Tuesday, October 6, 2015

Times have changed — going after dollars vs minutes

Just finished the first month back in the VC saddle at Greylock. After three and a half years away from the VC scene, I feel like I finally understand the description of “drinking from the firehose”. It’s amazing how much has changed in this short time.

To help get my footing, one of the first things I did when I got started was go through the top 100 US rankings in AppAnnie to see what I’d “missed” while I’d been heads down at Pinterest. I defined “missed” as independent companies that had their Series A from Jan 2012 to the present.

I counted seven companies that have managed to break through the top 100: Snapchat, Seriously, Ibotta, Draftkings, Dubsmash, Wish, and OfferUp.
To compare, I did the same analysis for when I joined Pinterest 3.5 years ago, and looked at companies that had raised a Series A since July 2008.

This turned out to be a longer list: Viddy, Instagram, Pinterest, Spotify, PopCap Games, Pocket (Readitlater), Shazam, Kik, TangoMe, Tumblr, Dropbox, and I think Voxer (the date of their Series A isn’t 100% clear).

Seven companies now vs 12 in 2012. Small sample size, so perhaps what’s more useful is the difference in the make-up. To do this, I broke the list into two groups: those going after minutes (often by converting offline minutes into online minutes), and those going after dollars:

No wonder things feel so different. Back in 2012, there were a lot more winners amongst the companies going after minutes. Now, there have been more recent successes focused on going after consumer dollars than minutes. Indeed, I’d be remiss if I didn’t mention that the two biggest winners of the past five years have both gone after consumer dollars: Uber and Airbnb.

A few hypotheses on why —
  1. FB/Google/Twitter/Apple are much stronger and more in control of their platforms. It’s not surprising that Viddy, Instagram, Pinterest, and Spotify were all beneficiaries of early FB Open Graph implementations.
  2. Because of #1, it’s useful if your unit economics means you can afford to pay for downloads.
  3. Hunter Walk reminded me that in a zero-sum world of only so many minutes in a day, blank spaces to absorb those minutes must come from cannibalizing other minutes, either from online or offline. When the smartphone was new, it was a lot easier to steal offline minutes and bring them online. Now, these opportunities are harder to find. Of course, there is a constant flow minutes from one app to the next, but FBs/YouTubes continue to increase their share of the ever expanding pool of smartphone minutes.
It’s exciting to see how this evolves — what experiences will break through to capture a large share of consumer minutes, and what new companies will figure out how to capture a large share of consumer dollars? Obviously, I’ll be keeping my eye out for both (and please contact me if you’re making it happen!).

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