The Syndicate

“Moving first is a tactic, not a goal….It’s much better to be a last mover.” — Peter Thiel On the surface this seems contrarian. When is being last better than being first? Steve Jobs understood this. Apple didn’t make the 1st MP3 player or the 1st smartphone. Yet in consumer tech, Apple is synonymous with both. That was no accident. This is Thiel’s theory in practice. Wealth accrues not to the first but to the monopoly, the company that captures the market, makes consumers forget all others and rides the waves as long as profits pour. They are the last. There is no successor coming. That is where the money is made and that is where startups and businesses should strive to be. Move slow and be boring? Not at all. That isn’t what Thiel’s talking about, that is horrible advice. Just look at the Windows phone or Kodak’s digital camera. This isn’t about perfectionism either. Lean startup principles still apply. You want to move fast and probably will break things. But don’t sacrifice the “it” factor it takes to win. The iPhone killed the Blackberry because it was 10x better. It wasn’t about rushing a competitor to market, it was about building the perfect enough product to crush the competition and with a innovative moat that got stronger and stronger over time — ie the App Store. Steve Jobs succeeded where RIM failed because of his team. They convinced him a 3rd party app store would outperform Apple’s dev team. They were right. Today, even against Android, Apple’s App Store keeps people coming back. The flywheel moat Apple’s first mover advantage, not in the smartphone space but in the 3rd party app store succeeded beyond their wildest imaginations. Developers raced to build apps and businesses around the iPhone and the customer experience got better and better. And with more users came more devs and more apps and a never ending cycle of value creation — the vast majority of which accrued in Apple’s oversea bank accounts. This example illustrates what ALL startups should shoot for — an increasingly defensible business model. The reason — competitive pressures and customer acquisition costs. Businesses without this defensibility almost always struggle with profit and unit economics. Look at Instacart or Uber, on the surface both great businesses. Dig deeper and you reveal weak foundations. Let me explain. Uber’s a bit like a house of cards No, that isn’t a reference to their management, Kalanick, or the Benchmark lawsuit. It goes deeper. Ride sharing is a local business. And with local businesses like this, the local network effects are incredibly strong. Uber spends a bunch to enter a city, onboards drivers, and pays to acquire customers. As more riders and drivers start using the system, it becomes more and more efficient and the unit economics start to make sense. This is the reason Uber, Didi, Grab, Lyft and dozens of other ride sharing services raise so much money. It is a land grab and VCs are racing to control their fiefdoms. But there is a big problem. Drivers and riders have NO LOYALTY. The reason I use Uber or Lyft or any one of a dozen services is a result of price, availability, and marketing. A better offer from ANY competitor and I’m gone. The same is true of drivers. Most Uber and Lyft drivers use two phones and drive for both. Whichever company gets them more business is king (of the day). Suddenly Uber’s moat doesn’t look quite so deep. It gets even worse. Buying friends Every city Uber enters they spend big bucks. But any other ride hailing app can do the same. How does Uber win? They enter cities sooner and outspend the competition. They buy riders and drivers. But anyone else can do that too. China challenged Uber and won, forcing them to leave with their tail between th...

Arlan Hamilton isn’t your typical VC. She’s a smart, scrappy founder and fighter and believes in inclusion and diversity to drive outsized rewards. Her firm Backstage Capital invests in underrepresented founders like herself: people of color, LGBT and anyone SF wouldn’t normally give a fair shake. She’s fiery, she attacks conventions and she’s changing the world of tech while focused on enormous ROIs. Enjoy. Listen and Learn: * How to raise your 1st VC fund, while being homeless * The power of connecting founders with investors * What will happen to Silicon Valley’s big boy club * Why under-represented founders deliver outsized returns * How to be contrarian with your focuses * Why grit is the #1 most important factor for founders and investors * What investors lack that operators know * The massive disparity in venture capital * Why Silicon Valley doesn’t have a pipeline problem Arlan’s Projects: Arlan’s Angellist profile Backstage Capital Bootstrapped VC podcast Arlan’s Twitter: @arlanwashere Backstage Capital Twitter: @backstage_cap Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow.Arlan Hamilton isn’t your typical VC. She’s a smart, scrappy founder and fighter and believes in inclusion and diversity to drive outsized rewards. Her firm Backstage Capital invests in underrepresented founders like herself: people of color, LGBT and anyone SF wouldn’t normally give a fair shake. She’s fiery, she attacks conventions and she’s changing the world of tech while focused on enormous ROIs. Enjoy. Listen and Learn: * How to raise your 1st VC fund, while being homeless * The power of connecting founders with investors * What will happen to Silicon Valley’s big boy club * Why under-represented founders deliver outsized returns * How to be contrarian with your focuses * Why grit is the #1 most important factor for founders and investors * What investors lack that operators know * The massive disparity in venture capital * Why Silicon Valley doesn’t have a pipeline problem Arlan’s Projects: Arlan’s Angellist profile Backstage Capital Bootstrapped VC podcast Arlan’s Twitter: @arlanwashere Backstage Capital Twitter: @backstage_cap Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow.

If you haven’t heard, Amazon won ecommerce. Bezos’ juggernaut is the most powerful marketplace and brand the Western world has ever seen (get my analysis here as an ex 7 figure Amazon seller). But it isn’t the only game in town. Every year new startups appear, looking to compete and grab their piece of the pie. As an ex-Amazon seller (and host of a top Amazon podcast), I can say for certain that the majority of the action in ecommerce is on the brand side. It gets easier and easier to source and manufacture product and put your label on it. These businesses ARE NOT fundable. There is no disruptive innovation, there is no world shattering business or venture scale profits in the pipeline. That is fine. But if you are here, you want to go big. You’re an investor or an operator interested in venture scale ecommerce and looking for an edge. There are two fundable categories of ecommerce: marketplaces and ecommerce brands. To date, the majority of the money and returns have been via marketplaces. Look no further than Amazon, Ebay and Etsy. (NOTE: SaaS/Shopify for ecommerce merchants was not included in these categories as it is a B2B SaaS play.) When it comes to marketplaces, I have covered the topic extensive. I will link to these articles here to avoid repeating myself. The Cult-Like Religion of ICOs and End of Amazon? The 5 Types of Network Effects and How to Hack Them Brand’s business models are getting more interesting, lets take a look. There are 4 types of disruptive ecommerce businesses: Direct to consumer brands Subscription companies Delivery companies Experiential commerce companies Let’s look at each of these, their outliers and what the future holds. Direct to consumer brands Recently, mega companies have been created by disrupting traditional supply chains. Brands like Casper, @Harry’s and Warby Parker are leading the way. These direct-to-consumer brands cut out the middlemen by selling online and owning manufacturing to give customers better value for their money. So while consumers save a ton; the brands get to boost their margins (fewer mouths to feed), control their supply chain and build defensibility into their business. They all take it a step further as well. The brand becomes the experience. Casper delivers a mattress in a box. Then it inflates automatically and ready to use. How cool is that. And Harry’s and Warby Parker deliver premium products and a premium experience at pretty affordable price. Their focus on brand keeps consumers coming back because customers love their products. And their NPS and word of mouth work wonders for marketing (Warby Parker — NPS: 91) (Source: NPSBenchmarks.com)

Shaun Abrahamson’s an angel investor and venture capitalist focused on the urbanization and transformation of cities. He’s an investor in Blue Bottle, Soma Water, Refinery29, Skycatch, Blokable and dozens of other early stage companies. Previously he worked at and with several Dotcom and made a bit of money with an exit, leading into his investing career. Listen and Learn: * What is the future of cities * The problem with traditional investment cycles * How startups are innovating on a local level * What cryptocurrencies means for government * How the tech bubble affects investors to this day * Why investors are rich on paper and poor in practice * What happens in M&A and when to sell * How investors should focus on creating the future Shaun’s Projects: Shaun’s Angellist profile Urban.us Urban.us Syndicate Shaun’s Twitter: @shaunabe Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow.Shaun Abrahamson’s an angel investor and venture capitalist focused on the urbanization and transformation of cities. He’s an investor in Blue Bottle, Soma Water, Refinery29, Skycatch, Blokable and dozens of other early stage companies. Previously he worked at and with several Dotcom and made a bit of money with an exit, leading into his investing career. Listen and Learn: * What is the future of cities * The problem with traditional investment cycles * How startups are innovating on a local level * What cryptocurrencies means for government * How the tech bubble affects investors to this day * Why investors are rich on paper and poor in practice * What happens in M&A and when to sell * How investors should focus on creating the future Shaun’s Projects: Shaun’s Angellist profile Urban.us Urban.us Syndicate Shaun’s Twitter: @shaunabe Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow.

Stefano Bernardi’s sat at both ends of the table. A YC backed founder and startup hustler, Stefano got into venture and angel investing early and never looked back. Stefano enjoys long walks in the Alps, investing and blogging about crypto and blockchain and helping European founders find their groove and succeed. Listen and Learn: * What angels need to know about ICOs * The power of mentors in entrepreneurship * How YC prepares startups to succeed * Why Europe is seeing a startup revolution * How to source startup deals on Twitter * Why investors don’t need to live in startup hubs to succeed * What investors lack that operators know * The future of cryptocurrencies and fintech Stephano’s Projects: Stefano’s Angellist profile Mission and Market venture fund Stefano’s Syndicate tokeneconomy.co Stefano’s Twitter: @stefanobernardi Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow.Stefano Bernardi’s sat at both ends of the table. A YC backed founder and startup hustler, Stefano got into venture and angel investing early and never looked back. Stefano enjoys long walks in the Alps, investing and blogging about crypto and blockchain and helping European founders find their groove and succeed. Listen and Learn: * What angels need to know about ICOs * The power of mentors in entrepreneurship * How YC prepares startups to succeed * Why Europe is seeing a startup revolution * How to source startup deals on Twitter * Why investors don’t need to live in startup hubs to succeed * What investors lack that operators know * The future of cryptocurrencies and fintech Stephano’s Projects: Stefano’s Angellist profile Mission and Market venture fund Stefano’s Syndicate tokeneconomy.co Stefano’s Twitter: @stefanobernardi Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow.

The Syndicate hosted The Future of Cryptocurrencies/Blockchain Live Streamed Round Table on 11/28/17   Our expert panelists include: Gil Penchina, Andy Bromberg, Lou Kerner and Joey Krug Gil Penchina’s one of the top super angels of all time, with investments in Ripple, Brave, Polychain, Paypal, Filecoin, Civic, Linkedin, Cruise Automation, Dollar Shave Club, Wealthfront, Discord, Fastly and a name as good as gold. Prior to that he worked at Ebay through the IPO process and now he runs 20+ syndicates on Angellist with millions in backing. And today he’s venturing to the other side of the table with Pryze, a decentralized sweepstakes system working on an ICO pre-sale. For more on Gil, check out his interview on The Syndicate podcast where we discuss How Gil Tried to Lose Money and Hit 5 Unicorns and the Future of Cryptocurrencies Joey Krug got involved in Bitcoin mining in 2011 before building Bitcoin point of sale system in 2013. In 2014, he dropped out of Pomona College to cofound one of the first projects on ethereum called Augur, and in 2015 they did the first crowdsale on Ethereum. Then this year he joined Pantera Capitalas Co-Chief Investment Officer managing their digital asset funds… oh, and he also run one of the top 10 (by backing) AngelList syndicates. To learn more about Joey, listen to our interview (the 1st of the podcast), on Cryptocurrencies, ICOs and the Future of Public Markets. Andy Bromberg is the CEO of CoinList, an innovative ICO launch platform and compliance company responsible for the Filecoin’s $205M ICO success. Spun out of Angellist, Coinlist is already a leader in the token space and has built the trust and success to fuel legitimate, world changing ICOs. Prior to Coinlist, Andy co-founded Sidewire, a startup which raised ~ $5M to connect experts for thought provoking conversations on politics on more. Lou Kerner is the founder and managing partner of Flight.vc’s Israeli Founder fund and the Social Internet fund. Before that, Lou pioneered social media with Bolt, the largest social media company of its time before being conquered by Myspace. Since then Lou has invested in the likes of Palantir, Facebook, Meetup, Klout, Plated and more. And if you missed Lou’s conversation on the podcast, it is a must. Offered 1/4 of Facebook for $5M – Plus Israel, Social Media, Cryptocurrencies and Future of Monopolies We will cover a wide range of topics from ICOs, the future of cryptocurrencies, the implications and disruptions of blockchain and much much more. Plus there will be a live Q&A session at the end with all our esteemed guests. Want more great round tables and investor interviews. Subscribe today to never miss a thing! Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow. The Syndicate hosted The Future of Cryptocurrencies/Blockchain Live Streamed Round Table on 11/28/17   Our expert panelists include: Gil Penchina, Andy Bromberg, Lou Kerner and Joey Krug Gil Penchina’s one of the top super angels of all time, with investments in Ripple, Brave, Polychain, Paypal, Filecoin, Civic, Linkedin, Cruise Automation, Dollar Shave Club, Wealthfront, Discord, Fastly and a name as good as gold. Prior to that he worked at Ebay through the IPO process and now he runs 20+ syndicates on Angellist with millions in backing. And today he’s venturing to the other side of the table with Pryze,

Michael Girdley is an angel investor, venture capitalist, former founder and operator and sits on numerous boards. He founded the San Antonio Angel Network, building it into the fastest growing angel network in the US and is focused on driving returns while also reinvigorating Texas and flyover states with smart money and startup growth. Listen and Learn: * The future of franchise businesses * Why San Antonio’s startup scene is growing rapidly * How to build an effective angel network * Why blockchain is in the dotcom era * How to avoid fear of missing out * Why angel investors and VCs should have similar investment strategies * How to avoid getting stuck as a CEO * Strategies to increase deal flow Michael’s Projects: Michael’s Angellist profile girdley.com Geekdom’s Angel page San Antonio Angel Network Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow.Michael Girdley is an angel investor, venture capitalist, former founder and operator and sits on numerous boards. He founded the San Antonio Angel Network, building it into the fastest growing angel network in the US and is focused on driving returns while also reinvigorating Texas and flyover states with smart money and startup growth. Listen and Learn: * The future of franchise businesses * Why San Antonio’s startup scene is growing rapidly * How to build an effective angel network * Why blockchain is in the dotcom era * How to avoid fear of missing out * Why angel investors and VCs should have similar investment strategies * How to avoid getting stuck as a CEO * Strategies to increase deal flow Michael’s Projects: Michael’s Angellist profile girdley.com Geekdom’s Angel page San Antonio Angel Network Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow.

Gil Penchina’s one of the top super angels of all time, with investments in Ripple, Brave, Polychain, Paypal, Filecoin, Civic, Linkedin, Cruise, Dollar Shave Club Wealthfront, Discord, Fastly and a name as good as gold. Prior to that he worked at Ebay through the IPO process and now he runs 20+ syndicates on Angellist with millions in backing. And today he’s venturing to the other side of the table with Pryze, a decentralized raffle system working on an ICO pre-sale. Listen and Learn: * How Gil invested early in Paypal * What he looks for in founders and markets * Why Gil is bullish on cryptocurrencies * His exact asset allocation strategy * How he built a massive network of Angellist syndicates * What blockchain means for society as a whole * How ICOs are affecting all of us * What all angel investors need to know about getting started Gil’s Main Projects: Gil’s Angellist Profile Flight.vc Angellist Syndicate Flight.vc Pryze Twitter: @gilpenchina Gil’s ICO Insiders Mailing List Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow.Gil Penchina’s one of the top super angels of all time, with investments in Ripple, Brave, Polychain, Paypal, Filecoin, Civic, Linkedin, Cruise, Dollar Shave Club Wealthfront, Discord, Fastly and a name as good as gold. Prior to that he worked at Ebay through the IPO process and now he runs 20+ syndicates on Angellist with millions in backing. And today he’s venturing to the other side of the table with Pryze, a decentralized raffle system working on an ICO pre-sale. Listen and Learn: * How Gil invested early in Paypal * What he looks for in founders and markets * Why Gil is bullish on cryptocurrencies * His exact asset allocation strategy * How he built a massive network of Angellist syndicates * What blockchain means for society as a whole * How ICOs are affecting all of us * What all angel investors need to know about getting started Gil’s Main Projects: Gil’s Angellist Profile Flight.vc Angellist Syndicate Flight.vc Pryze Twitter: @gilpenchina Gil’s ICO Insiders Mailing List Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow.

As an angel investor, I am always looking for transformational businesses. And marketplaces are arguably one of the strongest and most time-tested business models of all time. From early Rome and milenia earlier, merchants conducted commerce in markets. Thanks to efficiency gains for both buyers and sellers, the market thrived. Sellers could set up shop and instantly access customers. And buyers found everything under the sun, all in one place. While initially these merchants operated caravans to cover more ground, reach more consumers and acquire more valued commodities, the model has changed. Today more and more commerce happens online. You buy an iPad, book a room, grab an Uber and get Ticketmaster tickets to the last game — all online, all in 10 minutes. Everything is conducted online and marketplaces are the means that make this happen. They are the backbone of the modern economy and are constantly changing and evolving, adding efficiencies while stripping out waste. (For more on the dangers of marketplaces and Amazon, be sure to read how Amazon is killing ecommerce.) Why marketplaces make so much money Marketplaces are like matchmakers. They hook you up with a product or service and take a small commission (sometimes from buyers, sometimes from sellers — occasionally both). Marketplaces are middlemen in the truest sense of the word. Yet marketplaces have replaced many of the middlemen of old. Wholesalers and distributors? Most marketplaces don’t need them. The reason markets have evolved as they have is the reduction of waste. Time, energy and cost are continuously optimized, making the experience better for buyers and sellers. The network effect of marketplaces are known as the flywheel. The more travellers on Airbnb, the more homeowners want to list their properties. And of course more choices and destinations means consumers are more likely to join or refer friends… and so on and so forth. The law of diminishing risk The bigger they are, the harder they fall, normally. The problem with this statement is that it almost never applies to marketplaces. The reason: the larger the market, the more valuable it is for everyone involved. Everyone is winning. This makes displacement and disruption incredibly hard. Up-and-comers must 10x the value to convert the faithful. How can you 10x a system that is ever increasing in value for its users? So unlike most conventional business models where rewards diminish as efforts increase, marketplaces buck this trend. While direct profits are more challenging to impact at scale and individual users add less and less to the overall, every user adds buffer to the business model. Markets become exponentially more defensible — the risk goes down. Hence why venture valuations explode as marketplace companies start to reach scale. VCs recognize that much of the battle is already won in the hearts and minds (and most importantly wallets) of users. NOTE: An important distinction — Almost all two sided networks are considered marketplaces for the purposes of this article and analysis. For example: Uber is a marketplace, and a service. ICOs upset this balance Blockchain business models have blown up the world of traditional VC lately. Startups, many with little more than an idea, a white paper and a vision are raising 10s if not 100s of millions of dollars. The froth is crazy. (To read about the boom, bust and re-birth of ICOs, check out this post.)

Angela Lee is the founder and CEO of 37Angels, a angel network of over 60 female investors and the Chief Innovation Officer of Columbia University’s Business School – where she is also a full time professor. Oh, she’s also a board advisor for several education focused venture funds and successful startups. Listen and Learn: * The future of higher education * Why investors need to deal with their pipeline problem * Gender dynamics at play and how to avoid them * Why informed opinions are better that bets * How to help angel investors be more successful * Why society influences girls to avoid math * How to reduce gender bias in investing Angela’s Projects: 37Angels Angellist profile 37angels.com Twitter: @37angelsny Angela’s LinkedIn 37Angels Online Investing Bootcamp – Learn how to vet early stage startups, calculate valuation and dilution, and best practices for building a portfolio strategy to optimize your investments – on your own schedule. Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow.Angela Lee is the founder and CEO of 37Angels, a angel network of over 60 female investors and the Chief Innovation Officer of Columbia University’s Business School – where she is also a full time professor. Oh, she’s also a board advisor for several education focused venture funds and successful startups. Listen and Learn: * The future of higher education * Why investors need to deal with their pipeline problem * Gender dynamics at play and how to avoid them * Why informed opinions are better that bets * How to help angel investors be more successful * Why society influences girls to avoid math * How to reduce gender bias in investing Angela’s Projects: 37Angels Angellist profile 37angels.com Twitter: @37angelsny Angela’s LinkedIn 37Angels Online Investing Bootcamp – Learn how to vet early stage startups, calculate valuation and dilution, and best practices for building a portfolio strategy to optimize your investments – on your own schedule. Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow.

Pascal has 10+ years experience in Enterprise software and Consumer Internet and is passionate about marketplaces and local commerce since working at eBay. He built and scale VirtuOz (VC backed) from 4 to 80+ employees before ultimately being acquired.  Pascal also runs one of the top Angellist syndicates, having invested in Realty Shares, Checkr, Wag, Shyp, Caviar, Sprig and Payjoy. He also runs one of the first AL venture funds and is a is a mentor and judge at Stanford in the Technology Venture Formation class (MS&E 273). Listen and Learn: * How to run a top syndicate while working a day job * Why local commerce is the future * The way Angellist funds work * What most angel investors do wrong initially * How Angellist has evolved in the past three years * Why liquidity is hard to come by * How the on demand economy is changing commerce as we know it * Why cryptocurrency is overrated in the short term and underrated in the long term Pascal’s Projects: Pascal’s AngelList profile Pascal’s Syndicate Pascal’s LinkedIn Pascal’s on Twitter: @2pasc Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow.Pascal has 10+ years experience in Enterprise software and Consumer Internet and is passionate about marketplaces and local commerce since working at eBay. He built and scale VirtuOz (VC backed) from 4 to 80+ employees before ultimately being acquired.  Pascal also runs one of the top Angellist syndicates, having invested in Realty Shares, Checkr, Wag, Shyp, Caviar, Sprig and Payjoy. He also runs one of the first AL venture funds and is a is a mentor and judge at Stanford in the Technology Venture Formation class (MS&E 273). Listen and Learn: * How to run a top syndicate while working a day job * Why local commerce is the future * The way Angellist funds work * What most angel investors do wrong initially * How Angellist has evolved in the past three years * Why liquidity is hard to come by * How the on demand economy is changing commerce as we know it * Why cryptocurrency is overrated in the short term and underrated in the long term Pascal’s Projects: Pascal’s AngelList profile Pascal’s Syndicate Pascal’s LinkedIn Pascal’s on Twitter: @2pasc Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow.

Amazon’s is the most monopolistic and well positioned marketplace the Western world has ever seen. Last year they did $136B in revenue with double digit growth every year. Yet they haven’t even scratched the surface. The US food retail and food services industry represents a $5.35T market (with $800B+ in grocery alone). That is 40x Amazon’s total global sales – everybody’s got to eat. The food space is the future frontier, and Amazon is betting big. On August 28th, 2017, Amazon decided to buy Whole Foods. Consider this D-Day. The world of groceries will never be the same. Here is why. Amazon’s been salivating over food delivery for years. But, try as they might, their efforts have fallen flat every time. Amazon Fresh had $10M in revenue in Q1 of 2016. That is chump change for Bezos. (NOTE: For more on Amazon, my experience with the company and how they will kill ecommerce, see this post.) The network problem Amazon is a market. Amazon is a network effect. The reason why the company runs so well is so highly valued is its network of 3rd party sellers and massive customer base. Jeff Bezos founded Amazon on July 5th, 1994. Since then the company scraped and fought its way to market leader status, constantly growing areas of the business. They started with books. Books seemed easy enough to sell online and customers like options (just look at libraries). Bezos committed to crushing it with books. “Books, books, books. That is all we are ever going to sell.” That was the mantra early on. Amazon committed and as they grew a larger and more diverse customer base, other options presented themselves. They branched out into media and digital and quickly Amazon started morphing into a full fledged Everything Store. But the base was crucial. They attracted customers and used the demand to pull sellers to the site. With that the flywheel was born. Imagine if Amazon had started selling everything from day one. There would be no message for customers, confusion for sellers and chaos all around. Systematic Network Expansion Today Amazon is doing the same with Whole Foods. Amazon’s existing supply and demand structure was lacking. Despite the most advanced logistics network in the world, Amazon couldn’t quite get grocery. The reason lies in the nature of the product. Selling widgets is easy. 1,2, 2000… it doesn’t matter how much inventory and what type of products you stock. As long as you wait long enough, eventually you will sell them. It isn’t ideal but with enough money, turn time (speed of sales) is not critical. This isn’t true with food. Milk spoils. Eggs break or go bad and bananas are blobs after a few days. Groceries have to go fast or the business collapses. This is part of the reason food service businesses are so hard. You need choices so customers can choose but with too much stock, waste and spoilage will wreck your profits. Amazon suffered this problem for years. Amazon COULD NOT offer perishable products online. What would they do if they didn’t sell? Eat the lost? And there is no way they could get brands and 3rd party sellers on board without the demand. Whole Foods solves this. Whole Foods is one of the most well known and respected grocery brands. Their fans love them, their health conscious options and the incredible customer service/experience. Plus Whole Foods has locations in all the major urban hubs. Take a look at your average Whole Foods shopper. They are young, have money to spend and are culture and health conscience. This was not Amazon’s demographic initially – meaning Whole Foods opens up a whole new segment of the market to Amazon. But it is much more important than that. Whole Foods is a functioning, balanced, profitable network.

With great power comes great profit, and then even the innovative get fat and lazy. This was the paradigm pre 2000s. Rome rose and fell. Microsoft’s monopoly was cracked. Kodak created the digital camera and kept it from customers. The bigger they are, the harder they fall and the harder they fight. But historically failure was inevitable — no man, country or company ever reigned supreme in perpetuity. Chaos and innovation simply would not allow it. Fast forward to today. We are entering a world where this may no longer be the case. The companies of today are infinitely more powerful and resourceful than the empires and industry moguls of old. Established, valuable networks are nearly impossible to create, replicate or overcome. A 10% upgrade isn’t enough, you need 10x. Historically this was hard but inevitable. New changes and technologies propelled era after era out of existence at rapidly increasing rates (recently much in relation to Moore’s Law). Today is different Unlike even 10–15 years ago, tech giants are creating the bulk of the wealth and innovation in the economy. Companies like Facebook, Google and Amazon have more money than most small nations and more control than any one government, should they so choose. These giants don’t just fight competition, they destroy it. The leaders of today have learned the lessons of old and acquire promising startups often and early to protect their own ass. They have the most talent, the most money, the most data and no moral quandries with flat out copying competitors. Copy and paste In an era where user experience is everything and data is king, how can startups compete? US Anti Trust laws are dated. They define monopolies not by their power and control, but by negative impacts (specifically price gouging) experienced by customers. When you search for dinner and Google shows you your favorite restaurants, knows your preferences, suggests a great vegan cafe and books you a table, how can consumers complain. It is seamless, “Google just gets me.” But Google scraped Yelp’s database, showed reviews, cloned an OpenTable and booked a place, all without leaving your search browser. And guess what, the government does not care. Let’s not even start on Snapchat and Instagram. Snap’s growth has flatlined and Instagram appears unstoppable. Source: Recode Try it before you buy it Almost all giants have all been accused of Microsoft like monopolistic tendencies. They lure startups in with talks of acquisition, pick apart the tech, pass on the deal and build it in-house. Then thanks to network effects and enormous, engaged user bases, Facebook, Amazon and Google can deploy and dominate the market — just ask Dave Morin. And when Google and Facebook control the channels where startups acquire customers, a small tweak to the algorithm ensures their competitors drift in obscurity. Sounds like anti-trust is in order. But… More powerful than govt And this is why we find ourselves attending congressional hearings on the alarming power of tech and its ability to influence elections (on a sidenote, America has aggressively influenced dozens if not 100s of elections worldwide so it is hard to really whine about being on the receiving side). But these hearings and debates are a joke. The regulators assigned do not understand the underlying issue — network effects and user experience. Amazon’s a great example of this. Amazon aims to kill all 3rd party sellers, yet brands CANNOT afford not to sell on Amazon (more on this here). The rewards are too great. Like eating fastfood, it is great in the short term and deadly in the long run.

Nitin started UnshackledVC to help immigrant founders like himself simplify the visa problem of building businesses in the USA. His particular areas of interest when working with early stage startups are story-telling, pitching, fundraising, product strategy, and bringing in the first customers/sales. Listen and Learn: * How H1B visas get used and abused * The challenges for immigrant founders in the USA * Ways immigrant entrepreneurs can speed up the visa process * The chicken and egg problem for raising funding * How the US is hurting innovation and its future startup success * The power of applied technology startups * How to evaluate product pitches and problem solving Nitin’s Projects: Nitin’s AngelList profile Unshackled VC’s Angellist page UnshackledVC.com Nitin’s Twitter: @pachisia & @unshackledUS Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow.Nitin started UnshackledVC to help immigrant founders like himself simplify the visa problem of building businesses in the USA. His particular areas of interest when working with early stage startups are story-telling, pitching, fundraising, product strategy, and bringing in the first customers/sales. Listen and Learn: * How H1B visas get used and abused * The challenges for immigrant founders in the USA * Ways immigrant entrepreneurs can speed up the visa process * The chicken and egg problem for raising funding * How the US is hurting innovation and its future startup success * The power of applied technology startups * How to evaluate product pitches and problem solving Nitin’s Projects: Nitin’s AngelList profile Unshackled VC’s Angellist page UnshackledVC.com Nitin’s Twitter: @pachisia & @unshackledUS Are you an accredited investor? Apply to join our angel syndicate if you’d like to access our deal flow.

Apple and Google are two of the strongest, most profitable tech giants today. But both are in for a kick in the ass, here is why. Disruption is the name of the game. Great businesses die from one of two main reasons: failure to innovate or a powerful disruption. From my vantage point, both Apple and Google are firmly in those categories. An Apple a day and amazing profits. Steve Jobs must be rolling over in his grave. From one of the great innovators of all time to one of business’s most logistically efficient conmen, Tim Cook is driving Apple into the ground and grabbing dollars by the fistful. Everyone understands the pros and cons of short vs long term thinking/gratification. And Apple for one is focused on the short term. Cook’s greatest innovations have been dongles and adapters and connectors and crap designed to milk fanboys for all they are worth. Apple isn’t focused on usability or innovation anymore, they are focused on annoying, high margin accessories that have driven profits and market caps through the roof in recent years. Removing ports, removing headphone jacks, removing all simple functionality to force an additional purchase, all in the name of profit and aesthetics is downright troublesome. And Apple’s flops on new product lines and innovation are awfully embarrassing — the Macbook Pro slider, the Watch, the car, the marginally better iPhone at ever increasing prices… Apple is building fluff features for the sake of showmanship and sales… that is usually a formula for disaster. The question is how long will Apple fans feel okay being dragged through the dirt and robbed blind by Apple. It isn’t what have you done for me, it is what have you done for me lately… is Apple’s brand of old enough to carry to quick buck appearance of greatness and brand? Rome falls at the pinnacle of it’s opulence and Apple’s $5B spaceship headquarters is arguably the best product since the iPhone. Mhm. Bold prediction: Apple has peaked and short term greed has offset long term growth mindset. This is a company that HAS to buy someone to save their own ass and remain relevant. Logical Acquisitions: Netflix, Spotify, AR acqui-hire (and definitely not Tesla) Logical Expansions: Focus on podcasts and advertising to unseat radio and drive ad dollars through iTunes. Podcasting and curated streaming content creates obvious synergies with iPhone and value-add upsells to existing customer base. Hailmary Shot: Augmented reality could save Apple, if they are smart enough to execute well. Apple is a hardware/software company with raving fans and design aesthetic. If Apple can outperform competitors and create a new category defining product, AR is almost certainly it. Augmented reality will disrupt touch and screen based interfaces. Apple needs to lead from the front, rather than following to keep up and keep the brand relevant. “Ok Google, I don’t want to hear another ad” Voice is a paradigm shift, especially for Google. And it is ironic. Google is the leader in voice and NLP, clearly outperforming competitors like Alexa, Cortana and Siri (a joke) in the fields of voice. But that begs a bigger question: what happens to search results and paid ads without the screen interface? Will Google just read ads all day like Billy Mays?