Where Subscriber Lifetimes Outlive Funds

Hidden Opportunities in “Software-Driven Systems”

As an investor, I don’t know if I love anything more than backing a new set of physical products or experiences that integrate a subscription model to deliver value for consumers.

I gravitate towards businesses that broadly fall into two buckets: (1) the creation of a new market (eg. PlayStation Plus) or (2) the application of a new business model to improve an old market or service (e.g., or Dadi): 

Examples where tech enabled ecosystems drive high subscriber retention rates

While I am lucky to be a Board Member or institutional investor in many of these, I got involved because I deeply believe these businesses have some of the most compelling unit economics I’ve seen in my career. AND YET, they were underappreciated and ignored by investors for the majority of their early-stage lives, and, in some cases, through their IPOs!

But it is not often you see implied subscriber lifetimes outlast a fund’s life. When I do, I lean into it.

As a point of comparison, consider the overwhelming majority of mobile consumer subscription apps alongside the group above. Many a la carte applications have raised hundreds of millions in preference (individually!), but often these businesses have significantly worse fundamentals (e.g. churn, pricing power) and do not achieve enduring success.

The thread that ties the companies above together is that their subscriber base is centered around hardware or a physical experience. Importantly though, these are not businesses which simply slap a subscription on top of an existing offering (which we see a lot of in this market), but intentionally designed products that integrate software to create value across high frequency interactions or emotionally sensitive purchasing decisions.

And while investors have had an aversion to hardware-centric subscription models, it’s clear that not only can the retention dynamics be better than many segments of pure-play consumer apps, but so can the moats, purchase psychology, and long term FCF yield. 

Many VCs don’t believe it and some are even skeptical after I walk them through the numbers like the above. I welcome that.

As Fred Wilson likes to say, this is how new funds outperform — avoid “me too” investing.

Lastly, I share this as an example of why I believe it is critically important for emerging investors to develop a nuanced thesis – ideally one refined through experience, and overlooked by the market.  This is the only way I’ve found it’s possible to (a) gain the domain expertise needed for a sustainable investment advantage, (b) cultivate the open-mindedness required to see opportunity others won’t and (c) have conviction where others don’t.

When I look to the coming year, I am particularly interested in finding software driven systems within health & wellness, gaming and sustainability. I strongly believe the best businesses in these spaces will not be standalone mobile applications, but rather full-stack systems often with a physical or experiential component.  I welcome the skeptics, just as we did in financing Dadi, Peloton and Latch, from Series A through IPO

Founders who are building in this full-stack approach benefit from working with an investor who has walked the factory floors in Taiwan, knows complementary go-to-market channels, and has the product sensibilities in both hardware and software to drive increasing value for the customer each month.

Ultimately, customers are the voting machine, and they speak with retention. And as the data above suggests, an elegant “software-driven system” may be the best approach. 

If that resonates with you, get in touch on Twitter.

Special thanks to @Joanne Schneider DeMeireles @Brett Bivens @Ian D’Silva @Nikhil Basu Trivedi and @Eric Crowley for helping crystalize my thoughts, the entrepreneurs I’m so fortunate to work with, and my partners over the years who enabled me to find my game and take smart risks in the businesses above. Originally published at

Voice + The Future of User Generated Content

As UGC evolves from video-driven experiences to voice, what tools are needed?

One of my favorite themes to invest in over the last 15 years has been Vertical User Generated Content. In a world before ubiquitous wifi, streaming video, or creator tools, text-based user generated content emerged as the top of funnel for marketplaces of fragmented, offline supply (UGC 1.0). Video ushered in another era (UGC 2.0) and we are in the early innings of seeing voice-driven experiences catalyzing the growth of new social and consumer businesses (UGC 3.0)

As I spend more time on voice-driven platforms, I can’t help but wonder how will the next wave of UGC opportunities look different? Can voice impact the ‘path to purchase’ in e-commerce? When and how does the market tip? And what infrastructure is needed to get there?

The Case of Viator

To better test and evolve my own frameworks, I look to the past.

As an example, consider TripAdvisor (FY19A: $1.5Bn of revenue, $437M EBITDA), or Viator — foundational internet businesses emerging from the first wave of UGC in travel as a vertical.

While lesser known to most, Viator quietly scaled to serve +1.5M customers across +1000 destinations with +220 employees on less than $30M of total preference raised during a 15 year run. Quite the run!

So what made that efficiency and reach possible for a startup founded in Australia 25 years ago?

Looking back, text-based UGC was often ‘productized’ via unique, high-fidelity user reviews (ie. Yelp). In the case of Viator, the business amassed +600,000 verified reviews by travelers that in turn drove +10M monthly visitors; visitors who came to the platform for discovering, and ultimately booking local activities.

Conversion was driven by a mix of economic incentives once on platform (a low-price guarantee), differentiated convenience (a 24/7 multilingual call center), real-time availability (~75% of their inventory bookable within 24 hrs), supreme service, and proprietary expert destination content placed alongside their ‘closed loop’ user generated postings. The team deftly reinvested their UGC assets into a number of local language sites, growing to serve other international markets and +2,000 travel affiliates (airlines, hotels, loyalty platforms etc).

But how does any of this relate to voice?

On the surface, ‘what good looks like’ for Viator’s supply side was simple: deliver bookings volume to their partners and provide them with online tools including an overarching connectivity platform. However, what’s less discussed (and less simple) is what it takes to recruit your initial supply. Your first believers.

For Viator, that meant building a platform for local operators which included:

  • a Content Management System — enabling, say, easy upkeep of on-site photos
  • a supplier extranet — enabling inventory management
  • supplier APIs — enabling live bookings via direct integrations with vendors

Which brings me to Voice. Today, we find ourselves in the early stages of a new wave of voice-centric applications; and, if history rhymes, I’d bet that a form of supplier APIs emerge to unlock the market.These will be multi-modal and initially delivered B2B2C. A good example is Speechly:

While I am not an investor in Speechly, I recognize that Supply APIs have been core to each wave of UGC’s foundational businesses. And as history suggests, I believe that will hold true for the next. So if you’re a developer working with voice APIs let’s chat.

It’s about time…my fingers are tired from the last 20 years!

“A generation left behind?”

The Equity Gap in Pediatric Healthcare 

Last week, the LA Times highlighted the ways distance learning exacerbates educational equity issues and shortchanges those from low-income families.

It’s clear we must do better.

But this divide doesn’t just impact education. I believe the challenges stemming from poor computers, and broken cell phone connections, pose a threat in a realm that’s gone largely unmentioned: Pediatric Healthcare.

Consider the following:

  • There are 74mm children in the US, which includes 45mm in low-income families covered by Medicaid or the Children’s Health Insurance Program (CHIP).  This means that children under the age of 18 make up over roughly 50% of all Medicaid recipients nationwide.

2020 Health Insurance Federal Poverty Level - chart

Now picture a family of four, one that needs to make ~$35K a year or less to qualify for Medicaid (138% of the federal poverty level). Families struggling to maintain their income at these levels often can’t find the time during the workday to take their kids in to see a pediatrician or pay for supplementary on-call services.  And they most often don’t have insurance that extends effective telemedicine solutions to their kids.  So, they wait until a time of concern, and resort to taking them to their local 24-hour ER or urgent care facility.  

Studies show that Medicaid patients are over 50% more likely than people with commercial health insurance to use the ER as their primary place for care. Yet, one of the biggest drivers of avoidable pediatric Medicaid costs is overutilization of the ER for non-emergency situations.

For years we’ve known that having the ER as a pediatric care provider for low-income families is not cost-effective.  But what alternatives do they have?    

There have been several attempts to fix the ER problem over the years.  I wont go into all of them, but telemedicine done right (i.e. purpose built, with features designed for this cohort) has clear potential if aligned with outcomes.

Unfortunately, today, the pediatric needs of the Medicaid population have been largely left behind. Access to technology is just one of the hurdles this group faces. Historically, telemedicine products have been offered through employers as a benefit for employees. This poses a problem for families on Medicaid for two obvious reasons: 

First, it’s traditionally been higher-end plans that properly cover and communicate telemedicine benefits, though that’s changing. And second, both the product and software workflows are designed for doctors to talk to adults!

As you can imagine, the challenge of pediatrics is that the patients are often very young children. It’s much harder for a doctor to get the information they need to diagnose conditions from them than it is for adult patients.

Thus most vendors and plans have not made pediatric telemedicine a priority because they perceive utilization to be low. 

But in reality it may have been just the wrong product. Until now?  

As an example, consider Blueberry Pediatrics — a pediatric-focused telemedicine offering that gives parents affordable, quality care instantly via text, phone, or video any hour of the day. Blueberry removes all friction to getting care — there are no appointments, no waiting, and no gatekeepers — at just $15/month.

Your family's team of 24/7 on-demand Pediatricians

Any form factor, at any hour is deceptively powerful; it threads the needle on broadband issues and computer access concerns that the LA Times cites. And the Company goes one step further by providing an at-home medical testing kit: parents use the kit to collect their child’s vitals (heart rate, oxygen levels, temperature) and perform ear/nose/throat examinations without leaving home. This means Blueberry can handle cases other telemedicine services can’t, like ear infections, RSV, and croup. It is a powerful wedge, and life-stage to build around.

The best products lead with simplicity. Providing care via text creates significant advantages for the consumer experience as well as the business itself.  For example, text messaging also enables physicians to be in constant contact with families and manage symptoms as they progress instead of only getting a single 15-minute snapshot in a video session.

From what I’ve seen, this is a great step in the right direction, but the world desperately needs more folks like Harrison Gordon and the team at Blueberry building intentional solutions for those in need.

I am not an investor in Blueberry, but I am grateful to my old colleague Adi Sivaraman for introducing me to the team and problem they are solving.  I’ve always believed the best hires teach you, and I was fortunate to hire Adi as an associate years ago; to have him push my thinking on all things healthcare years later is unbelievably rewarding.   

We owe it to each other to try and leave no one behind. If your mission is to use technology to better care for a massive, undeserved, segment of the population — get in touch.

Venture capital has a clear role to play and I’d love to help.

Investing in “Confusion”

A key principle I’ve picked up from Jim Breyer over the years is to “invest in confusion.”

Massive confusion in growing markets represents an enormous arbitrage opportunity.

Confusion in this context can refer to a newly available technology, or to changes in the economics of supply, production and/or distribution of a good or service. It can also be driven by regulatory changes, changes in a competitive landscape and so much more.

While confusion manifests itself in different ways, it’s clear that not only are these the moments in time that are uniquely positive for emerging businesses, they are the cornerstone of my most successful investments.

This holds true across sectors. Consider:

  • Databricks successfully commercializing Apache Spark in the face of legacy vendors with larger sales forces and larger spark investments (IBM)
  • The ballooning impact of Facebook, Pinterest, Twitter, Reddit, et. al on our communities in contrast to Yahoo’s inability to move into social networks
  • Netflix and Hulu’s clear victory delivering a streaming offering that captures, serves and delights subscribers before legacy media got there

I could share a list of 100 more examples, but you get the point. Massive confusion of legacy players often renders them unable to compete, and paves the way for a new set of enduring companies.

Often, the only option for these established businesses is to buy into the market, but they rarely pioneer a market when confusion runs high. This is partly why the NYSE did not build Coinbase, and Splunk did not build Confluent.

For investors, confusion presents an added benefit of making it less likely that the market is appropriately pricing related investments. Often, it is because these companies don’t fold into a simple existing total addressable market definition, and/or have elements (including business models) that not many have underwritten in the past.

The best way I’ve been able to navigate this is to (1) dig deep into the platform shift by speaking with every participant (customers, competitors, industry analysts, founders and operators) (2) actually listen intently – with “Dumbo Ears!” and (3) force yourself to tune out the crowd.  I can’t tell you how many times I heard “No one makes money in media,” “Crypto is a fad,” or “Hardware is hard; it doesn’t scale” before backing teams proving folks wrong.

Do you believe there are certain shifts happening that established market leaders are confused about? Get in touch. I’d love to talk with you about it.

Why Now

A key question you hear in many investing conversations — but not enough!—is “why now?” Over the last 10 years, I’ve focused on becoming more disciplined in answering this question every time I map out a new market or explore a new business.

“Why now” could be that a newly-available technology enables a new service, such as the introduction of Broadband and subsequent roll-out of 5G, which catalyzed the widespread adoption of streaming-services like Netflix into homes and devices around the world. Or that patent expiry, like Invisalign’s, which cleared the way for Smile Direct Club, Candid, and Uniform Teeth to improve upon a dated approach with superior service and pricing. Or large behavioral shifts like the destigmatization of mental health, and related self-care movement, which paved the way for digital tools like Headspace to be a service consumers are proud to download and employers tout as a benefit rather than a fringe or shameful need.

Often, the simplest “Why Now” examples to understand are regulatory, which is what I’m going to focus on in this post.  I’ll cover other angles in future posts.

To understand the power of getting the timing right, consider the following two examples:

US Consumer Finance:  The Rise of Mobile Neobanks

  • The Credit Card Act of 2009:  Banned marketing of credit cards on college campuses, increasing the average age of credit card acquisition and leaving more young people in the last decade to depend on other means (ie. debit).Debit card users don’t want to overdraft, let alone incur related fees while working with a UX that left much to be desired. This interplay spurred a number of downstream consequences, including the increased adoption and engagement of personal financial management tools which can track spending in real time (among other functions).
  • The Durbin Amendment of 2010:  Reduced debit interchange rates for banks >$10B of assets from 155 bps + $0.04 to 5 bps + $0.21. This minimized the historically sizable profit pools that made servicing “low-value” checking accounts interesting to these types of banks. Thus, a legislative change disincentivized large incumbents from serving this population segment as they were precluded from charging sizeable fees to a large swath of accounts.What was the net result? Multiple segments of the market (young people, “underbanked” populations) began looking for better alternatives and upstarts like the Cash App, Chime, Varo Money, Moneylion, were able to cost-effectively take and better serve these customers.The timing of these two regulatory catalysts, coupled with a number of other factors, drove a strong “why now” for a large segment of fintech businesses. These businesses have seen strong product-market fit and billions of enterprise valuation creation.

US Telemedicine

Historically, the establishment of a “valid doctor-patient relationship” precluded the growth and penetration of telemedicine across the states.

Just 10 years ago, remote methods for establishing a valid relationship remained in legal limbo. Texas was the last US state to allow for remote validation following a landmark ruling involving Teladoc, and more recent regulation (ie Ryan Haight Act) has catalyzed the ability to facilitate online treatments and services across new use cases.

Now of course with the current pandemic climate, we are seeing even more widespread relaxing of these regulations which we can expect to pave the way for even greater use cases.

And this is what makes our job as investors and founders so interesting. It’s a constant exercise in understanding how changes to our world will enable greater innovation and usher in significant value creation. And how we capture that.

“Why now” unlocks this conversation.

Are you in the early stages of building something and have a compelling “why now?” If so, get in touch with me on Twitter. I’d love to talk with you about it.

Our Investment in Latch

Open Apt JPEG

We’re thrilled to welcome Latch to the ‘BAMily’ as an investor in their $70M Series B — alongside our friends at Brookfield, Lux, RRE , Primary Venture Partners and some of the biggest names in real estate.

At BAM, we’re big believers of companies integrating data, hardware and software, to deliver a superior product and provide value in ways previously untapped. As multi-family property owners look to lower the cost of package delivery, for example, and delivery carriers (i.e. UPS) push for more efficient distribution, the country’s top property developers have chosen to partner with Latch to implement a suite of tools that vastly improve the tenant experience.

Elegantly-designed hardware, enabled by software, and combined with a differentiated go-to-market strategy compelled our initial investment in Peloton years ago. Today, we believe Latch will similarly pioneer a new category of software-driven systems that deliver the convenience, flexibility, and experience an end user desires in an unparalleled way.

For property developers, Latch reduces building expenses — such as annual re-keying costs — and increases property values. For residents, trusted service providers can gain confidential access by smartphone, doorcode, or keycard, for everything from logistics (Latch-UPS) to short-term rentals (Latch-Airbnb Niido). For building managers, Latch offers a suite of software tools that provide guest, package and security capabilities. Lastly, Latch fundamentally restructures the cost model for last mile delivery and services in a way that has the world’s largest package delivery company excited to partner with them.

None of this would have been possible without the humility, foresight and determination of Latch’s founding team who put their heads down for three years to deliver a special product and business to the nation’s leading property developers.

For these reasons and many more, we couldn’t be more excited to partner with Luke, Ali, Thomas, Brian and the entire Latch team in creating a category-defining company.

We’re delighted to welcome Latch and their team to the ‘BAMily’.

P.S. Latch is hiring!


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