Tag: startups

• Toward a culture of innovation and entrepreneurship

  One way you could oversimplify the Canadian economy is to say that it revolves around three things: natural resources, real estate, and high immigration. (You can tell me I’m wrong in the comments below.) More recently, we’ve also been touting the growing number of tech workers in our cities. But in some ways this is a bit of a vanity metric. 

  I think of it in terms of two different categories of workers. There are tech workers that are the result of foreign companies opening satellite offices to take advantage of the weak Canadian dollar and our more enlightened immigration policies. And there are tech workers that are the result of Canadian-based companies innovating, growing, and needing more talent. Think Shopify.

  The former situation is not at all bad, but a lot of the value is going to accrue outside of the country. Whereas in the latter situation, we get to be the principal recipients and we get all of the positive externalities associated with innovation and entrepreneurship. One of these is a powerful compounding effect. Successful startups tend to beget even more new companies. 

  So even though I work in and benefit from one of the three things that I mentioned at the beginning of this post, I believe that we need to be much better at encouraging a culture of innovation and entrepreneurship in Canada. We’ve become too complacent.

  This is a critically important topic that we don’t seem to be talking about nearly enough. So I plan to do more of that here on the blog.

  2023.08.17

• Delivery > mobility

  I was picking up food the other night on Bloor Street (via Uber Eats) and the lineup of delivery drivers outside of the restaurant was at least ten people deep when we arrived. While we were waiting, another handful of drivers pulled over to quickly pickup their deliveries. This is what is happening in our cities right now, especially here in Toronto while we live through another stay-at-home order. And the numbers certainly reflect it.

  Last month in March, Uber’s delivery business (which is separate from the company’s mobility business) recorded a 150% year-over-year increase in annualized gross bookings. The company’s run-rate as of March is now $52 billion. To put this number into perspective, the company’s mobility business also had its best ever month in March with an annualized gross bookings run-rate of $30 billion.

  Delivery > mobility right now. Makes sense.

  To further put this into perspective, total restaurant spending across the entirety of the United States was $670 billion in 2019 (figure from Benedict Evans). So Uber Eats has quickly become a meaningful part of how we eat. I obviously believe that people are dying to get out and eat at restaurants again, but these figures are still interesting nonetheless.

  It’s also interesting to think about the above trendline from a broader logistics perspective. Alongside the rise in Uber Eats, we are seeing a wave of capital move toward “rapid delivery apps.” These are platforms that allow meals, groceries, and other stuff to be delivered, in some cases, almost right away, which aligns with where I think consumers are moving. Rather than making lists and doing weekly shops, it’s now about just-in-time delivery.

  It’s arguably a lazier way of going about things, but water will always find the path of least resistance.

  Many, or perhaps most, of these platforms have adopted an asset light approach. Instacart, which partners with existing grocers, would fall into this category. Their model revolves around gig workers going into existing stores, picking orders directly from the shelves, and then delivering those orders. And it is what Blair Welch was getting at in his recent RENX interview when he reasoned that grocery shopping is still being done, almost exclusively, at local stores.

  This approach is enough for Instacart to be valued at nearly $40 billion, according to the Financial Times. So something seems to be working.

  2021.04.22

• The sources of wealth

  Back in the old days, and by the old days I mean the 1980s, there were a handful of ways in which you were likely to get rich. You either inherited it, or you made it in oil or real estate. The Forbes list of the 100 richest Americans was first published in 1982 and, at that time, 60 of the people on this list had inherited their wealth. Of the 40 new fortunes on the list, about 60% were primarily related to oil or real estate. If you couldn’t inherit your money, these two industries were a good place to start.

  But as Paul Graham explains in this recent essay about “how people get rich now,” this is no longer the case. On the 2020 list, there were 73 new fortunes, but only 4 stemmed from real estate and only 2 stemmed from oil. As you might imagine, today’s biggest driver is what we call tech and, more specifically, it is people founding tech companies (there are also a couple of examples of early employees doing very well). Of the 73 new fortunes last year, approximately 30 came from tech, including 8 of the top 10 fortunes on the list.

  Given how many people are starting new companies today (it has become easier and cheaper) and given how many of these companies are quickly growing to big valuations (things are scaling faster), it is perhaps tempting to think about this period of time as being entirely unprecedented. Never before have we seen so many young people getting rich by starting their own company. And never before have we seen such inequality.

  However, Graham argues in his essay that this period of time is the default. What we saw in the second half of the 20th century was actually an anomaly. Indeed, if you go back to the end of the 19th century, the richest people in the US were mostly people who were starting their own companies and taking advantage of new technologies, such as that of mass production.

  His claim is that for the most part it wasn’t really viable to start your own company in, say, the 1960s. Instead, most people simply went to work for a big company that had some sort of oligopolistic positioning in the market. And it turns out that was pretty good for maintaining a strong middle class. Less people were getting fabulously rich. I’d like to see some more data points around entrepreneurship and wealth during this era. But regardless, I think it’s pretty clear that the dominant sources of wealth have changed.

  2021.04.18

• The 25 top-funded proptech startups in Canada

  Proptech Collective has just published their inaugural 2021 Proptech in Canada report. Here are a couple of screen grabs that you all might find interesting:

  

  

  

  What these images should tell you is that the Canadian proptech landscape is fairly Toronto-centric, but that it’s also very much in its nascent stages. We’re just getting started here.

  I would encourage you to download a full copy of the report. It’s very well done.

  2021.02.08

• Crossing the chasm in Austin

  I can’t open Twitter these days without seeing someone in the tech industry talking about moving or talking about someone who just moved to either Austin or Miami. “What’s the best neighborhood in Miami for startups? My friend just moved to Edgewater. Where did so-and-so move?”

  Here’s a recent article from the WSJ talking about how accelerated tech-fueled growth is straining Austin. And below is a set of charts (from the article) comparing home prices in Austin and San Francisco. (Reminder, the California-to-Texas migratory pattern recorded the highest number of “net movers” last year.)

  

  But in reading through the article, I am reminded that the challenges facing Austin are not entirely unique. Growing cities all around the world are being put in a position where they need to decide whether they want to remain car-oriented and relatively low-density, or if they want to make the shift toward more transit-oriented urbanism.

  It’s admittedly not easy, both politically and practically speaking. It’s hard to rewrite deeply entrenched built form. But Austin is naturally looking at what happened in San Francisco, where restrictions on new development are thought to be partially (largely?) responsible for the city’s unaffordable housing.

  According to the same WSJ article, voters in Austin turned down two previous transit proposals. One was in 2000 and the other was in 2014. There was concern over too much urbanization. There was concern it would induce more people to move to the city. And there was concern that it would threaten the city’s low-rise single-family homes.

  But this year a transit plan was approved that includes three new rail lines, one of which will tunnel through downtown. Provided that Austin can effectively pair this with more housing, more uses, and more density — which is generally what you need to make transit work — then it may be well on its way to crossing, if you will, the chasm of urbanity.

  Charts: WSJ

  2020.12.27

• Toronto’s tech cluster(s)

  A recent study by the City of Toronto has looked at why tech firms cluster (agglomeration economies) and where they cluster in the city. Here are maps of what they found:

  

  

  Downtown captured almost half (49.2%) of all tech employment in the city with some 29,701 jobs. The South Employment Monitoring Area, which is the area outlined above in blue, captured 63.4% of the city’s tech base.

  I usually shy away from headlines touting some total number of tech jobs because I feel that it can become a bit of a vanity metric. What about the quality of those jobs? How much venture capital have the companies raised?

  But this report is different and it is interesting to see the extent in which tech has concentrated itself in the core of the city. As of 2019, jobs in tech establishments represented about 4% of all jobs in Toronto.

  To download a copy of the report, click here.

  2020.01.10

• SHARE NOW exits North America (and a few European cities)

  Last week, SHARE NOW — which was previously known as Car2Go — announced that it will be exiting the North American market entirely come February 29, 2020, and that it will also cease operations in London, Brussels, and Florence. A couple of reasons were cited, including the “volatile state of the global mobility landscape,” but that really translates into low adoption:

  Further, despite our best efforts and investments in Brussels, London and Florence over the years, we are unable to continue operations in a manner that’s sustainable for our business due to low adoption rates.

  Moving forward, SHARE NOW will focus on the remaining 18 European cities. We, along with our shareholders, believe these markets show the clearest potential for profitable growth and mobility innovation.

  There was a period of time when I used to use Car2Go here in Toronto. My network did as well. But that quickly stopped with the rise of Uber and Lyft. I mean, why bother finding a Car2Go and then parking it, when there’s a much lower friction option? I would imagine that’s how most people feel. (Maybe there’s a care share advantage for longer trips.)

  At the same time, companies such as Uber and Lyft have, as you know, not performed well as public companies. The market is nervous about their path to profitability. In my view, they’re largely an undifferentiated offering right now, and it’s pretty easy to switch across them. So yeah, I guess the global mobility landscape is pretty volatile.

  2019.12.22

• Rules for location data

  The CEO of Foursquare — Jeff Glueck — published an interesting op-ed in the New York Times today, calling on Congress to regulate the location data industry. Currently, there are no formal rules in place.

  In case you’re not aware, Foursquare is one of the largest independent companies operating in this space. I have written about them many times before on the blog.

  Here’s an excerpt from Jeff’s op-ed explaining why this matters:

  But location data can also be abused. Bounty hunters were able to buy the current location of a cellphone for $300, Vice reported, because telecom companies sold the real-time location of phones to shady companies. And apps that track location data may turn around and sell that data, revealing someone’s every movement — whether it is to a retail store, an abortion clinic or a gay bar. Bloomberg Businessweek recently reported on a company with thousands of cameras selling car locations to debt collectors and others; there is no “opt-in” involved, and it’s illegal in all states to cover your license plate.

  I am writing about this today because I think it’s relevant to city building. Location data is inherently spatial. It is how we exist in cities. So it shouldn’t come as a surprise to any of you that this is valuable information — hence why it is being abused.

  Here we have a company advocating for more, not less, regulation. They, of course, want it to be sensible. But I still think it says things about the current location data environment. To learn about the specifics of what Jeff is proposing, click here.

  2019.10.17

• TikTok’s revenue is apparently over $7 billion

  Last week, audio clips from an internal Q&A session at Facebook were leaked and published by the Verge. These meetings have historically always been private. In what I think was the right move, the company then decided to publicly livestream a subsequent Q&A session — you know, to show that they had nothing to hide.

  The media tended to focus on Mark Zuckerberg’s comments about the threat of Facebook being broken up by regulators. #BreakUpBigTech. Lots of people are also attempting to glean what this leak might signal about the company’s current corporate culture. But there are lots of other interesting soundbites.

  Here’s an excerpt from Zuckerberg about the Chinese social media app, TikTok:

  So yeah. I mean, TikTok is doing well. One of the things that’s especially notable about TikTok is, for a while, the internet landscape was kind of a bunch of internet companies that were primarily American companies. And then there was this parallel universe of Chinese companies that pretty much only were offering their services in China. And we had Tencent who was trying to spread some of their services into Southeast Asia. Alibaba has spread a bunch of their payment services to Southeast Asia. Broadly, in terms of global expansion, that had been pretty limited, and TikTok, which is built by this company Beijing ByteDance, is really the first consumer internet product built by one of the Chinese tech giants that is doing quite well around the world. It’s starting to do well in the US, especially with young folks. It’s growing really quickly in India. I think it’s past Instagram now in India in terms of scale. So yeah, it’s a very interesting phenomenon.

  TikTok now has over 1.4 billion installs outside of China according to TechCrunch. And in the first half of this year, it supposedly booked more than $7 billion in revenue (though most of it came from China). The company is also saying that it posted its first profit in June of this year.

  All of this is, indeed, “a very interesting phenomenon.”

  But it’s even more interesting because this is probably the first consumer-facing Chinese internet product with massive global adoption. And it has Facebook paying attention. They’re now the ones who have to play copycat — their version of TikTok is called Lasso. Of course, it’s not nearly as popular.

  2019.10.07

• Patch Homes announces $5mm Series A round to grow fractional home equity platform

  There are a number of home equity startups in the marketplace today.

  A few years ago I wrote about an alternative product to HELOCs or home equity loans, called Point. And earlier this year, I wrote about a startup, called Landed, that is helping “essential professionals,” such as teachers, with their down payments. They’ll contribute up to 10% of the value of a home in exchange for a share in any future gains, or losses.

  Today, another startup in the space — Patch Homes — announced a $5mm Series A round. From what I can tell, it appears to be similar to Point in that it involves the fractional sale of home equity. Though, to be clear, the model is distinct from the fractional homeownership that is popular in many high demand vacation destinations. Here’s a bit more on how the product works (source):

  The Patch model enables homeowners to “tap into” their home equity by selling 20–40% to Patch’s affiliate, Patch Capital, which shares in both the upside and downside. The homeowner remains in control of her or his home for the life of the relationship and exits via a sale or refinances in 7–10 years.

  While this product is not for all homeowners, it provides a new and important financing option. The Fed estimates that home equity ownership in the US is $15 Trillion. It makes no sense that the only financing options are additional debt or a complete sale of the property. Patch gives homeowners the option to de-lever their personal balance sheet or otherwise raise cash. Clients have used Patch proceeds for numerous reasons, the most popular of which are to pay off debt, increase liquid savings and finance home improvements.

  I am not surprised to see this gaining momentum. The biggest benefit is that it gives you partial liquidity (i.e. cash up to $250,000), without having to sell your property or take on additional debt service payments. It’s equity, not debt. Fred Wilson, an investor in the company, calls it fractionalizing home equity.

  2019.09.12