🦄 Lessons From the Next Unicorns – Presales as a Service – Noise-Pollution Solutions 🎧
Hey Trendsters,
Nick here, one of The Hustle editors, pinch-hitting for Brad. You’ll be hearing more from me in the coming weeks as I help out our Trends team.
Like Sam, I’ve spent the past month searching for a new place to live. Last week, I sold my condo in DC in exchange for a house in the Maryland suburbs. (Unlike one of Sam’s recent pads, we don’t have a pool.)
Buying a home in a pandemic got me thinking about everyone else who’s pulling up stakes: remote workers in new cities, renters looking for cheaper housing -- they’ll all need help settling down. The business possibilities could be huge.
The tech startup scene in France has been booming since President Emmanuel Macron vowed to make the country “a nation of unicorns” back in 2017. Funding in French tech startups reached an all-time high of ~$4.3B in 2019 -- a ~32% increase from ~$3.3B in 2017.
Source: CB Insights
Macron has since predicted that there will be 25 unicorns in France by 2025, up from 11 at the end of last year.
Who will the next unicorns be?
Meet the French “Soonicorns”: an exclusive club of 55 companies deemed “the most promising French Tech startups that have also reached significant valuation milestones.”
We were inspired to dig deeper into a few of the rising stars on the Soonicorn list to uncover trends and opportunities that you can capitalize on, including:
A boom in communal living arrangements in cities where rent hikes outpace income growth.
The return of travel agencies in a post-pandemic world. Tourists will swap crowded destinations for socially distant attractions.
The migration of the “super app” from East to West as the service industry increasingly goes mobile.
Sustainability scorecards are changing business incentives and creating a market for services based on environmental and social metrics.
A surge in demand for organic produce is fueling growth in the natural pesticides and fertilizers market.
Big opportunities in micromobility as cash-strapped commuters favor bikes and scooters over crowded subway cars.
In a single day last week, a small army of software companies filed to go public.
The software sector is 🔥 for good reason: The 18 players that went public on US markets this year have climbed ~91% since their debuts -- compared to 52% for practically everyone else.
What should businesses take away from the SaaS splash? A few growth lessons:
Asana: “Land and expand.”
That’s how Deepak Nalla described the work-collaboration company’s model. Create super fans with free trials, and they’ll convert their employers to paying clients for you.
It seems to be working:
From 2018 to 2020, Asana increased its free-to-paid conversion rate from 3.6% to 4.8%.
But giving away the goods comes at a price. Asana has never been profitable (and, to be fair, its IPO-ing peers also lose a ton of money). It registered a $118.6m net loss in FY 2020.
Snowflake: Infrastructure is for suckers, and the future is in the public cloud.
Snowflake is a warehousing company that charges customers for storing and processing data. The pitch: Why manage reams of data yourself when we can do it for you, using the huge resources of Amazon, Microsoft, and Google?
The company is growing like crazy: Revenues in FY 2020 were $264.7m -- a 174% increase over 2019’s haul of $96.7m.
But the cloud comes with a catch: Snowflake relies on the 3 big providers to do business -- and it competes with them. Its margins depend on the deals the company negotiates with the cloud titans:
Unity: Subscriptions are a powerful path to recurring cash flow. Add revenue sharing, and as Brandon Beylo said in his thread on Unity’s S-1, you’ve got a recipe for hyper-charged growth.
Unity makes software for game designers. The company says it powers 50%+ of the most popular mobile games around (!) -- thanks to ~1.5m monthly active creators. Revenues grew 42% between 2018 and 2019 -- from $380.8m to $541.8m.
The secret:
Five tiered subscriptions, which make up 43% of revenue.
The other 57% is tied to customers’ success -- as their games get huge, Unity shares the windfall.
The Signal: The crowdfunding market is expected to more than double in the coming years, rising from ~$100B in 2019 to ~$224B in 2024, according to Technavio. The pandemic will accelerate this shift, as widespread layoffs and retail bankruptcies leave producers searching for safer business models.
Presales could put them on steadier footing. By selling goods in advance, companies can cover production costs, predict demand, and reduce unsold inventory on hand.
But the current presale landscape is limited, with Kickstarter and Indiegogo serving the bulk of the market. Large presale and crowdfunding platforms like Kickstarter are primed for unbundling, with entrepreneurs spinning off vertical-specific platforms for industries in need.
Background: In his recent piece on the unbundling of Reddit, Greg Isenberg says that all large platforms eventually get unbundled, often in response to:
Too much noise -- some super fans seek smaller, specialized communities.
Market gaps -- large platforms often can’t cater to the needs of these niche groups.
Black swan events -- events like COVID-19 force dramatic, unforeseen changes in behavior.
Rather than eating away at Kickstarter’s market share, these unbundled spinoffs will serve primarily to grow the presale pie. Some will even exceed Kickstarter’s revenue. As investors at Andreessen Horowitz note, when early leader Craigslist was unbundled into platforms like Airbnb, Upwork, Tinder, and more, several of those vertical spinoffs grew to be larger than Craigslist itself.
“They serve the needs of users in their vertical so much better that they can compete for a much larger share of their vertical against both analog and digital players,” the firm writes.
Source: Andreessen Horowitz, “Platforms vs Verticals and the Next Great Unbundling”
Data from Kickstarter offers ideas on which industries to spin off…
The Signal: Last year, The New Yorker’s David Owen suggested that noise pollution is “the next big public health crisis.” According to a March report from the European Environment Agency, the number of Europeans in urban areas who are exposed to excessive noise levels will rise significantly between 2017 and 2030:
Road (daytime noise): +7.8% (from 78.2m people to 84.3m people)
Road (nighttime noise): +10.3% (from 55.1m to 60.7m)
Rail (daytime noise): +11.8% (from 10.3m to 11.6m)
Rail (nighttime noise): +21.7% (from 7.8m to 9.5m)
Similar jumps are expected outside urban areas, too.
Big Picture: The health effects of noise pollution are staggering: It has been shown to shorten lives and harm people’s health. A 2012 report by the World Health Organization conservatively estimated that at least 1m healthy life years are lost annually as a result of traffic-related noise in Western Europe alone.
At the time the report was published, Europeans lost:
61k disability-adjusted life years for ischemic heart disease
45k for cognitive impairment of children
903k for sleep disturbance
22k for tinnitus
654k for annoyance.
Current data suggests that 20% of Europe’s population (100m+ people) is exposed to harmful long-term noise levels. At least 22m Europeans suffer chronic high annoyance as a result of noise pollution. A further 6.5m suffer serious and chronic sleep problems.
Noise pollution decreased dramatically when the world came to a standstill during lockdown. It is estimated that environmental sound pollution dropped by as much as 90% in some areas of Paris, the world’s 3rd-noisiest city.
This imposed moment of silence will highlight the enormity of the noise pollution crisis and create opportunities for companies that make the world a quieter place. A number of tech startups that focus on noise-absorbing technology are raising money and getting attention.
FOMO: Creating FOMO is crucial for pitching consumer brands.
Imagery: Use imagery to drive that FOMO.
But Not All Imagery: Cut any vague diagrams that don’t add to the story or provide real value.
🇮🇸 Icelandic company GRID landed ~$12m to reimagine our interaction with spreadsheets. Their secret sauce (particularly visible on their blog) lies in humanizing something that’s typically cold or boring. What other products or industries could benefit from a warmer, more personable solution?
What We’re Watching
Sam has a spreadsheet of companies he’s keeping his eyes on. Here’s a peek at a few businesses on his list:
Airport: A directory for apps built in TestFlight, Apple’s platform that helps developers test beta versions of their apps.
Why we’re watching it: TestFlight has recently become an “underground App store” that developers are using to build hype around their products and reach smaller, niche audiences.
PredictIt: An online betting platform for real-life events.
Why we’re watching it: It’s a university project that could make for a big business -- in July the site saw 1.93m visits.
Why it’s interesting: Similar to The Million Dollar Homepage, this site sells land in Scotland one square foot at a time, using the proceeds for conservation work.
📝 Programming Notes
Join Dawn Dickson, a serial entrepreneur and inventor with 19+ years of experience in marketing and business development, for our latest Trends lecture, “The Importance of MicroAngel Investors,” this Thursday (September 3) at 3pm ET.
Dawn has launched four successful cash-flow-positive companies since 2002, including her most recent ventures Flat Out of Heels and PopCom. In this lecture, she will draw on her experience, and you will learn about:
Various ways to connect with angel investors
The JOB Act and equity crowdfunding
How to build a community of investors to raise capital via crowdfunding
How you can invest in startups at any income level
This week’s Trends send was brought to you by Sam Parr, Steph Smith, Julia Janks, Nick DeSantis, Ethan Brooks, Trung Phan, and Brad Wolverton. 😉 Got 15 seconds? Please share your feedback by hitting the smileys above. Tell us what you liked and how we can make Trends better.