David Sacks on Bird Scooters, Cafe X, VR, and More – This Week in Startups with Jason Calacanis

Check out the This Week in Startups Episode Page & Show Notes

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Key Takeaways

  • The best consumer products tend to work right away
  • Don’t expand as a company more rapidly than you can effectively make customers happy
  • Bird scooters are a whole new mode of transportation made possible by advancements in battery technology
    • Most trips in cities are less than 3 miles
      • “It shouldn’t take 4,000 pounds of steel to move a human a mile and a half”
  • What makes a product “too soon”?
    • The user interface is too complicated and the functionality is a little too weak
    • Products that explode and work well are the reverse – they have an incredibly simple user interface but tremendous power beneath the surface
  • Aim to create products with real-world virality (observers convert into users)
  • A great point:
    • Instead of thinking – “How do I build my company?”
    • Think – “What are the sources of friction to this thing scaling and how do I remove those sources of friction?”

Intro

Yammer

  • It was sold to Microsoft for $1.2 billion in 2012
    • It only took 3.5 years from launch to sale 
      • Paypal was also sold only ~3 years after launching
  • “The best consumer products tend to work right away”

Company Growth

  • “We all want growth, but you have to be careful that a ‘grow at all cost’ mentality doesn’t cause the company to go off the rails.”
  • “Growth is not the only thing you should be thinking about”
    • In focusing on growth, don’t ignore things like compliance and gross margins
    • Also, don’t forget about things like your Net Promoter Score (NPS)
      • This is essentially a measure of how happy your customers are with you
      • Don’t expand as a company more rapidly than you can effectively make customers happy
        • “If your NPS is going down as you’re expanding, it’s time to put on the brakes”

Bird Scooters

  • David invested in the Series A round at a valuation of $50 million
    • 9 months later, Bird closed a round of funding at a valuation of $2 billion led by Sequoia Capital
  • How did Bird go from a $50 million to a $2 billion valuation in just 9 months?
    • “The revenue growth is just really fast. The demand for this product seems to be limitless.”
    • “Bird, to me, is a classic example of a transformative company that starts out looking like a toy”
      • But it’s not, it’s a whole new mode of transportation – made possible by the advancements in battery tech
        • “It’s like a personal electric vehicle”
    • Most trips in cities are less than 3 miles
      • “It shouldn’t take 4,000 pounds of steel to move a human a mile and a half”
        • (The average Bird scooter trip is 1.5 miles and averages $2-4, making it much more preferable to things like Uber and Lyft)

How are Bird scooters charged?

  • Bird actually has the public charge their scooters
  • Here’s how it works:
    • You register to become a “Bird Charger”
    • If your application is approved, within a matter of days Bird will mail you three charging packs to get started
    • Then it’s simple – anyone can go around, collect a few scooters, and charge away
    • The reward for capturing and charging a scooter can range from $5 to $20 depending on how difficult the scooter is to locate
    • Each scooter takes about 3 hours to fully charge
    • The Bird app then instructs you where to drop off the charged scooters
  • This method of charging allows Bird to move into a city without any footprint/buying real estate – smart!!

Bird Scooter Deployment in Cities

  • There’s was tons of outrage about Bird scooters when they landed in San Francisco
    • They have since been removed from the city
  • Bird first launched in Santa Monica, CA
  • Cities like Memphis, Tennessee have started painting/blocking off specific areas on the sidewalk for Bird scooter parking
  • There’s lots to consider when Bird chooses a city:
    • With a few cities, they’ve proposed a revenue sharing model
    • One thing Bird has proposed to limit “scooter clutter”:
      • Having a “dynamic cap” on the number of scooters they deploy in a city
      • If the scooters aren’t being used, they won’t be put on the street – they’ve proposed a cap of 3 rides per scooter per day
        • If a particular scooter isn’t hitting that mark, it’s off the street
      • Bird does this in Santa Monica
  • “People’s baselines have to change. Cars also create a tremendous amount of clutter in cities – we’ve just gotten used to accepting it.”
    • “Once people realize that these scooters are a legitimate new mode of transportation that ultimately make cities more livable, reduces pollution, help us get around, and reduce traffic…I think there will be greater acceptance”

What about the Segway? Why didn’t it work?

  • “The Segway is a classic example of a ‘too soon’ product”
    • Why are products usually “too soon”? 
      • The user interface is too complicated and the functionality is a little too weak
      • Products that explode and work well are the reverse
        • They have an incredibly simple user interface but tremendous power beneath the surface
  • “I suspect we’ll look back on Google Glass and see it as a ‘too soon’ product”

Individual Investments

  • David has been investing as an angel investor for ~20 years (he’s invested in ~80 companies, 13 of which are unicorns – a unicorn is a privately held startup company valued at over $1 billion)
    • David is an early investor in Uber
    • He invested millions in the Series B round for Houzz (it’s now worth $4-5 billion, and David invested when it was worth ~$100 million)
    • He invested in Facebook in 2006 (he’s since sold a few of his shares, but still owns some)

Virtual Reality (VR) – Why don’t we have mass adoption yet?

  • There’s both a hardware and software problem
    • The hardware problem – the VR headsets need to become fully untethered, otherwise it’s not user-friendly enough
      • Why are the headsets tethered? – It’s a GPU (graphics processing unit) issue, the headsets function best when connected to a gaming PC
      • “We need to get to the point where the GPU is built directly into the headset, and you don’t need a $3,000 PC in order to have a great experience”
      • The Oculus Rift headset doesn’t work that great unless you’re plugged into a good PC
        • The Oculus Go connects to your phone
          • “Phone-based VR just isn’t high quality enough. It doesn’t create the right level of immersion.”
    • The software problem – multiplayer is needed
      • Playing against computers gets old
  • How far are we from solving those problems?
    • “The good news is that Moore’s Law is definitely happening in the world of GPUs”
      • The price performance of GPUs is doubling every 18 months
      • “Within 5 years we’ll have a 10x improvement in the price performance of GPUs. VR will probably take off around then.”

Crypto

  • With Craft Ventures – “Crypto is definitely a theme that we’re still interested in”
    • They incubated Harbor, which is creating “legal initial coin offerings (ICOs)” on the blockchain
      • “ICOs are the one proven application of the blockchain to do fundraising, but the problem is, historically, it hasn’t been compliant”
    • Another big bet – BitGo, which is doing institutional custody for crypto

CafeX and Real-World Virality

  • CafeX is a robotic coffee bar
    • “It’s a really beautiful product and the coffee is great”
  • “Like Bird, I think it could have real-world virality” 
    • Real-world virality = observers convert into users
    • Bird exploded because if you saw someone riding a Bird there was the, “Woah, I want to ride one of those!” factor
    • David thinks Cafe X would be great for building owners/landlords, who want to have a robotic coffee maker in their buildings

A Great Point

  • Instead of thinking – “How do I build my company?”
  • Think – “What are the sources of friction to this thing scaling and how do I remove those sources of friction?”

David’s Advice to Angel Investors

  • “There’s a lot of pattern recognition involved and the more you see and the more time you spend doing this stuff, the better and better your pattern recognition gets”
  • Always support the best people/entrepreneurs
    • “For the great people, it almost doesn’t matter what the idea is”

These notes were edited by RoRoPa Editing Services

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