Stealing Signs - Issue 13
Facebook Advertising, Riot Forge, Clio's Journey, Marketplaces!, & MLB Playoffs
Worth Reading
Opportunities in 2020 and Beyond
Alex Iskold, 2048 Ventures
I love this list of opportunity and interest areas from Alex. I’m excited about three of them in particular: 1. Data & API based businesses, 2. Networks, Communities, and Marketplaces, and 3. Video is Eating Text.
Data & API based businesses: we think a lot about data network effects: “When a product’s value increases with more data, and when additional usage of that product yields data.” While many of our portfolio companies are collecting very high quality data and making great use of it, we haven’t yet invested specifically in the data/API business model. The closest we’ve come is one of our most recent investments, a clinical trial-matching software, Medicusdata.ai. They are gathering unique data and building a great business around it, but, secondarily, could offer access to their accumulated data to healthcare software tools via API for another revenue stream. Some very cool stuff. I’d love to chat with entrepreneurs building companies with data-first/API model around unique data sets — shoot me a note at jackson.bubala @ founderequity.fund or message me on Twitter @bubjacks
Networks, Communities, and Marketplaces: in the past two weeks I’ve looked at and/or met with compelling marketplace businesses in esports sponsorships, digital credentials, interior design, food waste, and interactive advertisements. Marketplaces are my favorite business model by far (as long-time readers know!) — so many different approaches to building them and so many industries that can still benefit tremendously from them. Healthcare and other regulated services are two areas I’m keeping an eye on at the moment. That said, all marketplaces are welcome!!
Video is Eating Text: I also met with a b2b video creation and distribution company last week. It’s pretty straightforward, but they opened my eyes to a seemingly massive opportunity that Alex also identifies — video is rapidly replacing text and brands are increasing their video content to promoted themselves to customers. It seems to boil down to the need to tell authentic stories and video is rapidly catching on as the most effective medium for it.
Alex also covers Biotech and Genomics in this list. I’m less familiar with these spaces than the others he covers, but he identifies interesting business models technologies.
We should chat, Alex — I’ve become a marketplace junkie and would love to learn more about your opportunity areas!
Facebook Advertising Decoded
James Chadwick, Facebook
“Use Facebook the way it was intended to be used, which means bringing real value to users with fast, fresh, and native content, and running signal-rich, liquid campaigns that allow the new Machine Learning capabilities to work their magic.”
An awesome breakdown of how Facebook advertising works and how to effectively leverage the service. Most of this was brand new info for me — some fascinating stuff. My favorite snippets are below:
Ad creative is a key factor in the auction process. Creative impact can explain up to 50% in ad results variance, yet James thinks very few leaders give it even 5% of their attention when creating and distributing an ad
Facebook’s Ad Library lets users view all of their competitor’s ads and links to their FB page. Took a spin through the Ad Library and it’s super interesting to see what brands are pushing what content — a look into where they want eyeballs, which customers they’re targeting, and what’s prioritized internally.
the raw, authentic content often beats out the polished, expensive ads
“Each advertiser will need to test and learn for herself. Smaller advertisers will still rely on targeting, and often the sharper the better. For instance, if you’re a new Direct-to-Consumer (DTC) custom tennis racket brand, forget fans of Roger Federer, target the fans of the players ranked #20 to #100. They will be the hardcore tennis superfans.” — I hadn’t thought of FB advertising in this light before, but it can be a great way to figure out what your ideal customer profile (ICP) is. Many startups struggle with this — targeted FB advertising seems like a great exercise in either discovering your ICP or refining it.
FB Messenger allows for conversational commerce — more than 20 billion messages are exchanged between people and businesses each month. One example of Messenger’s effectiveness: “an insurance company recently found that 12% more people completed the quote questionnaire on Messenger compared to their website’s quote tool, reducing cost per leads by 23%”
Riot Forge
Andrew Webster, The Verge
“Riot announced a brand-new publishing label, which will see the developer partner with smaller studios to create even more League of Legends games.”
Very cool announcement from Riot Games, the creators of League of Legends (LoL). I think the small game studio business model can shift from a hits-driven business to a more sustainable one. Riot Forge may be the start of this shift — one theory I’ve developed:
Large game developers (Riot, Epic) will transform their big hit games (LoL, Fortnite) into platforms — enabling small studios to develop games, product, and/or services “on top” of their games. Apple’s iOS is a good analogue: Apple’s iPhone operating software, iOS, is open to 3rd party developers and enables them build apps for the iPhone on top of iOS (within Apple’s constraints, of course). In this case, Riot Games = Apple, LoL = iOS, and small studios = 3rd party app developers. If big games adopt this model and become a platform, it’s possible that small studios can shift from heavy reliance on one hit game (the current model) to more games on the back of established franchises (potential future model). This gives small studios more at-bats and diversified revenue streams, meaning a greater chance at success and ultimately a more attractive opportunity for investors.
Riot Forge is part of the way to this, but they still control which developers can “build on top” of LoL and very likely have strict constraints on what they can develop. In other words, Riot is only working with studios “having previously shipped a great game or games” and are unlikely to allow them to build a game set in an elder care facility in the middle of Iowa, where the objective is to win as many bingo games as possible… or anything explicit for that matter. In order for Riot to transform LoL into a true platform, they need to make it an open ecosystem, allowing any small studio to build on top of it, and likely relax the constraints on what they can build (although Riot claims developers have full control over how they create and design their game, I’m assuming they have final say for pretty much everything).
Again, this is a theory after a few months of investigative work into the esports world. I’d love to hear feedback on this — trying to learn as much as possible and refine my list of opportunity areas in esports. Hate the hypothesis? Love it? Have feedback on it? Shoot me a note.
Clio: From Lifestyle Business to Legal Tech Juggernaut
Simon Owens, Point Nine Capital
“The entire legal profession seemed hostile to the very idea of using cloud technology. ‘In 2008 when [practice management] products came out, many in the legal profession had never even heard of the cloud and, among those who had, the general consensus was that using the cloud was certainly dangerous, perhaps irresponsible, and maybe even heretical,’”
What a great story — from niche lifestyle business to a market leader with $300M+ in venture funding. It’s utterly crazy that the two co-founders stumbled upon their first investment from an email buried in their spam inbox from now very-well-known SaaS investor, Christop Janz. Insane!
This article is great overview of the entire Clio story, too — inception, first customers, first investment, scaling, building a passionate community from the ground up, and now and established market-leader… they even have their own conference for legal software!!
A Social Resurgence
Rebecca Kaden, USV
“As we look at these new social platforms, my biggest questions aren’t about fun, functionality, uniqueness, 30 or 90 day retention or breaking through the noise. They’re about longevity. In the last decades we’ve watched lots of quick rises but then fast falls–anonymous apps, mobile trivia shows, a long list of social games, and every variety of sharing platform.”
A very thoughtful analysis of longevity in modern social networks. I particularly like Rebecca’s Identity Effects idea, where users are able to a “build deeper identity over time creating an increasingly more meaningful asset the more [they] use a platform.” I think she hints at potential gamification features that would help users build a unique, dynamic identity like badges, cosmetic upgrades, etc. I think that’s very clever — we’re seeing almost the inverse in modern video games. In Fortnite for example, players began by building their identity with cosmetic upgrade, which they can purchase with in-game currency earned by in-game achievements, and later started to interact with other players much like they would on a social network. Outside of video games, I’d like to see a professional network take this approach — a dynamic resume? Not sure how this would look, but I like the “more meaningful asset the more a user uses the platform” concept as it relates to professional identity building — I think this is a major flaw of LinkedIn.
<stuff> Weekly!
LOL Weekly - Travisbott
lol — this sounds exactly like his real music. It’s a decent song imo
Funding Weekly - Deepnote: Data Science Collaboration
Frederic Lardinois, TechCrunch
“As Deepnote co-founder and CEO (and ex-Mozilla engineer) Jakub Jurových told me, though, he believes that the most important feature of the service is its ability to allow users to collaborate. ‘Over the past couple of years, I started to do a lot of data science work and helped a couple of companies scale up their data science teams,’ he said. ‘And again and again, we run into the same issue: people have real trouble collaborating.’”
Deepnote, a data science specific collaboration platform, raised $3.8M from an impressive group of investors, including Accel, Index Ventures, Y Combinator, Elad Gil, Dylan Field (Figma Founder), Greg Brockman (OpenAI), and Lachy Groom (Stripe). This is a very cool product and interestingly has had the most traction with students and teachers. Excited to chat with our data scientists about this one.
Baseball Weekly - MLB Playoffs: New and… Improved?
Mark Feinsand, MLB.com
“the total number of playoff teams in each league increase from five to seven, with the Wild Card round expanding from a one-game playoff to a best-of-three series. The new format could go into effect as early as the 2022 season.”
This proposal received quite a bit of backlash online and current players are vehemently opposed. I like it. A few thoughts on the new model:
More teams have a chance to make the playoffs which means more teams will stay competitive deeper into the season. This means more $$ for the MLB/teams and a better fan experience.
TV ratings skyrocket in the postseason — this model produces more of these games, which means more $$ for the MLB/teams and more eyeballs on the sport
An interesting note — this model does not make it more likely that the best team wins the World Series — it just makes the playoffs more random (more teams). 3 home games for the better seed in each series only increases their advantage slightly. In baseball, the home team is favored to win roughly 52%/48% (in the NBA, the home team is favored 60%/40%, a much greater advantage). So, while it helps the better seed (home team), it doesn’t mean we won’t see Wild Card teams win less often.
Listen Weekly - All Things Marketplaces w/ Fabrice Grinda
Erik Torenberg & Fabrice Grinda
This is one of my favorite podcast episodes ever — by far the best on marketplace businesses. Fabrice covers everything there is to know about investing in marketplaces and the key considerations when building one. It’s an awesome listen.
Art Weekly - Interchange X (1966)
Paul Reed
One of the things I love about this piece the most is the scale — it’s enormous. Hint: if you click “view in room” below the artwork on Artsy.net, you can get a feel for just how big it is — its a great feature of the site.
