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from A Round to Apple Inc.
December 4, 2016

Enjoy to the World!

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Market Snapshot

Indices Week YTD

On Black Friday last week, over 102 million Americans stampeded into retail stores across the country to take advantage of deep discounts on everything from diapers to drones and iPhones.

But impressive as this thundering herd may be, this year it was outnumbered for the first time by e-commerce shoppers, which clocked in at just over 103 million strong. Consumers spent $3.3 billion shopping online on Friday, a 22% year-over-year increase, and more than a third of these purchases were made on mobile devices.

In one sense, this is a story about gravity. In 2016, e-commerce is projected to account for only 8.7% of global retail sales. The growth opportunity remains staggering and online sales numbers will continue to smash old records.

But lost in the lead-up to Black Friday was an announcement from Airbnb a week earlier that highlights a new frontier in the World of commerce. CEO Brian Chesky unveiled a service called “Trips,” which will offer much more than a place to sleep. It’s a collection of over 500 private tours and tailored activities — from art classes to workouts and nightlife — available through the network. Airbnb is not content to be a room broker. It’s going all in on experience.


Source: Wall Street Journal

The rise of Amazon, which accounted for over 30% of spending on Black Friday through “Cyber Monday”, has been about scale and efficiency. According to PiperJaffray, the company now has a warehouse or delivery station within 20 miles of 44% of the U.S. population. That’s up from 38% in 2015 and 26% in 2014.

Today, Amazon Prime counts over 54 million members in the United States, reaching nearly half of U.S. households. Prime members spend 1.8x the average consumer. This year, Amazon held it’s second annual “Prime Day” — which includes a variety of deals for members — generating an estimated $600 million of incremental revenue.

For participants in this market — old and new — growth is fundamentally driven by logistics, not an expansion of products, offerings, or experiences. That’s where experience comes in — and why Airbnb’s announcement is a window to the future.


Source: GSV Asset Management

If you look at the world of physical stores, many compete on service — the customer experience — not just efficiency. For every Best Buy, there is an Apple store. For every Target, there’s a Nordstrom.

The next wave of digital commerce will bring a renewed focus on combining efficiency with a superior personal experience.


Retail e-commerce sales are projected to reach $1.9 trillion in 2016, accounting for 8.7% of total retail spending worldwide. It is projected to grow to $4.1 trillion by 2020, eclipsing 15% of total spending.

Sales ($ Trillion) and Percentage of Total Retail Sales

Source: eMarketer

China’s e-commerce market surpassed the United States in 2013 and today, Alibaba handles more transactions than Amazon and eBay combined. In 2016, Alibaba topped its Singles’ Day record (annual online shopping event), netting $17.8 billion in 24 hours. The average cost per order was $27 and 82% of were completed on smartphones. In 2016, mobile commerce will account for over half of online purchases in China, or $506 billion — up from $180 billion in 2014.

Surging e-commerce, particularly in the United States, has come at the expense of traditional brick and mortar retails. In 2006, a year before the first iPhone was released, Best Buy, JCPenney, Kohl’s, Macy’s, Nordstrom, Sears, Target, and Walmart had a combined market value of $400 billion. Today, they’re worth $315 billion. If you back out Walmart, which managed to grow a modest 2% over this period, the average decline in value was -53%.


Source: Yahoo Finance

*Peak Market Value 2006

Contrast this with Amazon, which has grown 1,910% over the same period. What’s remarkable is that at $17.5 billion, Amazon was a huge market cap company in 2006. It has still been a twenty-bagger since then. That’s the amazing thing about the Internet. Disproportionate gains go to the leader in a category. It’s winner-take-all.

Another recent accelerant for e-commerce has been the rise of same-day delivery apps.

In the dot-com bust, on-demand delivery services like Kozmo, Urbanfetch, and Webvan weren’t just high-profile failures. They became a symbol of the excess that fueled the crash. At its peak (or valley, depending on your perspective), Kozmo was charging $2 per delivery while hemorrhaging money on courier and warehouse expenses (in 1999, Kozmo reported $3.5 million of revenue on $29 million of expenses).

But something funny happened in 2013. Companies promising instant gratification from same-day delivery services roared back to life, raising over $8.5 billion through 2015, backed by heavy-hitters like Sequoia, Greylock, Accel and Khosla Ventures.

In the span of 2014 to 2015 alone, Berlin-based Delivery Hero raised over $1.2 billion across an alphabet soup of financings. China’s, a popular restaurant delivery platform, secured a $980 million investment from Tencent and others (followed by a $1.25 billion strategic investment from Alibaba in April, 2016).

Funding for Companies Delivering Physical Goods and Products on Demand ($B)

Source: CB Insights, CrunchBase, GSV Asset Management

Others crossing the $100 million investment threshold include Instacart ($275 million), Deliveroo ($475 million), and Postmates ($278 million). As private financings surged, Benchmark-backed GrubHub recorded a successful IPO in 2014 and is valued at over $3 billion today.

While the new crop of business may sound eerily familiar, the fundamentals are very different than the dot-com days. In 2000, there were only 370 million people on the Internet (roughly 5% of the world’s population), smartphones were a fantasy, and applications off of a platform had not been invented.

Today, digital infrastructure is in place, with three billion people on the Internet, over 2.6 billion smartphones in the hands of Digital Natives, and 226 billion apps having been downloaded from Apple and Alphabet (Google). Goods, services, and delivery teams can be more efficiently networked and coordinated. And the customer experience is vastly superior in a paradigm of on-demand, transparent commerce.

The renaissance of same-day delivery in recent years has been focused on applying powerful new technology and business models to create efficiencies for customers. But it’s still a market where you win on scale and efficiency. It could be winner-take-all or winner-take-most, and leaders like Amazon and GrubHub loom large.

The next frontier will be creating a superior experience, which means we’ll have to think differently about e-commerce altogether.


Enjoy, co-founded by former Apple retail head Ron Johnson, is at the forefront of this trend. It’s a personal commerce platform built to revolutionize the way people buy and experience the World’s best technology products — from smartphones to wireless sound-systems and drones. The central feature of the company is hand-delivery of every item within 2-3 hours, including product set-up by an Enjoy expert. Effectively, Enjoy is Uber-meets-Apple Genius Bar. (Disclosure: GSV owns share in Enjoy)

The magic is in the experience Enjoy delivers. Efficient, on-demand delivery is table stakes. Enjoy experts meet customers at a time and place of their choosing, arriving early 97% of the time. Delivery is free and the product prices are the same or less than Amazon, Best Buy, or the Apple store.

How does it work? Enjoy doesn’t build stores. It hires great people. Enjoy can deploy a team of highly trained, engaging product experts a lot less expensively than building a physical storefront. Effectively, it works off the same margins as a physical store, but with a different model.

While the white-glove service Enjoy offers is free to the consumer, corporate partners like Apple, AT&T, Sonos, DJI, GoPro, HP, and Microsoft pay for each product delivered. Partners love Enjoy because it’s a bolt-on service that delights customers and lowers cost by reducing support requests and returns. Customers love Enjoy because it’s convenient and free.

One of the biggest challenges for most e-commerce platforms, particularly newcomers, is that acquiring customers is prohibitively expensive. Enjoy is thinking differently about this paradigm as well. It works directly with manufacturers to integrate its “hand delivery with expert help” service as an option at the point of sale (e.g. you can select Enjoy when purchasing an iPhone through AT&T).


Ron Johnson (Right) and Tom Suiter (Left) Discuss the Future of Digital Commerce Reimagined at GSV Capital’s 2016 Investor Day

Source: GSV Asset Management

Enjoy believes that after delivering a delightful experience to customers, it will be able to invite them back to to purchase additional products over time. To date, the company has an average customer rating of 4.96/5.

In this respect, Enjoy is taking a page out of Amazon’s playbook from the 1990s. Amazon used to run e-commerce websites for brands like Target — a strategy that helped the company build scale before blossoming into its own brand.

Ultimately, Enjoy is part of a trend that transcends the delivery market. It is focused on creating a delightful experience for people that make digital purchases. In this respect, popular, emerging consumer businesses like SoulCycle are kindred spirits.

There is nothing about what SoulCycle does that can be patented. The casual observer might even mistake it for a “spinning class.” But when you study SoulCycle, you realize that its monster success derives from doing a hundred little things better than anybody else.

First, SoulCycle is a digital commerce platform. You go on your phone. You pick your class, your bike, your instructor, and your session time. Mobile payments are fully integrated.

Digital Commerce, Delightful Experience

And then you show up and have a delightful experience. The bikes are specially designed for SoulCycle to develop your “core.” The program emphasizes every muscle in your body, so that after 45 minutes, you’re wiped. The instructors are trained to be both inspirational and aspirational. The music is perfectly choreographed. Despite the heavy sweat, SoulCycle studios sparkle and smell fresh. And there is plenty of cool SoulCycle swag, so you can proudly display that you’re a member of the tribe.

Like Enjoy, SoulCycle starts digitally, and ends with an experience you love. We see a new generation of businesses emerging that are creating advantages through experience.


Founded: 2003

Market Value: $31 billion

Why it Matters: As the company rightly notes on its website, “Ordering your Tesla is just like any buying experience on the Internet. Simply choose your options, enter your contact information, and indicate your preferred delivery timing.” Goodbye car dealerships and awkward, high-pressure sales experiences.

The Tesla ordering process begins in a virtual “Design Studio” where buyers customize the appearance of their future car and select various options. Price changes are transparent. Once the order is confirmed, a Tesla “Experience Specialist” follows up to answer any lingering questions you may have, as well as to discuss financing options, trading in your old car, installing charging equipment, and delivery day logistics.


Founded: 2006

Market Value: Undisclosed ($150+ million estimated annual revenue)

Why it Matters: There is nothing about what SoulCycle does that can be patented. The casual observer might even mistake it for a “spinning class.” But when you study SoulCycle, you realize that its monster success derives from doing a hundred little things better than anybody else.

The bikes are specially designed for SoulCycle to develop your “core.” The program emphasizes every muscle in your body, so that after 45 minutes, you’re wiped. The instructors are trained to be both inspirational and aspirational. The music is perfectly choreographed. Despite the heavy sweat, SoulCycle studios sparkle and smell fresh. And there is plenty of cool SoulCycle swag, so you can proudly display that you’re a member of the tribe.

SoulCycle, which has been preparing for an IPO since a 2015 announcement, saw its revenue hit $112 million in 2014, up from $36 million in 2012, according to its IPO filing.

Uber & Lyft

Founded: Uber (2009), Lyft (2012)

Market Value: Uber ($68 billion), Lyft ($5.5 billion)

Why it Matters: Here’s how the old taxi model works. You stand on the edge of the street, put your hand up in the air while competing with other would-be riders, and pray for a car to swerve to a stop in front of you. Taxi drivers, meanwhile, troll around blindly for fares, relying on dead reckoning and luck to find passengers. The ride doesn’t usually go much better. For starters, the customer is never right. Try suggesting a preferred route. And safety isn’t exactly first.

Ride-sharing platforms like Uber and Lyft are the polar opposite. They create a variety of efficiencies while empowering the customer. Your ride appears where you want it, when you want it. You don’t need physical money — or even a credit card for that matter — to pay your driver. It’s all in the app.

Given two fundamental shifts — efficiency and customer experience — it is no wonder that we are seeing a major industry transformation unfold rapidly before of our eyes. We estimate that ride-sharing has grown from $500 million in 2012 to over $45 billion in 2016 — a 208% Compound Annual Growth Rate (CAGR).

Warby Parker

Founded: 2010

Market Value: $1.2 billion

Why it Matters: On one level, Warby Parker is following a tried and true playbook. They’ve taken a relatively expensive product — glasses, in this case — cut out the middle men (distributors and licensors), and sold it directly to consumers online at a discount to traditional retailers. For $95, you can get a cool pair of glasses, including prescription lenses and shipping. And for every pair purchased, Warby Parker donates a pair to someone in need.

The company sold over one million pairs of glasses in just four years while holding off a slew of copycats because it is creating powerful technology-based lifestyle brand. The buying process includes recommendations based on face shape and style preferences. And then Warby sends you five frames to test out in a stylish box reminiscent of Apple’s packaging. And if you still need help deciding, you can post a picture of yourself using #warbyhometryon and the company will give you feedback.

Warby Parker has built on its popular digital experience with the launch of 12 strategically placed storefronts to reinforce its brand. It plans to have 20 by the end of 2016. It is also investing in new technology to make shopping for frames in stores and online easier, including enabling customers conduct eye exams using their smartphones.


Founded: 1971 (acquired by investor group led by Howard Schultz in 1987)

Market Value: $83 billion

Why it Matters: In November, Starbucks announced its quarterly earnings, narrowly beating analysts’ estimates. But buried among the ho-hum financial reporting was a remarkable development. Over 25% of the company’s U.S. transactions are now paid through the Starbucks app.

Launched in 2011, the Starbucks app is generating six million transactions per month. And with $1.9 billion in prepaid deposits, it’s larger than many banks. Why has it been so successful? Not only does it make the check-out process more efficient and enjoyable, but it reinforces a brand that people love, offering perks and rewards with every purchase.

Snap (Snapchat)

Founded: 2011

Market Value: $18 billion

Why it Matters: In September, Snap announced that it would begin selling Spectacles, a set of connected sunglasses that record 10-second videos and sync seamlessly with the company’s flagship app, Snapchat.

The product roll-out has been marketing gold. Without advanced warning, Snap has dropped unmanned vending machines, or “Snapbots” — into random locations, from Venice Beach to New York City. The machines, which sporadically appear in a map on the company’s website, are followed immediately by throngs of would-be buyers. While the glasses retail for $130, they already sell for as much as $2,500 on eBay.

While Snap may not be in the hardware business in the long run, the company has reminded the World of retail how powerful it can be to create a truly distinct customer experience — not to mention the potential for robot vending machines that are likely shattering records for sales-per-square foot.

The Trump rally finally hit the pause button last week, with the S&P 500 falling 1%, NASDAQ dropping 2.7%, and the GSV 300 down 3.7%. The 30-company Dow advanced 0.1% last week, reaching another new record high. Bond yields continued their ascension, with the 10-Year Note yield now at 2.4% Oil prices surged over 10%, with the OPEC cartel agreeing to limit production for the first time in nearly 10 years.

World Indices

Source: Yahoo Finance, GSViQ

The stocks that are doing the best have low P/E multiples — which makes sense in that as interest rates rise, it makes the future earnings of higher P/E stocks less valuable. What doesn’t make sense is that the growth characteristics of many higher P/E stocks are vastly superior, and P/E multiples aren’t high vis-à-vis growth.

The economy continues to show some good signs, with unemployment falling to 4.6% and strong manufacturing numbers. The bad news is that main reason unemployment is so low is because an increasing number of people have stopped looking for work.

There were no IPOs last week but five are expected to price this week. Ola, the Uber competitor in India, did a “down round” but still received a $3 billion valuation.

We remain optimistic on the Innovation Economy and the outlook for growth companies. Accordingly, we are BULLISH.


by Luben Pampoulov

Emerging Mega-Platform

Once in a decade, we witness the creation of a mega-platform company that will thrive for decades. In the ‘90s it was Google (now Alphabet), in the ‘00s it was Facebook, and we are betting that Snapchat (now Snap) is the one from this decade. (Disclosure: GSV owns shares in Snap).

These companies are defined by exceptionally strong leaders with a clear vision and a mission. In Google’s case, Larry and Sergey wanted to index and organize all the information in the World. Mark Zuckerberg wanted to connect everyone on planet Earth. And Evan Spiegel wants to create the best camera and broadcasting company in the history of the World.

In each case, competitors already existed and others tried to quickly copy an idea that’s working. Alta Vista and Yahoo each launched their search engines in 1995. Google came along in 1998, and in a few short years it surpassed the competition. Soon enough, other countries replicated the formula and companies like Baidu and Yandex managed to succeed and thrive in their home markets.

MySpace was a growing success before Facebook, but its weak management failed to maintain it as a superior platform, which then opened doors for Facebook. Mark Zuckerberg used the opportunity and created a best-in-class experience. Facebook grew from just a Harvard site, to capturing the Ivy League schools, to U.S. colleges, to global schools, and to everyone on the Internet. As a result, a bunch of copycats around the world tried to jump on Facebook’s success. The only one that truly succeeded is Tencent, now a $231 billion company.

Over the past few years, many companies tried to win in the Mobile Video category — clearly the “thing” of the future. Twitter had two great opportunities with Vine and Periscope, but due to its poor management, the company failed. Snapchat, which was initially just a disappearing messaging app, quickly took its chances and created a highly disruptive broadcasting service. Snapchat Stories took on the world overnight, with its user base now close to 200 million daily active users. Snapchat’s engagement metrics are among the best we’ve seen, with average time spent per day at about 30 minutes.

With Snapchat’s success, other are jumping in on the action. Facebook, and Instagram specifically, have made multiple attempts to copy and duplicate the app. In fact, Facebook has had more than 15 attempts to copy Snapchat. Their latest try — Facebook is now working on a plan to pick news from favored media partners, just like Snapchat’s Discover channels. Instagram recently launched its own user Stories, essentially copy-pasting Snapchat’s “code” into its own app.

Regardless of all these “attacks,” Snapchatters continue to grow rapidly and they continue to be super engaged. Snapchat’s focus, and the quality of its app are tops. People use Snapchat to follow and watch friends, celebrities, events, and also to “broadcast themselves.” Instagram meanwhile is the go-to place for nice pictures and video sharing. And Facebook has evolved to a “media utility” showing what’s trending on the Internet…

Self-broadcasting on Snapchat

Other countries are also copying. In South Korea, Naver owned Snow recently raised $45 million from Line. Snow is more or less the same like Snapchat, with over 90 million downloads to date, which has doubled in just 6 months. Facebook, Tencent and Baidu have all tried to acquire Snow, but Line’s management is looking to grow the business and to spin it off as an IPO, eventually.

Snow’s app has 400 live-motion filters and 200 masks, which is considerably more than Snapchat. It has been topping the app rankings in South Korea and Japan, but recently fell behind local competitors in China; Shenzen-based Faceu is a face recognition camera app, and Tencent’s own Pitu is an automatic make-up and motion sticker app — both of those apps have moved ahead of Snow in China’s app ranks.

We believe that Snap Inc. is well positioned to grow its dominance in the quickly evolvingSelf-Broadcasting space. It is growing its platform around video and broadcasting, and media partners and advertisers are paying high prices to be “in the club.” Other smart initiatives, like the Spectacles sunglasses for example, are helping to promote and to strengthen the Snap brand. 

Pioneer Notes

by Li Jiang

The Top 10 Startups To Work At In 2017

In 2017, we’ll likely see the IPO of Snap, the relaunch of SpaceX Falcon 9/Heavy, and maybe, just maybe, even the first Hyperloop trip.

But if you are looking to get in early on the next amazing company with a ton of upside, you’ll have to look at earlier ideas. Here are my list of startups to work at in 2017, balancing both stability (i.e. they’ve raised a round) and upside (i.e. it’s still not too big yet).

For this list, we used Mattermark data and narrowed it to the sweet spot of companies with $10m < capital raised < $100m and have 20 < number of employees < 200. They all have a growth score of over 500 on Mattermark and the list is fenced around Silicon Valley (Bay Area).

Number 10: Doctor On Demand

Thinking of driving to the doctor’s office? Nah, just turn on your device and start chatting with your doctor. Doctor on Demand decreases the friction to access care when you need it. This concept will only continue to grow as more users experience care in this way.

Leadership: Hill Ferguson.

Funding: $87M; Shasta Ventures, Jump Capital, GV, Andreessen Horowitz, TomorrowVentures.

Employees: 200.

Number 9: Patreon

While the Internet has democratized content and media, it makes no attempt to evaluate or curate the quality and the inspiration of all the content out there. Patreon gives consumers a way to vote with their wallet and also unleashes the best creators by giving them a sustainable way to create new ways to delight and entertain us. We are just at the beginning of this Megatrend of more individuals sharing their talents with the world and having a way to be supported for their work.

Leadership: Jack Conte, Sam Yam.

Funding: $47M; Index Ventures, CRV, SV Angels, Thrive Capital.

Employees: 103.

Number 8: Segment

Sadly, most companies still run on spreadsheets, a multi-decade old technology. Thankfully with Segment, you can now organize all of your customer data and integrated into every marketing and customer application. Today, 7,000 companies use Segment which only means that millions of companies are not using Segment. The ocean for growth should be pretty endless for the foreseeable future.

Leadership: Peter Reinhardt

Funding: $43M; YC, New Enterprise Associates, General Catalyst, Accel, Kleiner Perkins, Thrive Capital.

Employees: 115.

Number 7: Matterport

Have you ever wanted to teleport? Well you still can’t, but you can have the next best thing with Matterport. The company creates immersive 3D spaces so real that it feels like you are actually there. You can get really lost just touring all of their amazing 3D worlds. As mixed reality continues to grow, Matterport is well positioned as the leader of its category.

Leadership: Bill Brown.

Funding: $56M; Greylock Partners, Lux Capital, YC.

Employees: 170.

Number 6: Honor

Awarded the “best new startup of 2015″, Honor is taking a fresh look at the senior care industry. As the baby boomer generation set to ride off into the sunset, the necessity of a smart, personalized and more human service will be in very high demand.

Leadership: Seth Sternberg, Sandy Jen

Funding: $62M; Andreessen Horowitz, Kapor Capital, Thrive Capital.

Employees: 141.

Number 5: Branch Metrics

When the world first made apps, we made them live in siloed boxes. That made no sense since we already had this thing called the Internet that had hyperlinks crawling all over it. Branch Metrics unleashes the full power of apps by powering the linkage between mobile apps. The company has more than doubled in size over the past year and is still small and nimble compared to the massive mobile opportunity they are tackling.

Leadership: Alexander Austin

Funding: $53M; New Enterprise Associates, Founders Fund, Cowboy Ventures.

Employees: 151.

Number 4: Ozy Media

Ozy is a digital media platform redefining culture for the Change Generation, the group of educated and edgy consumers that make up the bulk of digital global citizens. In addition to reaching tens of millions with its daily stories that are ahead of the curve, Ozy brings together its community at its annual Ozy Fest in NYC and produces thought provoking television shows like The Contenders — 16 For 16. They are constantly on the look out for creative talent.

Leadership: Carlos Watson (@carloswatson) and Samir Rao (@vrsamir)

Funding: $25M; Emerson Collective, Axel Springer, GSV Capital.

Employees: 71.

Number 3: Earnest

Student loan debt in the U.S. is greater than credit card debt. That’s shocking. Now you can do something about it. Earnest gives out loans based on merit and uses data to effectively hand out loans with rates that are appropriate to the individual. Earnest will even help you refinance loans you’ve had for years (President Obama had student loans until he was 42). Hey, that’s the true meaning of paying it forward.

Leadership: Louis Beryl.

Funding: $90M; First Round, Andreessen Horowitz, Battery Ventures, Maveron.

Employees: 176.

Number 2: Zipline

I wrote about Zipline in a previous post as one of the most exciting tech companies to watch. It’s also one of the most exciting places to work on a mission that transforms the lives of the most vulnerable. Plus you get to work with catapults and drones. And I hear they have a sweet pad in Half Moon Bay.

Leadership: Keller Rinaudo, William Hetzler, Keenan Wyrobek

Funding: $45M; Sequoia, Andreessen Horowitz, GV.

Employees: 41.

Number 1: Flexport

It’s not every day that a startup can talk about its market opportunity in terms of trillions of dollars. Flexport is bringing global trade into the 21st century and has in 3 short years expanded to offices in New York, Amsterdam, Hong Kong, and ShenZhen. And oh boy are they hiring.

Leadership: Ryan Petersen

Funding: $92M; Founders Fund, GV, First Round, YC, Bloomberg Beta.

Employees: 200.

Company data from Mattermark with these criteria:

$10m < capital raised < $100m

20 < number of employees < 200

Growth score > 500

Bay Area

As of November 20, 2016

Market Update

Week ending December 4, 2016

World Indices

U.S. Indices Snapshot

Valuation P/E Est. P/E/G Price/Sales