JDR’s Newsletter – #8

Hello there,

This is a (roughly) weekly newsletter experiment containing links to things I’ve written and made, plus links to other interesting articles, reports and essays I’ve come across.

In case you haven’t already subscribed, you can do so through Tinyletter. You can find an archive of this and previous issues of my newsletter at news.jdr.fyi.

Thoughts, opinions and typos are my own.

My blog posts and articles

A Beginner’s Guide To VC (Mattermark)

This week, I compiled a list of some of the best resources I’ve used to learn about the venture capital industry over the past couple of years. It contains over 60 links to books, academic articles, explanations of common terminology and a list of influential VC blogs and podcasts. If there is anything that I may have left out, please let me know and I’ll be sure to add it if it’s a good fit.

3 Places To Start Learning About Marketplace Businesses (jasondrowley.com)

After the Mattermark piece, I received a lot of requests to provide resources on specific industry verticals. In what’s probably going to be an occasional series on my blog, I start with marketplace businesses. Here, I identify my essential list of readings from Version One Ventures, Benchmark’s Bill Gurley and product maestro Rishi Dean, all of which provide their own analytical frameworks for understanding and evaluating marketplace businesses.

Notes on Twilio, Line, and the Open (?) Window (jasondrowley.com)

On Thursday, Twilio, the cloud communications company, made its public debut on the NYSE. And boy what a debut it was. Priced at $15, opening at $23.99 and closing nearly 90% above its IPO price, investors from Sand Hill Road to Wall Street may feel tempted to proclaim the tech IPO window is open. ? But as I point out in this post, one data point does not a trend make, and the next company on the IPO docket, Line, may curb some of that enthusiasm.

Brexit: History, Market Failure, Threat (jasondrowley.com)

Thursday’s vote for the United Kingdom to exit the European Union was certainly interesting. It’s tragic for some, and a point of elation for others… exactly what you’d expect from a highly contentious referendum. To me, though, the most interesting aspects of Brexit is the failure of prediction markets to anticipate the outcome and the impact the move may have on the scientific and tech communities in the UK and EU going forward. In this brief post, I share some of the best analysis of the prediction markets and science stories that I could find.

Other Tech News

Boston Dynamics Debuts SpotMini

Robotics company Boston Dynamics unveiled their new model, SpotMini in a Youtube video on Thursday. This smaller, nimbler successor to Big Dog and other models moves even more smoothly and has an attachable “neck” that can be held stable in space as the body moves around it. The unit in the video has a (presumably detachable) neck with a “mouth” that can grasp and manipulate delicate objects, but this mouth module could presumably be replaced by a camera or other sensor array. We’re definitely creeping into Uncanny Valley territory here.

After watching the SpotMini video, you might want to read this essay about the Uncanny Valley from n+1.

Elon Musk’s Company Bids For Elon Musk’s Company

In a move that would make even the best due diligence team die a little, Elon Musk’s Tesla announced a bid to acquire green energy installation company Solar City, of which Elon Musk is largest shareholder. Remember that Tesla is trying to expand its network of car battery charging stations and expand its “Power Wall” battery business, so the missions of the two companies are well aligned. This would move Tesla further down the road toward becoming the generalized energy infrastructure company it aims to be, if and only if SolarCity shareholders, Tesla shareholders, and in all likelihood some court feels as though there’s no conflict of interest here.

Other news and links

Best Of

Like most Chicagoans, I like giardiniera, the spicy mixture of pickled veggies and hot peppers usually served with Italian beef sandwiches. I made a batch using this recipe and it is diabolically good.

Patrick van Hoof published a guide to AI for designers. And, while on the subject of AI, it might be fun to check out The Scientific American’s reporting on Facebook’s AI and machine learning efforts. The piece goes into significantly more detail than reporting in the big tech press.

Tech Trends & Industry Commentary

In an essay on Medium, software engineer Laura Montoya helps to unpack the tension between diversity and “cultural fit” in the tech business.

Leigh Honeywell’s post about the problem of “rock stars” in the tech business is amazing. If you’re reading this, you’ve probably seen an a job listing or heard someone describe someone as a “rock star [developer/designer/sales person]”. According to Honeywell, a senior staff security engineer at Slack, this sort of characterization breeds the culture of narcissism and arrogance that tech is known for and even celebrates. I agree, and you should read her post.

It turns out that Uber drivers don’t make a lot of money, according to reporting on leaked internal data by Buzzfeed’s Caroline Donovan, but that shouldn’t have surprised anyone. Average wages: less than $13.25 per hour.

3 Places To Start Learning About Marketplace Businesses

Earlier this week I published “A Beginner’s Guide to VC” on the Mattermark blog. There were a number of people who reached out to ask me to add more resources explaining certain business verticals. There is no possible way I could fit them all into that one post, and, so, I decided to make lists of great introductory resources to give investors, journalists, entrepreneurs, researchers and the otherwise curious a jumping off point to learning more.

Here, I want to talk about marketplace businesses. When you sit and think about it, most of the sites and apps we regularly interact with are a form of marketplace. There are, of course, companies like Ebay, Amazon, Etsy, and a number of marketplace platforms (Shopify, Magento, and their peers), but there are other marketplace categories. The online travel booking industry, on-demand services like Lyft and Uber, real estate sites like Zillow, and even consumer review sites like Yelp and Zocdoc are all incarnations of the marketplace idea.

So, we all use marketplace services to some extent, but unless it’s your job to analyze or grow these kinds of businesses, it’s surprisingly easy to not think about how and why marketplaces work and grow. Well, for those who want to learn more about marketplaces – whether you’re starting from ground zero or are just looking for extra reading material – I have some recommendations on where to start.

Without further ado, here’s that list:

Boris Wertz & Angela Tran Kingyens’s Book

Start with this excellent (and pleasantly short) e-book from VC firm Version One. Authors Boris Wertz and Angela Tran Kingyens explore the theory and practice of marketplace businesses while providing tactical advice on determining the business model, getting over the 2-sided-market problem and sustainably growing the business. The book’s concluding sections unpack the rise of new kinds of marketplaces (on-demand, community-driven, and decentralized marketplaces are all examples) and get into the nitty-gritty of metrics and dealing with investors.

Bill Gurley’s List of 10 Factors To Consider

Bill Gurley, general partner of Benchmark Capital, oversaw the firm’s investments in Ebay, Yelp, OpenTable, GrubHub, Uber, Zillow and many other leading marketplace businesses. Needless to say, he’s seen a lot, and in 2012 he did his best to condense some of those observations into a list of 10 factors to consider when evaluating digital marketplaces. Although this was written by a VC for an analytical audience (other VCs, journalists, commentators) entrepreneurs would do well to consider some of the factors he brings up. Some of the highlights include: frequency of purchasing activity, network effects, payment flows, and whether technology has the opportunity to add value.

Rishi Dean’s 7 Marketplace Design Patterns

At the time of writing, Rishi Dean is the head of product at Sittercity, a marketplace that connects child care professionals with parents. He’s thus spent a lot of time thinking about designing and scaling products and marketplace businesses, and he’s shared some of his thoughts on his blog. Like Gurley, Dean devised his own framework for thinking about consumer marketplace business models in 2013, which borrows and adds on to Gurley’s work. But I think Dean’s best work on the subject is from September, 2015.

In “The 7 Marketplace Design Patterns” Dean provides an analytical framework that categorizes marketplace businesses across three dimensions:

  1. Whether the marketplace is for commodity goods/services or something more “experiential”
  2. The degree to which consumers must consider their decision to use the marketplace .
  3. Finally, the degree to which the marketplace operator can predict the frequency of a given user’s transaction.

For each of the seven design patterns he gives example companies and goes into some detail about the tactical and strategic considerations marketplace operators (or investors in said operators) should keep in mind.

For those interested in the ecosystem of on-demand marketplaces, another post from Dean delves into 6 qualitative factors to account for when analyzing on-demand marketplaces.

Did you find this post interesting? Was there something I missed? Feel free to reach out and let me know.