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Our ‘In The Know’ articles keep you up to date with the latest news, trends and happenings in the world of innovation – and tell you what you should do about it. Go on, have a browse.
J Crew, Express and Urban Outfitters are all increasingly getting into the marketplace game, copycatting Walmart and Target by listing products from third-party sellers on their online platforms in a bid to compete with Amazon, which now gets 60% from its marketplace product. The benefits? Better SEO, larger order sizes and fewer abandoned carts, according to Mirakl(who provide the backend software).
So what? Cooptition to beat the man (the man is Jeff Bezos) is a smart move: like Amazon circa the year 2000, these players are short-circuiting the classic marketplace chicken-and-egg situation through frontloaded demand on their existing platforms, so listing others’ wares without having to buy their inventory should be all gravy (I’m lovin’ these food analogies). Sellers get to reach new customers and play in less crowded spaces than Amazon’s endless aisle, where competition is increasingly fierce. Watchouts? The product edit is key to retaining brand equity; customer issues tend to come back to the marketplace, not the seller; and competing with Amazon’s seller tools and traffic is always going to be a challenge – but suppliers are hungry (ahem) for alternatives.
Need for Speed
German quick commerce startup Flink just raised another $240m to compete with the other heavily funded 10-min grocery ventures that exploded everywhere during the pandemic. The difference? Flink won grocery giant Rewe as a strategic investor and exclusive supplier, a smart move to bring COGS down. Competitors Getir and Gorillas also just raised massive rounds and are going after the US market. Meanwhile, Delivery Hero, who left its home turf Berlin a few years back, is relaunching in Germany and is hoping to compete by using cloud-kitchens and a rapid grocery delivery concept.
So what? As competition in grocery delivery intensifies, a strategic partnership with a large grocery chain can be the ‘unfair advantage’ Flink needs to stand out and make those unit economics work. Rewe’s minority investment might also be a first step towards acquisition. In any case, Rewe has done a few things right by 1) reacting quickly to an emerging market, 2) forming a strategic partnership leveraging their assets and 3) going in big vs going home. Expect to see more big corporates like Rewe and Delivery Hero going after this growing market, and a lot of consolidation sooner rather than later – after all, it’s all about speed.
The grand reopening
Office outfitter-as-a-service start-up Kitt just raised a $5m seed round, providing landlords with a way to offer custom WeWork-like offices to tenants and automating building and office management tasks. And WeWork is ready to go public later this year (this time for real) and could simultaneously be one of the biggest losers and winners of WFH at the same time: losses quadrupled to $2.1bn in Q1 this year but revenue will likely accelerate with companies wanting more flexible office space post-COVID. Meanwhile, a French startup called Café (who raised some $1m from early WeWork employees, among others) is aiming to help companies with existing office space to manage their hybrid workforces.
So what? With vaccination campaigns gaining traction (have you had yours yet?) things are opening up at a pace that 6 months ago nobody could’ve imagined – and we’re suddenly arriving at the ‘new normal’ everyone has been talking about since the pandemic started. Opportunities are arising to serve new hybrid ways of working, labour shortages and the many implications for travel. If 2020 was the year of the stay-at-home unicorn (Hopin, Gorillas), 2022 will be the year of the flexible, chimaera hybrid.
Snap into it
Snapchat unveiled AR try-on services spanning clothes, jewellery, accessories and eyewear; key to the play is the possibility of engaging Snapchat’s 229 million users (170 million of whom engage with AR around 30 times a day). Where FAGMA have typically stuck to beauty-tech investments, discouraged by the clunkiness of getting (and tracking) a full-body view, Snapchat are out taking the competition by developing a fashion play, rolling out a host of new features alongside accurate tracking with 3D Body Mesh.
So what? – Ever since the start of the pandemic we’ve been getting phygital, with fashion, where the key component to conversion is visual, leading the way. Now you can judge a dress by its Snap filter and change clothes through voice activation (or in the case of Snap’s Prada collab by swiping right a la Tinder) and brands ranging from Burberry to Buffalo are leveraging physical-digital synthesis to make real money via stores, shows, and influencers. Smart retailers and brands aren’t just thinking about AR to improve their purchasing environment and reduce the cost and environmental impact of e-commerce returns, they’re working out how to use this increasingly pervasive tech to engage audiences and build their brand.
May the government be with you
The Pentagon is considering ending the $10bn JEDI (that’s short for Joint Enterprise Defence Infrastructure, of course) cloud-computing contract, amid an Amazon win in court. They complained that the former President had ‘improper influence’ over the award (aka Donald Trump hates Jeff Bezos). It’s a lot of dough, and there’s more where that came from with governments worldwide now spending heavily to keep their economies afloat – take Joe Biden’s infrastructure bill, which is looking to invest billions into clean energy, education, climate resistance, elder care, EVs, etc with both startups and big companies getting ready to bid.
So what? ‘I’m from the government and I’m here to help’ are no longer the most terrifying words in the English language as governments are getting ready to spend trillions boosting their economies post-COVID, addressing climate change and other big challenges. As with defence spending previously, we can expect to see a ton of new innovative companies leveraging the tech that comes out of it. While Big Tech has identified that their biggest growth opportunities are within the government’s realm, they don’t have a monopoly on those contracts (yet) and established corporates are well positioned to deliver innovative solutions at scale.
Crypto trading soared last month (while volumes in stocks and derivatives tumbled) with ETH and its confreres seemingly hitting new all time highs every other day, boosted by the (multi-)millions of dollars spent on NFTs (collectibles that don’t exist IRL). But people are increasingly outraged at their environmental impact: cryptos typically use Proof-of-Work protocols, meaning computers compete to be the first to solve cryptographic puzzles in return for currency. As the chains get longer, the problems grow more complex and more energy is needed to solve them. Bitcoin is famously energy consumptive and it’s now estimated that the Ethereum networks’ annual energy consumption is around 24.43 TWh — roughly equivalent to that of Ecuador or Libya: aka a whole lot of power for a rotating Shiba Inu.
So what? Just because your digital house doesn’t use cement (Decentraland), your virtual car doesn’t need gas or a battery (GTA), and your limited edition hi-res hoodie is made of pixels (Fortnite), doesn’t mean your NFT collection is saving the planet. Brands looking to shore up their sustainability creds by making products traceable with on-chain digital twins are in hotter water (it’s the climate, stupid). But help is on the way: palm.io claims to create NFTs on Ethereum with 99% less environmental impact (something the Ethereum network itself is still working on) while companies like Soluna Power ignore the core issue and aim for upstream energy mitigation with their 37,000 acre wind farm in Morocco. We expect to see a host of new technologies springing up in the next few months catering to the conscious crypto consumer.
Track me if you can
Apple updated it’s privacy settings in their new OS, forcing all apps to ask users if they’d ‘like’ to be tracked across third party apps to ‘optimise’ their advertising experience. Axel Springer, Facebook and other media companies quickly filed an antitrust complaint against Apple, arguing their ad revenue might decline by up to 60%. In a similar move, Google will ban third party tracking on Chrome altogether and rely on first party data – between Maps, Chrome, YouTube, etc they should have enough of it.
So what? Apple wants you to know that they care about your privacy (…and Tim Cook might not like Facebook). But they’re also seeing the writing on the wall (and doing a bit of graffiti themselves), between 1) increasingly aggressive regulatory moves to give users transparency and power over their personal data and how it’s being used and 2) paid content subscriptions (like Apple’s News+, TV+ and Arcade..), the days of free content in exchange for data are numbered. If your business is built on targeted advertising, you need to go back to the drawing board: do you have a direct relationship with your customers? Is your content good enough that people will actually pay for it? Will they pay for being part of your community? We expect lots of interesting new business models coming out of these changes, less clickbait – and potentially fewer cat videos.
Warren G had to regulate
The Biden administration’s proposal to massively increase capital gain taxes has not received much praise amongst VCs who would pay significantly more on their carried interest payments. They’re arguing that it’ll become much less attractive to start or invest into tech businesses in the US and ultimately give away America’s competitive advantage (ignoring that tax isn’t the only thing driving tech in the US – defence spending has effectively subsidised that market for years). Similar talking points are also being used following signals that greater regulation may hit crypto markets (with Bitcoin prices falling on cue). Meanwhile, the EU is proposing new regulations on the use of AI, aiming to enforce ethical use of algorithms.
So what? For any regulation of new technology there is always a trade-off between inhibiting innovation and ensuring negative externalities are avoided early on. But once technologies come off age (like AI and crypto), providing clear regulatory frameworks often accelerates adoption by increasing consumer trust and providing clarity to investors by reducing regulatory risk. No one likes having to pay more taxes or face greater regulatory hurdles, but being responsible is a part of growing up: when an industry is reaching mass adoption, investors will keep opening their check books because they still stand to benefit – and paying more taxes won’t stop them.
Knitwear label PH5 gained a new employee, AMA, as ‘Chief Decision Scientist’. If AMA seems a bit uncanny to you, it’s because she’s a CGI-rendered personification of PH5’s aesthetic and ethos. While CGI models have been around for a while (Lil Miquela now boasts 2.9m Instagram followers and a YouTube channel for her songs — her creator used to manage popstar Banks) this is the first time a brand has created a CGI influencer who is also personalised. Apparently, AMA will not only be responsible for educating around sustainability but also to negotiate upcoming collaborations – a potentially interesting way to ensure that no one holds all the cards in a meeting.
So what – In the coming years, brands will increasingly leverage CGI and deepfakes tailored to their ethos to boost customer engagement. Digital modelling agencies like The Diigitals(responsible for the world’s first CGI supermodels) will increasingly be brought in-house until every brand is repped by their own AMA (negotiating power may vary). If all goes to plan, consumers will find themselves resonating more and more with the faces of the brands because these actors are programmed to resonate with their interlocutor. Whether that’s Rosebud AI’s Deepfake models, who respond directly to consumer data to morph around what a consumer will find appealing, or Hour.oneAI’s Deepfake chatbots, the customised avatar programmed to please might change the whole nature of ad creation and customer service.
This is a (privately-educated white) man’s world…
Founders Intelligence leveraged their experience running accelerators for BP, ITV, Facebook, etc and interviewed 27 VCs and founders to dive into the issues behind the lack of diversity across the tech ecosystem and what we can do about it in this whitepaper. A key issue is that ecosystem gateways like accelerators are often (unwittingly) designed to target non-diverse founders; even the good guys don’t get it right: the S20 cohort of Y Combinator had 9% female founders and 4% Black founders.
So what? Excluding diverse entrepreneurs isn’t just bad vibes, it’s bad for the bottom line: in the US, diverse founders who receive funding drive higher returns on average — generating 3.3x realised multiples on exit compared to 2.5x generated by their counterparts. Similarly, women-led startups generate 78 cents in revenue per dollar — more than 2x the 31 cents that male-led startups return. What do we do about this ‘trillion dollar blindspot’? We found three key activities that could make a difference – for the TL;DR crowd, see the summary in Sifted or read below: 1) Be loudly, transparently open to underrepresented founders, and include diverse voices in your investment committees to help you recognise opportunities and signals of success outside your experience; 2) Share your social capital and facilitate connections – knowing people shouldn’t be the difference between success and failure; 3) Dont expect founders to have safety nets: not everyone can move cities or 100% commit to their concepts with no income – give actual financial support so they can.