The Unicorn Club: Revisited

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The Unicorn Club: Revisited

In 2013, when Aileen Lee of Cowboy Ventures first coined the “unicorns” term describing startups valued at $1 billion or more, she named 39 companies in the U.S fitting the definition.

In the spring of 2014, when I first set to compile a list of unicorns from around the globe as part of my work at InVenture Partners, the final list consisted of 83 companies, 56 of them in the U.S.

Over the next few years, this number continued to increase at an alarming pace, with CB Insights now highlighting 186 companies, and CrunchBase Unicorn Leaderboards listing 224 unicorns and 43 exited unicorns as of February 25th, 2017.

Still, those lists, while highly interesting, don’t necessarily provide the depth of insight offered in the original article by Aileen Lee. I thought it might be interesting to revisit the topic today, and explore what unicorns from around the world have in common and what differentiates them from each other.

To do that, I set to compile a list of companies that qualify to be called “unicorns” that carries as much information as possible. This list includes all startups co-founded since...

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The Benefits Of Integrated Offering Model

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A few days ago, TechCrunch published a list of 10 largest Series B rounds of 2016. The 10th place on the list went to Juicero, a juice making machine company, which raised $70 million in Series B. I’ve missed this deal earlier this year, but it still seems worth digging into, as I believe it provides some food for thought on the topic of building businesses that have hardware at their core.

An important note here is that I’m less interested in trying to predict whether or not Juicero will be a success, or defending the company’s strategy, and more interested to try to see the logic behind certain strategic decisions the company made so far.

Introducing Juicero

Juicero was founded in 2013 by Doug Evans, the founder and former CEO of Organic Avenue, a chain of stores selling organic juices. Until 2016, the startup remained in stealth mode, raising over $20 million of funding in Series A and Seed rounds. Shortly after closing $70 million round in March this year, the company announced another cash injection of $28 million, bringing its total funding close to $120 million.

Juicero sells a cold-press juicer of its own design, that fits the countertop and costs $699. Yes, you heard that right, it costs 700 hundred bucks. Sure, it looks nice, is small enough, and even has wi-fi for some reason (what device in 2016 doesn’t have it, after all?) It’s still a lot of money for a juicer, though. But that’s not all. After you buy the device itself...

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The New Reality Of 2016

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The first thing I did last morning was to type “election” query into Google search box. Even though I was following the election results until around 2am, I still nurtured the hope that something changed the last minute. Of course, it didn’t happen. The new reality the world woke up into yesterday was that Donald Trump would be the next president of the United States, something that seemed unthinkable to a lot of us even on the morning of the election.

***

Before continuing, though, I wanted to make a disclaimer. I am not U.S. citizen. Moreover, I hold the passport of one of the most anti-American countries in the world. Therefore, I feel uneasy expressing my opinions on the current election and contemplated whether to publish this post at all, even though I reside in the U.S. right now and intend to do so in the future. I do have vested interests in the U.S. elections (largely aligned with Clinton supporters, or better yet with Bernie Sanders supporters), and also believe that in today’s global economy, the results of the U.S. election influence the entire world. Still, if you feel that this election is the internal affair of the U.S. that should be of no concern for everyone else, that’s OK, just close this post and forget about it; I sincerely hope it hasn’t offended you.

Also, in this post I have no intention to argue how terrible Trump might be (there is already enough written on the topic anyway), or make any predictions how good or bad his presidency will be for the U.S. Instead, I wanted to dig into...

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E-Commerce Is Dead, Long Live E-Commerce: Part 2 (Bonobos Case)

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This is the second post in the series. In the first part, I talked about how the dominance of one player on the eyewear market led to unjustifiably high prices for the consumers, thus creating an opportunity for a massive disruption.

This time, I wanted to focus on an entirely different kind of market: much more diversified, often characterized by cutthroat competition and therefore low margins. This space, however, still offers room for a significant innovation in terms of product, customer service and operations.

Clothing Industry: Huge But Competitive

Apparel market in the U.S. alone reached $208 billion in 2014, according to NPD Group estimates. Footwear and accessories accounted for another $62 and $52.7 billion, respectively. Online apparel sales reached $52 billion. What’s even more interesting is that the space remained quite fragmented: top-9 retailers accounted only for 35% of the market, with Macy’s, Wal-Mart and Target being the largest ones with 9%, 7% and 5.4% shares.

Putting all those numbers aside, the main question is whether there still is a significant opportunity for innovation in this market. Granted, the market is huge, which creates strong incentives to look for untapped opportunities. However, unlike the eyewear market discussed in the first part of this post, this is also a very efficient market (in terms of competition), with a huge amount of players operating in the space: for example, apparel retailers’ net profit margins are usually lower than all-industry retail averages of around 8%. E-commerce apparrel retailers lack high margins as well because, while having significant advantages in terms of operations, they are usually forced to accept lower gross margins due to intense competition, lack of differentiation and a number of other issues (e.g. high percentage of returns), and also often have to engage in...

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E-Commerce Is Dead, Long Live E-Commerce: Part 1 (Warby Parker Case)

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In 2015, e-commerce sales in the U.S. accounted for $341.7 billion, with 14.6% growth rate over the previous year, and there are no signs of this growth slowing down in the future. Still, while the revenues of online retailers are soaring, very few of those are actually profitable or have a decent chance of turning profitable in the near future.

The reason why it is so difficult to build a sustainable business in the e-commerce space is simple: the vast majority of online retailers look too much alike. Sure, there are some differences, but most of those are still selling the same products to the same customers, thus creating a fertile ground for perfect competition. As a result, the gross margins become depressed, the marketing and operating costs soar, and ultimately the profits are competed away. Even Amazon, famously known for its brutal efficiency, was never really been profitable until a couple years ago (and those profits now come from AWS services, not its online retail business).

But while e-commerce in general might be a tough space to succeed, it doesn’t mean that the opportunities to build successful companies making huge impact on the customers aren’t there. One just needs to know to look hard enough to uncover those.

***

Imagine going to the mall to buy some clothes. You look around and see all the usual brands: Gap, J.Crew, Banana Republic, H&M, Levi’s and many others, all of them there. But as you enter the first store and start checking the items, you notice a strange pattern. Everything costs $200. You check a few pairs of jeans, a jacket, several tees — everything costs the same. Bewildered, you move to the next store, but there...

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The Benefits Of Being Agile

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There are five items in the top menu of Starbucks mobile app. Four of those allow you to place the order, reload your Starbucks card and find nearby shops. The last and the most noticeable one, however, has nothing to do with coffee. Instead, it allows Starbucks customers to connect their Spotify accounts into Starbucks app in order to be able to track music played at local Starbucks stores, listen to it from their smartphones and organize their favorite songs into playlists. The integration is done in both directions, which means that the users can not only enjoy the music through their Starbucks app, but also access Starbucks playlists from Spotify application.

Spotify struck a deal with Starbucks in 2015, making it public just a month before the launch of Apple Music. The timing was rather peculiar considering that Starbucks has already had an exclusive partnership with iTunes for almost 8 years by then. Still, Starbucks chose to go with an independent player rather than expand further expand its long-existing partnership with arguably the most influential company in the music industry in the U.S. Starbucks and Spotify announced that the roll-out of the service was to start in the U.S. in the fall of 2015, followed by Canada and the United Kingdom.

Spotify Rise to Dominance

Today, Spotify is the largest music streaming service in the world, sporting over 100 million active users and 30 million users on its monthly subscription plans as of June 2016. This is a pretty impressive result for 10-year old company that was started in 2006 in Stockholm, and until 2011 wasn’t even present in the U.S. market.

Those numbers didn’t come easy, though. Over its history, Spotify has raised over $2.5 billion in funding, including $1 billion in convertible debt from TPG, Dragoneer, and clients of Goldman Sachs in a round closed in March this year. While Spotify sported a huge valuation of...

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Why Microsoft’s Acquisition Of LinkedIn Might Be A Great Thing After All

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When Microsoft and LinkedIn announced the acquisition on Monday, the Web literally exploded. Most publishers went with the articles that were either neutral or questioning of the deal. Bloggers and regular users were much less forgiving. Many voiced concerns that the price Microsoft had agreed to pay was unreasonably high, that Microsoft had had very little success integrating acquired businesses into the wider offering of their products before, or that combining LinkedIn social graph with Microsoft productivity tools would mean that the users would enjoy even less privacy. While most of these concerns could turn out true, I personally have a more positive outlook of this acquisition.

The Opportunities

Most M&A deals in tech can be broadly attributed to one of two distinct categories: product acquisitions and business acquisitions. In case of product acquisition, the acquirer is typically going after the product/technology, and the team behind it, with the ultimate goal of either strengthening some of its already existing products, or integrating this new product in their broad ecosystem, thus offering their customers additional services. In case of business acquisition, the objectives can be less obvious. As such deals typically happen at the later stages, the business of the company being acquired may already be successful on its own. This means that while the acquirer may still go after that company hoping to use it to strengthen its own business lines, it is also possible that the main goal is to use the vast resources of the parent company to help the company being acquired grow its own business further.

Most articles covering the acquisition of LinkedIn were primarily focused on the ways LinkedIn’s extensive userbase and social graph might be used to augment certain Microsoft products. While Microsoft indeed draws very significant revenues from a number of products that might benefit from the deeper integration with LinkedIn, many wondered (e.g. Peter Bright from Ars Technica http://arstechnica.com/information-technology/2016/06/nope-i-still-cant-make-sense-of-microsoft-buying-linkedin/) if it would make more sense for Microsoft to try and enter some form of extensive partnership with LinkedIn instead of going forward with...

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The Start

I’ve been contemplating starting blogging for quite some time, from time to time getting a strong itch to share some thoughts on startups and venture capital industry, plus to have a way to structure certain ideas and thoughts for myself for future use. Previously, amidst other activities, I’ve never got to do it, unfortunately. But today, with my stint in venture capital ending (at least, for now) and moving on to attend business school, I think it’s time to finally do it.

Over the last several years, I’ve been answering questions from dozens of people about how to get into venture capital, pros and cons of going VC fund right out of undergrad, the key skills required for the job and so on. Granted, there is plenty of information on the internet nowadays about what it means to be a pre-MBA VC. Most of it is scattered over multiple sources, though, making it a little bit hard to discover for someone just starting to research the field. Besides, I believe there is significant difference between working for VCs operating on established markets vs. ones that work in developing countries. I joined a venture capital fund in Russia in 2012, when the local market there was only starting to shape. This gave me...

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