities are important to you as an investor. To do this effectively, VCs also have to have a good understanding of different markets and consumer trends to reduce market sizing and timing risks.

6. Open-mindedness

VCs need to be open to finding good ideas that initially look like bad ideas.

Sometimes entrepreneurs have unlocked a secret about a market that other people haven’t uncovered, so it’s important to have an open mind when considering pitches. That said, it is still important to support logic with facts — so you must be able to think outside the box without getting carried away in the moment or with a shiny object.

7. Willingness to get involved

Companies are looking for VCs who offer more than just capital. They want people who are willing to get involved and get their hands dirty. This could be helping the company meet business goals, find new talent or customers, or giving your two cents worth about the best direction to take the company.

In the past, I have become the interim CFO of portfolio companies in stormy waters, and have a ‘black book’ of more than 1,000+ industry contacts which I open up to my portfolio companies to help them accelerate growth. Your experience and network are equally as valuable as your checkbook.

8. Conviction

Great VCs never say maybe, instead they find a balance between gut-based decisions and methodical/data-oriented decisions, which allows them to choose between two options: pass or invest.

This is especially important if you are the lead investor on a round, because if you can’t make a decision quick, another fund may beat you to drafting a term sheet. If you are a co-investor then you may have more time as a round is coming together, but if a round is towards the end of being completed, you have to be able to move quickly too.

9. Emotional regulation

To be a VC which people want to work with, it’s best to avoid coming across as cold hearted (a common criticism of VCs). However, while the best VCs have emotional connections and positive relationships with their portfolio companies, they don’t let this affect their decision making when it comes to crunch time.

The hardest part of being a VC is deciding whether to let your underperforming companies die gracefully, die-hard, or to put in the effort to help find a way to at least get some or all of your money back by finding a safe home for the company. You need to be non-emotional in how you deal with portfolio companies and most importantly build up your stakes in the ones that are actually performing the best.

Being too quick to let companies die leads to underperformance as a VC, but investing good money after bad can also quickly lead to little or no return! How you manage your follow-on investments, and how you help your worst companies without investing more capital, is a huge part of being a great VC.

10. Business acumen

Having the ability to look across sectors and understand market sizes, market opportunities and market timing is essential. In the VC industry, being early is the same thing as being wrong.

While consultants are good at evaluating markets, VCs are often faced with the unique challenge of evaluating markets that don’t exist yet or are in their early days. In my experience, the best VCs can do an industry assessment of market size on the back of an envelope, based on solid logic alone.

“We determined that bitcoin was not a security, it was much more a payment mechanism and stored value,” says SEC Chairman Jay Clayton on #btc. “Our current payment mechanisms–have inefficiencies those inefficiencies are the things that are driving the rise of bitcoin.”— Squawk Box (@SquawkCNBC) November 19, 2020

This post is curated by Keith Teare. It was written by Squawk Box. The original is [linked here]

Jay Clayton Calls Bitcoin a Store of Value Beyond Regulatory Reach of SEC

This post is curated by Keith Teare. It was written by Daily Hodl Staff. The original is [linked here]

The head of the US Securities and Exchange Commission, Jay Clayton, is giving Bitcoin a final boost as he prepares to leave the agency.

In an exit interview with CNBC’s Squawk Box, the SEC chief confirms that the SEC does not view Bitcoin as a security and says he personally perceives the top cryptocurrency as a store of value option.

“We did not regulate Bitcoin as a security… We determined that Bitcoin was not a security. It was much more a payment mechanism and stored value.”

Clayton adds that the government does regulate payments, suggesting Bitcoin will be regulated as such especially as the king coin attracts more users who are tired of the inefficiencies embedded in traditional payment mechanisms.

“The government does regulate payments. And what we are seeing is that our current payment mechanisms domestically and internationally have inefficiencies. Those inefficiencies are the things that are driving the rise of Bitcoin and these types of digital assets.”

Jay Clayton has served as SEC chief since 2017 and will be stepping down at the end of the year. Under his administration, the SEC has filed 56 crypto-related actions.

Under Clayton’s tenure, the SEC has also continually halted attempts to introduce a Bitcoin ETF.

Clayton is leaving as the crypto-friendly Hester Peirce stays on with the SEC for another term.

Check Latest News Headlines

Follow Us on Twitter Facebook Telegram

Check out the Latest Industry Announcements

Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

Featured Image: Shutterstock/Tithi Luadthong

The post Jay Clayton Calls Bitcoin a Store of Value Beyond Regulatory Reach of SEC appeared first on The Daily Hodl.

Episode 10: Validating Your Startup Idea

This post is curated by Keith Teare. It was written by Clément. The original is [linked here]

Last week we covered how to come up with great startup ideas. This week I present how to evaluate if the idea is worth pursuing. I detail which hypothesis you need to validate and how to go about providing or disproving them.

Vivian Graves, an entrepreneur in residence (EIR) at FJ Labs, joins to share how she evaluated whether to pursue a temporary veterinarian labor marketplace idea.

For your reference I am including the slides Vivian used during the episode.


If you prefer, you can listen to the episode in the embedded podcast player.

In addition to the above Youtube video and embedded podcast player, you can also listen to the podcast on:

The post Episode 10: Validating Your Startup Idea appeared first on Fabrice Grinda.

5 Interesting Learnings From Shopify. At $3+ Billion in ARR.

This post is curated by Keith Teare. It was written by Jason Lemkin. The original is [linked here]

Shopify has grown so quickly, it’s tough to even comprehend.  From A $1.6B run rate a year ago to $3.2B today.  Wow.

Zoom is the most obvious “Covid Beneficiary”, but Shopify, in many ways, isn’t far behind:

Ok, the issues marching to $4b in ARR are a bit removed from what most founders experience.  But, there are still many interesting things we can learn from Shopify, especially since it sells to so many SMBs, has been late to go upmarket, and combines a payments/fintech element with pure SaaS.

So what can we all learn from Shopify?

1.  Moving from a 14-day to a 90-day free trial really, really worked.  So are you sure your trial needs to be so short?  When Covid hit, Shopify took care of its customers, extending many free trials from the customary 14 days to 90 days.  What happened?  Only good things.  MRR took off:

There are several great lessons here.  First, make it easier on your customers, not harder.  That almost always pays off.  Sales might want a shorter and tighter “gate” for free to convert to paid.  But maybe don’t do that if it isn’t best for the customers.

Making the free trial even more free worked for Shopify. It works for Zoom and Slack, too.  It can work for you.

2. Subscriptions can fuel payments and merchant is seeing something similar.  As more and more SaaS apps add a payments element, that payments element can really scale over time. It’s now bigger than Shopify’s SaaS revenue, by far:

3.  You don’t have to leave your SMBs behind as you go upmarket.  You can be both SMB and at least somewhat enterprise at the same time, without leaving your SMBs behind.  We also saw this with Zendesk here.  Both Shopify and Zendesk have added rich enterprise offerings over time, but despite the larger ACVs of bigger customers, SMBs have kept up as a percent of revenue.

So you don’t necessarily have to leave your SMBs behind as you add enterprise offerings.  Many will tell you that you sort of have to, to scale.  You don’t have to in many cases.

It’s also important to note that Shopify and Zendesk, while they do serve many large enterprises, aren’t traditional enterprise software.  They aren’t as feature-rich as typical $500k-$1m+ ACV products.  So that’s part of the trade-off here.  But they’ve made it work, since their SMBs have continued to scale to $1B in ARR and beyond.

4.  Referrals and agencies can really work as channels with SMBs.  We’ve seen this with Hubspot as well.  37,400 agencies and web design shops referred a customer to Shopify in the last 12 months.

What are you doing to really incent agencies, designers, third parties, partners, etc. to promote your app?  Are you doing enough?  Do you have a team here?  Do you have anyone at all that is 100% dedicated for them to work with?

5. Be patient with your ecosytem and partners.  You can almost always monetize them more later than you can now.  A mistake I see so many SaaS start-ups make is arguing too much over revenue sharing with partners in the early days, and/or trying to “overmonetize” their budding ecosystems.  My advice is almost always just this: wait.  Err on the side of undercharging or not charging your partners in the early days.  Zendesk still doesn’t charge most of its partners anything.  Later, you can charge more.  Once you’ve won the market.  What matters most is your ARR later, and dominating the market today.

We can see this clearly with Shopify, which waited all the way until 2020 to really monetize its partner base heavily.  And the payoff was big.  20% of their 2020 revenue, up from just 8% in 2018:

Want more?  We did a great deep dive with Loren Padelford SVP of Shopify Plus / Shopify here:

A few others in this series here:


The post 5 Interesting Learnings From Shopify. At $3+ Billion in ARR. appeared first on SaaStr.

Seed Investing in the UK Is Losing Momentum

This post is curated by Keith Teare. It was written by Francesco Perticarari. The original is [linked here]

losing momentum.png-a6690fc0

Are UK VCs losing courage?
— Why this matters for founders, especially outside the London-Oxbridge triangle
— Why this matters for the ecosystem if we don’t reverse the trend
— Possible reasons around this based on industry representatives within the Silicon Roundabout community
— Sentiment going forward and a "new hope" for the future

The post Seed Investing in the UK Is Losing Momentum appeared first on Silicon Roundabout.

Tech Must ‘Get Uncomfortable’ With Its Impact on Society: An Interview With Swati Mylavarapu

This post is curated by Keith Teare. It was written by Alex Kantrowitz. The original is [linked here]

OneZero is partnering with the Big Technology Podcast from Alex Kantrowitz to bring readers exclusive access to interview transcripts with notable figures in and around the tech industry.

This week, we’re joined by Swati Mylavarapu, a founder at Incite. This interview has been edited for length and clarity.

To subscribe to the podcast and hear the interview for yourself, you can check it out on Apple Podcasts, Spotify, and Overcast.

Swati Mylavarapu is a tech investor and activist who spent $2 million in the 2020 election cycle on Democratic causes, in partnership with her husband, Nest co-founder Matt Rogers. Mylavarapu isn’t your typical Silicon Valley investor. She’ll explicitly admit that the tech industry has some culpability in the hollowing out of the middle of our economy, delivering wealth to the few while leaving the rest in a tough spot. She also served as Pete Buttigieg’s national finance chair in the 2020 Democratic primaries, playing a key role in his surprising upstart campaign.

Mylavarapu joined the Big Technology Podcast fresh off a bout with Covid-19 to discuss the tech industry’s role in our society, and how it can be a force for good moving forward.

Kantrowitz: We were actually scheduled to record last week. Do you want to fill us in on what your past couple of weeks have been like?

Mylavarapu: Yeah, it’s actually why I am literally excited to be here. My family and I contracted Covid, so we were grappling with the realities of that for most of the last two weeks, including over Election Day. But thankfully, relatively mild symptoms in our house, and we are on the mend and very lucky to have had access to great medical care, which is something that I wish every family had access to.

And it was also such a reminder because we’ve been extremely careful, maintaining a strict quarantine, lockdown, not traveling, and it still managed to come into our house. It’s a reminder that this thing is very real and we need a better coordinative response out there than what we’ve got at the moment.

You’re the first guest that we’ve had on that’s had it. I’m glad that you’ve recovered and are doing well.

Thanks. We’re also really lucky to be in San Francisco because the city’s gone above and beyond to make testing super accessible, so that helped us.

So, to start, there are people that call you a Silicon Valley power broker. I know you don’t like the term, but why do you think people say that?

Oh, I think that’s an awful term. I suppose people say that because I do a fair amount of work really at the intersection of supporting breakout leaders, and increasingly that’s been in the political realm, not just in the startup and venture realm. And I think that I am too rare a bird in Silicon Valley. But part of what I’m excited to talk to you about is why I think it’s important that more of us do this kind of work like we’re doing at Incite to invest in early stage political leaders as well as early stage startup and technology builders.

We spoke for a story a few weeks ago, and you seemed willing to say the way that tech accumulates wealth is part of the reason why have such a disconnect in the country right now.

We’re living in this moment in America where the idea of market fundamentalism and unfettered capitalism is increasingly in question, and that is not just led from one political party. You see people on the conservative side, like Marco Rubio and Josh Hawley, starting to call for more conscious capitalism, to folks on the super progressive side as well.

Tech is very much caught in the crosshairs of all of these conversations. And I think the best way for us to grapple with that is to start grappling with these hard questions about what we’re building and why. And [asking] who it benefits; where it concentrates power, and who loses out as a result of it. Because if we’re not having those conversations, the world outside of our industry is having them for us.

Silicon Valley seems to have built a lot of platforms that end up accruing wealth to the few and taking opportunity from the many. One example is TurboTax. There used to be this whole class of accountants who would make a nice living doing families’ taxes, but TurboTax came around, it was more efficient, but it harmed this important middle of the economy. Do you see this as a problem?

It’s one of the biggest problems of our time. And it’s not something that sits squarely on the shoulders of technology companies in our industry, but it’s something that we very actively play a role in.

Can you elaborate on that a little bit?

Sure. Well, you’ve given a great example of what this might look like if you are, say, building an enterprise software company. It’s equally true if you are building a delivery service company, and you are starting to make decisions about who are stakeholders in your business versus not and what is the relative value that a driver or delivery person participating on your platform has or not.

It’s also something even more fundamental. Mary Gray is an anthropologist who was recently given the MacArthur Genius prize, and her research over the last couple of years has done groundbreaking work to talk about what she calls “ghost work.” And the idea that any major technology platform in the modern age—whether you’re Amazon and what they’ve done with Mechanical Turk to a gig-economy company or any large company like Facebook that’s using a huge distributive global workforce—what they have done to create and underclass, a global underclass around the world.

And some of these might seem like fringe ideas, but I think we’re starting to see the credence that this notion of class and caste is starting to take on in public conversations about what’s happening in America, and it’s extremely relevant to what we build in the tech industry and these forces of power and earning asymmetry and the divide between capital and labor and how tech feeds into it.

Going back to the TurboTax example, are we going to end up in a society where we do have a small percentage of people who have the wealth and everybody else struggling to get by? We have a lot of political unrest in this country, in large part because people feel that the system has left them maybe one expense away from economic catastrophe.

Populism is in some ways a really powerful lens through which to view what’s happening in the United States at this moment, and if you think about technology as a way of supercharging some of the forces that are giving rise to populism, it can be really telling.

I spent a lot of time last year in places like Iowa, where Donald Trump is about as popular as Bernie Sanders, and that should tell us something. It’s not this red versus blue, good versus evil, the predominant cleavage for a growing number of Americans is around who gets access to having and who doesn’t.

So it’s interesting, you’re posing this as a question of technology building software that’s kind of inverse Robin Hood and taking from the folks that can least afford it and accumulating wealth. I think it’s a little bit more complicated than that, it’s not just that certain stakeholders are getting to accumulate disproportionate amounts of money. It’s also what we’re taking away from so many people that provided for their family, [who] were able to put bread on the table, and buying the American dream of their children and their children’s children having a better life than their own. We are stripping that away, and we’re not offering a viable alternative.

So I guess what you are pointing at is this is something that the political system needs to address?

No, I don’t think this is something that sits just on the political system. I think that this is also a reality that the tech industry has to grapple with and ask questions around. At some point, these companies that we’re building, what is the point of them if they are not meaningfully improving the quality of life for people?

Do you think people actually ask that question?

I think we’re starting to more and more. And I think in our earliest days, those were the questions that gave rise to the tech industry as we currently know it. Wherever those intentions have led us, and I believe at our core we are good and we do hard things not just to make a lot of money but because they make the world better.

And so what I’d love to see is a wider spread, deeper reckoning with some of those core, values-based questions. These days, I think our industry would be better if we talked as much about our leaders’ values and the real-world value that our companies are creating as we do about our valuations.

So often when I speak with tech leaders, they talk about people who are against technological changes being similar to the people who were against the horse and buggy moving to the car. Should we start discussing — and why have so few people started to ask — how tech products are leading a division between the economic haves and have nots?

Yes, we should be having those conversations. Those conversations are happening, they are happening today right now, whether or not we acknowledge that they are. So the question for my peers and my colleagues is: Do they want to be part of those conversations?

Obviously there’s somebody in the White House who calls into question foundational science and the advance of modern thinking when it benefitsed him. And he is just the tip of the iceberg. There is a growing movement of conservatives and elected officials in this country that do the same.

And so too, on the other side of the political spectrum, there’s a growing conversation around [the question]: What is the purpose of capitalism? What is the purpose of technology and innovation if it is not fundamentally improving the lives of everyday people? This movement’s getting a term, “conscious capitalism,” and I think there’s a lot of credence to it. And the more those of us that are here investing in future technologies, building the companies of the future, choose to participate in it, I think the better served we are in terms of what we find is investment-worthy.

But also in the kinds of problems that we decide to take on and solve with the companies that we build. For example, should more venture capital go into technologies and companies that are addressing our climate crisis? We make that choice in the allocation of capital in the founders and companies that we back alongside wanting to generate a top-notch return. It’s not clear that we have to choose between building great businesses and making a ton of money and solving big hard problems that are worth solving.

What is going on behind closed doors when you speak with people in the tech industry about the impacts of this wealth consolidation are?

The tech industry is a monolith. You know that better than most—it’s showcased in the diversity of viewpoints you bring on your podcasts and you cover in your stories, but I think that there is a growing concern.

This year saw two concurrent things that are really interesting to me. One, there’s a growing popular tech-lash, if you will, across most of America outside of Silicon Valley that calls into question the motivations, goals, and unquestioned utility of what’s happening in our industry. But we also saw an unprecedented number of people from inside the tech industry become politically and civically engaged.

How many of our colleagues and friends were motivated to do something around this year’s election? And so what that tells us is we’re an industry full of individuals that care deeply about the future direction of America, about doing good in the world, about solving hard problems that matter.

But somehow that has come a little bit unplugged from what the ramifications of our platforms and our businesses have had. There’s reason for optimism in that. I think we can get out there and rectify things and take more ownership and have these harder conversations.

It’s something that I push the folks in our Incite portfolio to do all the time. We start at the very beginning, by looking for founders that want to build big, hard problems and values-driven businesses, and we drive them and help create platforms for them to have conversations about some of these hard questions around what they’re building. I’d love to see us create more space for those kinds of conversation from more leaders across our industry.

You studied with Pete Buttigieg and ended up being his lead fundraiser here in Silicon Valley. I’m going to say this with a caveat, I’m not a Bernie Sanders voter, but looking at the message it seems to me that you might have gravitated toward him. So why Pete Buttigieg?

The way that you phrased your question, Alex, is in part my answer. So much of Pete’s magic is his ability to have very direct conversations with voters and talk to them openly about ideas that they might have pre-assumed to be too extreme or too radical but to make them palatable.

I’ll give you an example: At the beginning of the primary last year, Pete was the candidate out there in the Democratic presidential primary calling into question why the number of justices that we have on the Supreme Court was a fixed number and in fact, opening up the question of maybe there’s future court reform that calls in the question the size of the court.

Now wherever you are, and that is a potential solution, it became a mainstream idea in the run up to the election two weeks ago, something that everybody across the spectrum was talking about. It was there on Fox News as much as it was discussed on CNN or C-Span. And that is so much of Pete’s magic and his talent—to position ideas that might seem too far extreme or too futuristic and to make them seem approachable and palatable and to make them seem relevant in the current political moment.

It’s a skill that he has in spades, it’s also something that I think is true of new generation political leaders. So while you’re right, I’ve known Pete for half of our lives, and he asked me, he gave me the opportunity to work on his presidential campaign. It’s also something that I’ve seen in the deep political work that I’ve done for the last four years. Right after the 2016 election, I helped build a program called the Arena, which at this point has trained a few thousand young Americans around the country who are incredibly diverse to be first time candidates and staffers.

And this attribute, this ability to talk past partisanship and to speak to core values and to connect with voters on both sides of the political spectrum, is a skill that we see in all of these graduates coming out of the Arena too. I think it’s an indicator of the direction our politics are headed in.

Court-packing was something the more progressive wing of the Democratic Party embraced, but it wasn’t something really geared toward fixing the economic system. And when people thought of Buttigieg, I don’t think that’s really what they thought of. In fact, the tech industry’s support of him was that he was kind of a safe candidate that would ensure the economic systems that have made tech folks wealthy would stay in place. What do you think about that?

I don’t know, he came out here and he protested with Uber drivers; he was in support of AB5. He was out there very openly saying that social media platforms had gotten away from our democracy and the institutions that we respected and that those were all things that needed to be open to review.

So, were the positions as extreme maybe as Bernie Sanders’ economic positions? Not necessarily. But I think that they had a degree of pragmatism to them that also made them approachable, and there was a willingness to put everything out there.

And I’ll say, I think part of the reason why folks on the West Coast gravitated to Pete, especially in the tech industry, is because we have this thing, we understand what it is when young people step up to the plate and try to do big, hard things. And I think we have unique appreciation for that. So that’s part of what we saw reflected in the support that came out of Silicon Valley for Pete.

I don’t want to re-litigate the whole 2020 Democratic primary, but I think that the folks who listen to this might be skeptical that Silicon Valley actually wants real change in the political system. This is not an anti-tech industry podcast, but there’s definitely a feeling that there’s a reticence to tackle some of the real troubling aspects of our society head-on. So where do you stand on that?

For sure. Yeah, and so let me be very clear, this is not a normative position. I want to be very descriptive of what I see happening as a student of the social sciences and history; change is coming for the technology industry. The question is how actively our industry is going to participate in that conversation and in what ways.

Say more about that.

I just think you can see it in the tea leaves of what is happening in different corners of our country and the way that is starting to gain steam. The fact that populism is becoming a major theme in our politics, that there are more and more Americans beginning to question the technology industry, who are beginning to sort of wake up and realize that actually, democracy is more fundamentally American than capitalism, that the notion of unfettered market fundamentalism and businesses seeking profits for profit’ sake.

You can either be a turtle and stick your head back in the shell and hope that it just passes by, or we can get out here and actually listen, learn, participate, and demonstrate that there are better ways to build a more conscious kind of business that solves hard problems, satiates shareholders, and brings all of the stakeholders like our employees, our labor pools, the consumers that we rely on, along with us.

Could you see people actually in this world gravitating toward that message?

For sure I can. It’s part of the reason why we built Incite and why we look to invest in founders that lead with their values as well as their desire to create value.

We’ve got a portfolio now. In the last four years, we’ve made 60 investments of companies that are building important climate technologies, cancer therapeutics companies that have pivoted into COVID treatment development firms. We’ve got companies that are led by incredibly diverse teams that are making maternal health care more accessible to more people in America, that are building really amazing high return likelihood businesses but are also doing it in a conscious way. And if their businesses succeed, their stakeholders will succeed, as will their investors. So I’m in this business because I believe, I know it to be possible.

It seems like, at Incite, you’re looking for mission-driven or founders that want to heal the world, make things better.

I don’t know what we call it these days, but we invest in good people that want to solve big problems and make some money along the way.

Doesn’t everybody in the tech world feel like they’re a good person who wants to solve a problem in a good way and make some money along the way?

I hope so. I want to believe that most of us in tech are good people. But again, you’ve got to be willing to have the hard questions about what you’re building and why and in what ways does it actually benefit people.

I think for a long time, the first few years after I started Incite, I could tell some people got it and some people really didn’t because you’d start to talk about values and doing good and it would make some folks really uncomfortable. Like “Oh there is no data around that.” Or “Well what’s good or what’s bad?” This notion of false neutrality. No, you’ve got to have the conversations .

Right, once you bring that up then you can start to see who’s actually in it and who actually just had a slide in their PowerPoint deck that we’re going to improve the world by doing X.


So you’re trying to help with the fund and with the political activism, what would you say is more impactful?

They’re both really impactful, and at their core, they are very similar. It’s the willingness to take early bets on good people that are getting out there to solve really hard problems, but we do it with an awareness that in 2020, big, hard problems aren’t just things that startup companies can fix. Sometimes they require really talented leaders in our politics, sometimes they require new nonprofits to advocate for whole new areas of investment. So we try to be flexible and nimble in the form that solution can take.

Okay, let’s end with this: What are some of the key policies that you would like to see implemented over the next four years? Now, I know we’re going to have divided government most likely, so the chance of anything getting done—if the last four years are any indication—is little. But if you had a dream set of policies that we would implement, what would they be?

Well for one, I’d like to see us get this pandemic under control because I think there is no economic recovery. We can’t even really start a conversation about economic recovery until we figure out how we’re going to get this virus in control.

And there are too many Americans whose health but also livelihoods depend on better leadership from the top. So that’s the first thing that I hope we get there on, and I think that’s such a huge opportunity for the tech and innovation community to step up to the plate and play a part in it. Because we know how vital science and scientific and tech breakthroughs are going to be in the development of treatment and the widespread accessibility of it.

So that’s a big one, but the other thing is I want us to have a set of forward-looking policies that really look at getting the economy working for more Americans. It’s a lot of the themes that you and I have spoken about today, Alex, but I think we’ve gotten the opportunity with the new administration to focus on some of these nonpartisan conversations around how we get the American economy working for more Americans.

And maybe that starts with things like student loan forgiveness and an economic stimulus and relief for families and small business owners across the country. But forward-looking, I think it’s got to be a lot more than that and really look at the breakdown of capital versus labor in this country and who has access to those two things.

And just looking at the composition of the transition team for the Biden-Harris administration and how incredibly diverse it is in gender, in race but also in thinking [and] socioeconomic background. I’m really hopeful, I think this could be one of the boldest periods of leadership on economic issues that America’s seen in a long time.

Okay, so help end the coronavirus and then think about student loan forgiveness—is there anything else that you’d be interested in pursuing?

Student loan forgiveness would be part of just a much broader-based economic reimagining. So I think that could include a host of things, including reinvestment in underprivileged communities, focusing on advancing home ownership for more parts of the country, focusing on minimum wage and what that looks like. We saw some important advances with the ballot box around those questions two weeks ago, but I think there’s more to be done under federal leadership there.

And then for tech companies out there, if there’s a few things that they could do differently, what would you recommend?

Focus on their core products and platforms and ask those hard questions about how their products and platforms are supporting or undermining democracy, and who they’re working for and why, and how we ensure that they work for more people. That’s a big part of it. And then the second is to look internally because it’s not just what our companies build, it’s also how we build them.

So these conversations that we’ve been having for a while around the diversity, or apparent lack thereof in our boardrooms, in our management teams, and our employee bases, it’s a really important moment to be asking those questions.

These are the things that we have control over—what we build and how we build it—so I’d love to see more of us asking these kinds of hard questions and pushing ourselves to choose between right and wrong. Get in there, and get uncomfortable.

New post: Sizing the Ask This is where even experienced founders can sometimes go wrong. It can have a surprisingly big impact on one’s fundraise process.

This post is curated by Keith Teare. It was written by Rob Go (@robgo). The original is [linked here]

Silicon Valley Needs a Shakedown with Chamath Palihapitiya

This post is curated by Keith Teare. It was written by Harvard Business Review. The original is [linked here]

Investor Chamath Palihapitiya discusses venture capital, regulation, and investing for change.

RT @StratecheryMO: 11-18-2020 •Zuckerberg and Dorsey in Congress, Again •Apple Reduces App Store Fees for Small Developers •Apple’s Aggreg…

This post is curated by Keith Teare. It was written by Stratechery Members (@StratecheryMO). The original is [linked here]

And @jack goes back to moving to protocols, to avoid having a centralized content moderation system, and pushing choice and control to the end users, more or less paraphrasing my paper (neat):

This post is curated by Keith Teare. It was written by Mike Masnick (@mmasnick). The original is [linked here]

Everything you need to know about Airbnb’s IPO

This post is curated by Keith Teare. It was written by Shakeel Hashim. The original is [linked here]

There aren’t many tech companies harder hit by COVID-19 than Airbnb. When the pandemic took hold, the company’s business was undermined and its plan to go public this year looked totally shot. But it forged ahead and, on Monday, filed its long-awaited S-1, suggesting that it seeks to list before the end of the year after all.

Here’s everything you need to know.

Airbnb’s Financials

Back in the halcyon days of 2019, Airbnb’s numbers were huge. Customers booked almost $38 billion of nights and experiences on the platform, bringing in $4.8 billion in revenue. The company still lost $674 million though, thanks in part to hefty sales and marketing costs.

The pandemic has been awful for Airbnb. Its revenue started to decline in March, before plunging in April, when bookings were down 72% year-over-year. Things recovered a bit over the summer, but bookings are still down. The collapse in demand has seriously affected Airbnb’s financials.

  • In the first nine months of 2020, the company made just $2.5 billion in revenue, down 32% from the same period a year earlier.
  • The company’s net loss more than doubled too, from nearly $323 million in the first nine months of 2019 to almost $700 million this year. That’s despite intense cost-cutting, which included 1,900 layoffs.

But it’s not all bad. In the third quarter of 2020, the company made a profit of $219 million, not much smaller than the nearly $267 million profit it made in Q3 2019. (Q3 is always a good period for the company, as it’s the busiest travel season in the U.S. and Europe, and this year lockdown restrictions were less stringent in many places over the summer.)

  • The company also has more than enough cash on hand to weather the storm: $4.5 billion, to be precise, up from $3 billion at the start of this year, thanks in part to a rapid fundraising spree in April.
  • The business is remarkably diversified, too: No single city accounts for more than 2.5% of Airbnb’s revenue, and last year 63% of its revenue came from hosts outside the U.S. (That number is smaller this year, likely due to less international and more domestic travel.)

What Could Go Wrong?

Airbnb’s risk factors are dominated by three themes: COVID-19, regulation and competition.

The pandemic devastated Airbnb’s business in the first part of this year. And while summer offered some respite, the company thinks things will get worse before they get better thanks to a new wave of infections in Europe and the U.S.

  • There could be long-lasting effects, too. "We cannot predict if and when demand will return to pre-COVID-19 levels," the company says. It cites the impact of economic downturns on depressing travel spend, and suggests that it could be affected by some hosts losing their homes or businesses as a result of the pandemic. "We believe a number of our hosts are individuals who rely on the additional income generated from our platform to pay their living expenses or mortgages," it says.
  • Still, there could be some tailwinds. "Just as when Airbnb started during the Great Recession of 2008, we believe that people will continue to turn to hosting to earn extra income," the company argues. It also notes that work-from-anywhere practices could boost its long-stay business, too.

The other big problem is regulation. "We are subject to a wide variety of complex, evolving, and sometimes inconsistent and ambiguous laws and regulations," the company says. And it truly is a wide variety: Short-term rental laws, tax regulation, financial regulation, GDPR and even Section 230 all crop up as potential issues for the platform.

  • Some are particularly worrying. Airbnb thinks new legislation in New York City requiring it to share host data with authorities could "substantially’ reduce its revenue as hosts flee the platform. Given that NYC accounted for approximately 2% of Airbnb’s revenue last year, that could have a big impact.
  • The company’s also involved in an odd tax dispute about the transfer of some intellectual property. It says that in September the IRS wrote to the company, proposing "an increase to our U.S. taxable income that could result in additional income tax expense and cash tax liability of $1.35 billion, plus penalties and interest." Airbnb seeks to challenge the proposal; if it fails, the consequences are significant.
  • Regarding payments, Airbnb says it received a "cautionary letter" from the Office of Foreign Assets Control concerning its operations in Crimea, where it may not have fully complied with U.S. sanctions laws. OFAC is also investigating Airbnb’s practices in Cuba, which could lead to "potentially significant monetary civil penalties and litigation."

And then there’s Google. Of all Airbnb’s competitors, the search engine gets the most discussion in its S-1, revealing some quite intense animosity.

  • "We believe that our SEO results have been adversely affected by the launch of Google Travel and Google Vacation Rental Ads," Airbnb says, noting that Google could promote its own products at Airbnb’s expense.
  • The company’s worried about mobile, too: "If Google or Apple use their own mobile operating systems or app distribution channels to favor their own or other preferred travel service offerings … it could materially adversely affect our ability to engage with hosts and guests."

Who Gets Rich?

Airbnb’s valuation is an open question still: Though it was valued at $31 billion back in 2017, an April 2020 round valued it at just $18 billion. But even at the latter valuation, some people stand to do very well.

  • Sequoia is the company’s largest shareholder, with a 16% stake worth almost $2.9 billion at an $18 billion valuation. Founders Fund’s smaller stake is worth around $923 million, in comparison. Silver Lake, Sixth Street and DST Global also own stakes.
  • CEO Brian Chesky owns around 15% of the company, worth around $2.7 billion at an $18 billion valuation. Nathan Blecharczyk and Joe Gebbia’s stakes would be worth around $2.4 billion each.

What People Are Saying

"Very sneakily but not surprisingly, Airbnb is NOT breaking out Experiences revenues or investments." — Skift CEO Rafat Ali suggested that might be because Airbnb’s return on investment with experiences is … not great so far.

"Airbnb reports that building a community is their primary differentiating factor." — CMX’s David Spinks did the math, and "community" appears 166 times in the S-1.

"Wow! These Airbnb numbers are [terrible]/[incredible]! Brian Chesky is [the next Steve Jobs] / [the wrong person to lead this company]. [Congrats to the @airbnb team! Huge fan!] / [Ooof another overfunded sharing economy dud]" — Packy McCormick had the best take.

Airbnb’s Words of Wisdom

It wouldn’t be a tech IPO filing without a few ridiculous and nonsensical claims. Fortunately, Airbnb doesn’t disappoint:

"We have helped millions of people satisfy a fundamental human need for connection. And it is through this connection that people can experience a greater sense of belonging."

"People are feeling increasingly disconnected in the world, and loneliness is pervading our society. The opposite of loneliness is belonging — the feeling of deep and genuine connection to a person, a place, or community. It’s the feeling of being ‘at home.’ The feeling of being known and loved."

Values: "Be a cereal entrepreneur. Our employees are bold and resourceful. ‘Cereal entrepreneur’ refers to the time when was struggling to earn revenue, and Brian and Joe decided to sell collectible breakfast cereal during the U.S. presidential election in 2008. They created and sold Obama O’s and Cap’n McCain’s and earned nearly $30,000, enough to keep Airbnb going."

Steve Jobs’s last gambit: Apple’s M1 Chip

This post is curated by Keith Teare. It was written by Om Malik. The original is [linked here]

Even as Apple’s final event of 2020 gradually becomes a speck in the rearview mirror, I can’t help continually thinking about the new M1 chip that debuted there. I am, at heart, an optimist when it comes to technology and its impact on society. And my excitement about the new Apple Silicon is not tied to a single chip, a single computer, or a single company. It is really about the continuing — and even accelerating — shift to the next phase of computing.

The traditional, desktop-centric idea of computing predates so much of what we take for granted in the smartphone era: constant connectivity, ambient intelligence of software systems, and a growing reliance on computing resource for daily activities, to name a few.  Today’s computers are shape-shifting — they are servers in the clouds, laptops in our bags, and phones in our pockets. The power of a desktop from just five years ago is now packed inside a keyboard and costs a mere $50-a-pop from Raspberry Pi. Cars and TVs are as much computers as they are anything else.

In this environment, we need our computers to be capable of handling many tasks — and doing so with haste. The emphasis is less on performance and more about capabilities. Everyone is heading toward this future, including Intel, AMD, Samsung, Qualcomm, and Huawei. But Apple’s move has been more deliberate, more encompassing, and more daring. 

Steve Jobs’s last gambit was challenging the classic notion of the computer, and the M1 is Apple’s latest maneuver. The new chip will first be available in the MacBook Air, the Mac mini, and a lower end version of 13-inch MacBook Pro (a loaner version of which I have been trying out over the last three days). To get a better sense of what the company is up to, I recently spoke with three of their leaders: Greg “Joz” Joswiak, senior vice president of Worldwide Marketing; Johny Srouji, senior vice president of Hardware Technologies; and Craig Federighi, senior vice president of Software Engineering.

The conversations shed significant light on the future — and not just of Apple.


But first, what is the M1?

Traditionally, computers are based on discrete chips. As a system on a chip (SoC), the M1 combines many technologies — such as Central Processing Unit (CPU), Graphics Processing Unit (GPU), Memory, and Machine Learning — into a single integrated circuit on one chip. Specifically, the M1 is made of:

  • An 8-core CPU consisting of four high-performance cores and four high-efficiency cores
  • An 8-core integrated GPU
  • 16-core architecture Apple Neural Engine. 
  • It is built using cutting-edge 5-nanometer process technology.
  • Packs 16 billion transistors into a chip. 
  • Apple’s latest image signal processor (ISP) for higher quality video 
  • Secure Enclave 
  • Apple-designed Thunderbolt controller with support for USB 4, transfer speeds up to 40Gbps.

In a press release, Apple claimed that the “M1 delivers up to 3.5x faster CPU performance, up to 6x faster GPU performance, and up to 15x faster machine learning, all while enabling battery life up to 2x longer than previous-generation Macs.”

The difference between this boast and Apple’s positioning back in the heyday of personal computers could not be more stark. Back then, the symbiotic relationship of WinTel — Intel and Microsoft — dominated the scene, relegating Apple to the fringes, where its chips were crafted by fiscally and technologically inferior partners at IBM Motorola. Its prospects fading, Apple had no choice but to switch to Intel’s processors. And once they did, inch-by-inch, they began to gain market share.

Jobs learned the hard way that, to stay competitive, Apple had to make and control everything: the software, the hardware, the user experience, and the chips that power it all. He referred to this as “the whole widget.” I’ve previously written about the critical need today’s giants have for vertical integration. Much of it can be summed up in this line from a 2017 piece: “Don’t depend on a third party to be an enabler of your key innovations and capabilities.”

For Apple, the iPhone represented a chance to start afresh. Their new journey began with the A-Series chips, which first made their way into the iPhone 4 and first-generation iPad. In the ensuing years, that chip has become beefier, more intelligent, and more able to do complicated tasks. And while it has become a hulk in its capabilities, its need for power has remained moderate. This balance of performance and muscle turned this chip into a game-changer. The latest iteration of that chip, the A14 Bionic, now powers the newest generation of iPhones and iPads. 

Increasingly, Apple products have been powered by the genius of its ever-increasing army of chip wizards. Except for one notable exception: The device that got it all started, the Mac. 

Enter the M1.

“Steve used to say that we make the whole widget,” Joswiak told me. “We’ve been making the whole widget for all of our products, from the iPhone, to the iPads, to the watch. This was the final element to making the whole widget on the Mac.”

Why The M1 Matters 

  • Modern computing is changing. Software is an end-point for data and works using application programming interfaces.
  • Chips have become so complex that you need integration and specialization to control power consumption and create better performance. 
  • Apple’s chip, hardware, and software teams work together to define the future systems to integrate them tightly. 
  • The future of computing is moving beyond textual interfaces: visual and aural interfaces are key. 
  • Machine learning will define the capabilities of the software in the future. 

It is very much like Apple’s chips inside the iPhone and iPad, except that it is more powerful. It uses Apple’s Unified Memory Architecture (UMA), which means that a single pool of memory (DRAM) sits on the same chip as various components that need to access that memory — like the CPU, GPU, image processor, and neural engines. As a result, the entire chip can access data without copying it between different components and going through interconnects. This allows them to access memory with very low latency and at a higher bandwidth. The result is a much better performance with less power consumption. 

With this new technology, everything from video conferencing services, games, image processing and web usage should be snappier. And in my experience, it is — at least, so far. I have been using a 13-inch M1 Macbook Pro with 8GB of memory and 256 GB of storage. Internet pages load up briskly on Safari , and most of the apps optimized for the M1 — Apple calls them “universal apps” — are blazing fast. I have not had much time with the machine, but the initial impression is favorable. 

Some other analysts are very bullish on Apple’s prospects. In a note to his clients, Arete Research’s Richard Kramer pointed out that the world’s first 5-nanometer chip put M1 a generation ahead of its x86 rivals. “Apple is producing world-leading specs over x86, and it is doing so at chip prices less than half of the $150-200 paid by PC OEMs, while Apple’s Unified Memory Architecture (UMA) allows it to run with less DRAM and NAND,” Kramer noted. He thinks Apple will drop two new chips next year, both targeted at higher-end machines and one of which will be focused on iMacs. 

I don’t think AMD and Intel are Apple’s competitors. We should be looking at Qualcomm as the next significant laptop chip supplier. Apple’s M1 is going to spark an interest in new architectures from its rivals. 

This approach to integration into a single chip, maximum throughput, rapid access to memory, optimal computing performance based on the task, and adaptation to machine learning algorithms is the future — not only for mobile chips, but also for the desktop and laptop computer.  And this is a big shift, both for Apple and for the PC industry. 


The news of the M1 focusing on the lower-end machines got some tongues wagging. Though, according to Morgan Stanley research, these three machines together represent 91% of trailing twelve-month Mac shipments.

“It seems like some of these people were people who don’t buy that part of our product line right now are eager for us to develop silicon to address the part of the product line that they’re most passionate about,” Federighi told me. “You know that their day will come. But for now, the systems we’re building are, in every way I can consider, superior to the ones they’ve replaced.” 

The shift to the M-family will take as long as two years. What we are seeing now is likely the first of many variations of the chip that will be used in different types of Apple computers.

This is a big transition for Apple, and it is fraught with risk. It means getting its entire community to switch from the x86 platform to new chip architecture. A whole generation of software will need to be made to work with the new chip while maintaining backward compatibility. “This is going to take a couple of years, as this is not an overnight transition,” Joswiak cautioned. “We’ve done these big transitions very successfully in the past.” 

The most significant of these shifts came in 2005. Hampered by the fading Power PC ecosystem, the company made a tough decision to switch to the superior Intel ecosystem. The shift to x86 architecture came alongside a new operating system — the Mac OS X. The change caused a lot of disruption, both for developers and the end customers. 

Despite some turbulence, Apple had one big asset: Steve Jobs. He kept everyone focused on the bigger prize of a powerful, robust and competitive platform that would give WinTel a run for its money. And he was right. 

“We’re developing a custom silicon that is perfectly fit for the product and how the software will use it.”

Johny Srouji, senior vice president of Hardware Technologies

I transitioned from the older Mac to the OS-X based machines, and after many years of frustration of working on underpowered computers, I enjoyed my Mac experience. And I am not alone. The move helped Apple stay relevant, especially among the developers and creative communities. Eventually, the normals became part of the Apple ecosystem, largely because of the iPod and the iPhone. 

In his most recent keynote, Apple CEO Tim Cook pointed out that one in two new computers sold by Apple is being bought by the first time Mac buyers.  The Mac business grew by nearly 30% last quarter, and the Mac is having its best year ever. Apple sold over 5.5 million Macs in 2020 and now has a 7.7 percent share of the market. In truth, many of these buyers probably don’t know or don’t care about what chip runs their computer. 

However, for those that do, many are conditioned by multi-billion dollar marketing budgets of Intel and Windows PC makers to think about gigahertz, memory, and speed. The idea that bigger numbers are a proxy for better quality has become ingrained in modern thinking about laptops and desktops. This mental model will be a big challenge for Apple. 

But Intel and AMD have to talk about gigahertz and power because they are component providers and can only charge more by offering higher specifications. “We are a product company, and we built a beautiful product that has the tight integration of software and silicon,” Srouji boasted. “It’s not about the gigahertz and megahertz, but about what the customers are getting out of it.” 

Apple’s senior vice president of Hardware Technologies Johny Srouji. (Photo Credit: Apple.)

Having previously worked for IBM and Intel, Srouji is a chip industry veteran who now leads Apple’s gargantuan silicon operation. As he sees it, just as no one cares about the clock speed of the chip inside an iPhone, the same will be true for the new Macs of the future. Rather, it will all be about how “many tasks you can finish on a single battery life.” Instead of a chip that is one-size-fits-all, Srouji said that M1 is a chip “for the best use of our product, and tightly integrated with the software.” [Additional Reading: Is it time to SoC the CPU: The M1 & Apple’s approach to chips vs. Intel & AMD ]

“I believe the Apple model is unique and the best model,” he said. “We’re developing a custom silicon that is perfectly fit for the product and how the software will use it. When we design our chips, which are like three or four years ahead of time, Craig and I are sitting in the same room defining what we want to deliver, and then we work hand in hand. You cannot do this as an Intel or AMD or anyone else.”

According to Federighi, integration and these specialized execution engines are a long-term trend. “It is difficult to put more transistors on a piece of silicon. It starts to be more important to integrate more of those components closely together and to build purpose-built silicon to solve the specific problems for a system.” M1 is built with 16 billion transistors, while its notebook competitors -— AMD (Zen 3 APU) and Intel (Tiger Lake) — are built using about ten billion transistors per chip. 

“Being in a position for us to define together the right chip to build the computer we want to build and then build that exact chip at scale is a profound thing,” Federighi said about the symbiotic relationship between hardware and software groups at Apple. Both teams strive to look three years into the future and see what the systems of tomorrow look like. Then they build software and hardware for that future. 

Apple’s senior vice president of Software Engineering Craig Federighi (Photo Credit: Apple Inc.)


The M1 chip can’t be viewed in isolation. It is a silicon-level manifestation of what is happening across computing, especially in the software layer. In large part due to mobile devices, which are always connected, computers now must startup instantaneously, allowing the user to look, interact, and move away from them. There is low latency in these devices, and they are efficient. There is a higher emphasis on privacy and data protection. They can’t have fans, run hot, make noise, or run out of power. This expectation is universal, and as a result, the software has had to evolve along with it. 

The desktop environments are the last dominion to fall. One of the defining aspects of traditional desktop computing is the file system — in which all of your software shares a storage area, and the user tries to keep it organized (for better or for worse). That worked in a world where the software and its functionalities were operating on a human scale. We live in a world that is wired and moves at a network scale. This new computing reality needs modern software, which we see and use on our mobile phones every day. And while none of these changes are going to happen tomorrow, the snowball is rolling down the mountain. 

The traditional model is an app or program that sits on a hard drive and is run when the user wants to use it. We are moving to a model where apps have many entry points. They provide data for consumption elsewhere and everywhere. They respond to notifications and events related to what the user is doing or where they are located.

Modern software has many entry points. If you look at more recent mobile OS changes, you can see emergence of new approaches such as App Clips and Widgets. They are slowly going to reshape what we think of an app, and what we expect from an app. What they are showing is that apps are two-way end-points — application programming interfaces — reacting to data in real-time. Today, our apps are becoming more personal and smarter as we use them. Our interactions define their capabilities. It is always learning. 

As Apple merges the desktop, tablet, and phone operating systems into a different kind of layer supported by a singular chip architecture across its entire product line-up, traditional metrics of performance aren’t going to cut it. 

“The specs that are typically bandied about in the industry have stopped being a good predictor of actual task-level performance for a long time,” Federighi said. You don’t worry about the CPU specs; instead, you think about the job. “Architecturally, how many streams of 4k or 8k video can you process simultaneously while performing certain effects? That is the question video professionals want an answer to. No spec on the chip is going to answer that question for them.”

Srouji points out that, while the new chip is optimized for compactness and performance, it can still achieve a lot more than traditional ways of doing things. Take the GPU, for example. The most critical shift in computing has been a move away from textually dominant computing to visual-centric computing. Whether it is Zoom calls, watching Netflix, editing photos, and video clips, video and image processing have become integral parts of our computing experience. And that is why a GPU is as essential in a computer as any other chip. Intel, for example, offers integrated graphics with its chip, but it is still not as good because it has to use a PCIe interface to interact with the rest of the machine. 

By building a higher-end integrated graphics engine and marrying into the faster and more capable universal memory architecture, Apple’s M1 can do more than even the machines that use discrete GPU chips, which have their specialized memory on top of normal memory inside the computer. 

Why does this matter? 

Modern graphics are no longer about rendering triangles on a chip. Instead, it is a complex interplay between various parts of the computer’s innards. The data needs to be shunted between video decoder, image signal processor, render, compute, rasterize all at rapid speeds. This means a lot of data is moving. 

“If it’s a discrete GPU, you’re moving data back and forth across the system bus,” Federighi points out. “And that starts to dominate performance.” This is why you start to see computers get hot, fans behave like turbochargers, and there is a need for higher memory and more powerful chips. The M1 — at least, in theory — uses the UMA to eliminate all that need to move the data back and forth. On top of that, Apple has a new optimized approach to rendering, which involves rendering multiple tiles in parallel and has allowed the company to remove complexity around the video systems. 

“Most of the processing once upon a time was done on the CPU,” Srouji said. “Now, there is lots of processing done on the CPU, the graphics and the Neural Engine, and the image signal processor.” 

Things are only going to keep changing. For example, machine learning is going to play a bigger role in our future, and that is why neural engines need to evolve and keep up. Apple has its algorithms, and it needs to grow its hardware to keep up with those algorithms. 

Similarly, voice interfaces are going to become a dominant part of our computing landscape. A chip like M1 allows Apple to use its hardware capabilities to overcome Siri’s many limitations and position it to compare favorably to Amazon’s Alexa and Google Home. I have noticed that Siri feels a lot more accurate on the M1-based machine I am currently using as a loaner.  

At a human level, all of this means that you will see your system as soon as you start to flip open the screen. Your computer won’t burn your lap when doing zoom calls. And the battery doesn’t run out in the middle of a call with mom. 

It’s amazing what goes into making these small-seeming changes that, without many of us even realizing it, will transform our lives.

Present Future

If you pay enough attention, you can see the future. You can learn, adapt, and be ready for a world reshaped by science and technology. My occasional newsletter is focused on the future — the Near Future, to be precise. (read more)

Is it time to SoC the CPU?

This post is curated by Keith Teare. It was written by Om Malik. The original is [linked here]

The M1, the first member of the Apple Silicon family focused on laptops and desktop computers, is taking the battle that has been brewing for a long time right into the enemy camp. It is poised to pull down the curtains on CPUs as we have known them. 

After nearly five decades — Intel 4004 came to market in 1971 — the central processing unit, aka the CPU, now has competition from System on a Chip, aka SoC. While a traditional CPU has maintained a stranglehold on the world of laptops and desktops, the SoCs have ruled the mobile world. And this detente was expected to persist, for no one thought that SoC could handle Intel’s best punch. 

Here is how they are different. (Frankly these two images do a better job than my words.) 

CPU needs an ecosystem of other chips to become a computer. They need memory chips for data, audio chips, graphics processors, connectivity chips, and more. SoC, on the other hand, as the name suggests, has everything on a single chip and is more efficient. 

This is why mobile phones embraced the SoC approach to computing. Today, most computers are becoming derivative versions of mobile phones — lightweight, low power, instant-on, and always connected. 

An SoC isn’t very much bigger than a CPU. However, when you apply cutting edge manufacturing technologies such as 5 nanometers, you can pack a lot more punch in an SoC. And Apple has done precisely that with its M1 — 16 billion transistors that do everything a modern computer needs to do. In comparison, a CPU still needs more chips around it to make a computer work — and that creates constraints for the machines. 

With an SoC, there is a lot more room for disk storage and batteries. Because there are much higher integration and less internal wiring, power requirements are much lower, as well. You do the math: The sum of lower power requirements, fewer parts, and more room for batteries equals a machine that can last a day without a charge. 

The SoC approach also means it is cheaper to build a computer. Richard Kramer of Arete Research estimates that an M1 costs somewhere in the range of $50 to $55 apiece. In comparison, a good CPU can cost between $150 to $200 apiece. And that is before adding memory and other chips. This is a significant opportunity for Apple to mop-up the lightweight laptop market — considering that there isn’t an x86 competitor in sight for at least a year. “We think Apple can increase sales of Macs by $18bn from FY20’s $28.6bn to $47bn, by growing units from 20m to 30m,” Kramer wrote in a note to his clients. 

The most significant shortcoming of the SoC approach to computing is relative inflexibility. You can’t replace any components. There is no way to swap out CPU, GPU, or boost RAM. However, thanks to its tight operating system and chip-level integration, Apple can build custom SoC chips in various permutations. It can optimize the performance across its entire system. 

As far as Apple is concerned, SoCs are the future of computing. Sure, there will be a need for general-purpose CPUs, but the writing is on the wall. Intel and AMD are embracing this trend of integration, though they are still selling CPUs. 

Computing is changing, and so are the engines that power it. The sheer volume of mobile devices sold every year gives companies like Apple and Qualcomm a chance to better understand computing’s future. As a result, they can build chips for future computers better. I don’t see any difference between a 13-inch laptop and a tablet. And neither do companies like Apple. 

For those unfamiliar with it, Moore’s Law — postulated by Gordon Moore, a co-founder of Intel  —  argues that the number of transistors on a microchip doubles every two years, while the cost of computers is halved. This has been the cornerstone of Intel’s success. The company’s ability to make the best chips before everyone else allowed it to maintain a hefty market share with outsized margins. 

It is why it could afford to miscalculate and whiff on the mobile chip opportunity. It sold more expensive laptops, desktops, and server/datacenter focused chips, and it enjoyed Rolex-like profit margins. However, the company hit some manufacturing stumbling blocks — its transition to 10 nanometers and 7-nanometer manufacturing didn’t go as well. This ill-fated misstep happened just when mobile phones (and tablets) became dominant computing platforms. 

Intel is still focused on the CPU and has no choice but to keep pushing ahead and seek more high-end CPU design opportunities. This means more advanced and complicated transistor designs, which lead to additional manufacturing challenges. So, now Intel is trapped and has to use outsourcing to make its chips. It is quite a fall for a company that once was known for its fierce chip independence and brutal approach to competition. 

Intel’s chip manufacturing competitors, Samsung and TSMC, decided to bet on mobile and played it safe with the SoCs. The boom in mobile has enriched these companies. TSMC, for instance, is now making chips for Apple at 5 nanometers. They have a cash-rich client interested in the best manufacturing capabilities and will stay ahead of Intel’s curve.

Apple saw Intel’s challenges coming from a mile and has smartly moved away from the Intel platform. It knew that it had to build its laptop and desktop chips. M1 is the right first move. It is time to SoC the CPU. 

Main Post: Steve Jobs’ last gambit: Apple’s M1 Chip & why it matters

Present Future

If you pay enough attention, you can see the future. You can learn, adapt, and be ready for a world reshaped by science and technology. My occasional newsletter is focused on the future — the Near Future, to be precise. (read more)

Airbnb Finally Files For IPO, We Break Down Its S-1

This post is curated by Keith Teare. It was written by Sophia Kunthara. The original is [linked here]

After months of anticipation, Airbnb has finally publicly disclosed its S-1 registration statement as it prepares for its public market debut.

Subscribe to the Crunchbase Daily

The IPO, arguably the most anticipated of 2020, is set to happen before the end of the year.

The company announced last year that it planned to go public in 2020, but the COVID-19 pandemic initially raised questions if an IPO was still in the cards. It confidentially filed an S-1 with the SEC in August.

As a private company, Airbnb raised around $6.4 billion in funding from investors including FirstMark, General Atlantic, and Andreessen Horowitz. It last raised a $1 billion private equity round led by Silver Lake and Sixth Street Partners, and $1 billion in debt financing in April 2020 after the COVID-19 pandemic took a hammer to its business.

The company suffered as the pandemic put a sudden stop to travel and had to lay off 1,900 employees, or about 25 percent of its team. It’s since recovered a bit after shifting its focus to local travel.

The company acknowledged the impact of COVID-19 on its business in the S-1 filing.

“COVID-19 has materially adversely affected our recent operating and financial results and is continuing to materially adversely impact our long-term operating and financial results,” the company wrote. “However, we believe that as the world recovers from this pandemic, Airbnb will be a vital source of economic empowerment for millions of people.”

The impact of COVID-19 was apparent in Airbnb’s reported gross booking value and revenue this year (we’ll get more into revenue later). While the company’s gross booking value grew 29 percent between 2018 and 2019 (from $29.4 billion to $38 billion), it fell in 2020 to $18 billion, or down 39 percent year over year.

“In early 2020, as COVID-19 disrupted travel across the world, Airbnb’s business declined significantly. But within two months, our business model started to rebound even with limited international travel, demonstrating its resilience. People wanted to get out of their homes and yearned to travel, but they did not want to go far or to be in crowded hotel lobbies. Domestic travel quickly rebounded on Airbnb around the world as millions of guests took trips closer to home. Stays of longer than a few days started increasing as work-from-home became work-from-any-home on Airbnb. We believe that the lines between travel and living are blurring, and the global pandemic has accelerated the ability to live anywhere. Our platform has proven adaptable to serve these new ways of traveling,” the company wrote.

A look at the numbers

Airbnb’s revenue was climbing annually, until 2020 when the COVID-19 pandemic hit. Its total revenue fell around 31 percent between the first nine months of 2019 and the same period in 2020.

Airbnb reported nearly $2.52 billion in revenue for the first nine months of 2020, down from nearly $3.7 billion in revenue for the same period in 2019. 

Its revenue had been climbing from $919 million for the year that ended on Dec. 31, 2015, nearly $1.7 billion in 2016, nearly $2.6 billion in 2017, nearly $3.7 billion in 2018, and $4.8 billion in 2019.

The company’s net losses have been all over the place since 2015, but 2020 has definitely been the worst, for obvious reasons. Airbnb reported losses of $135.4 million in 2015, $147.4 million in 2016, $70 million in 2017, $16.9 million in 2018, and $674.3 million in 2019.

The company’s net losses for the first nine months of 2020 have come out to about $696.9 million, more than double the $322.8 million in losses it recorded for the first nine months of 2019.

The players involved

Silver Lake and Sixth Street Partners, which threw Airbnb a lifeline earlier this year amid the COVID-19 pandemic, are two of the largest stakeholders in the company. Silver Lake owns 23.5 percent of the company’s Class A common stock, while Sixth Street owns about 18.5 percent of the Class A common stock. Other large shareholders include DST Global (17.5 percent of Class A and 2.3 percent of Class B), Jonathan Poulin and Affiliated Entities (13.1 percent of Class A), Greystar Real Estate Partners (5.4 percent of Class A), Accel (5.3 percent of Class A), Sequoia (4 percent of Class A and 16.6 percent of Class B), and Founders Fund (5.4 percent of Class B).

What’s coming up

Airbnb is expected to begin trading on the Nasdaq under the ticker ABNB in the coming weeks. Morgan Stanley and Goldman Sachs were among the underwriters for the IPO. 

Illustration: Li-Anne Dias

Good thread

This post is curated by Keith Teare. It was written by Ben Thompson (@benthompson). The original is [linked here]

Quoted Tweet:

The real lesson for Substack is that they should beware of features in publications representing industries they are disrupting. CJR isn’t writing about failed Shopify merchants 🤷‍♂️

This post is curated by Keith Teare. It was written by Ben Thompson (@benthompson). The original is [linked here]