A (Satirical) Interview Amongst The Co-Founder Of Dollar-Discount.Com
March 05, 2017
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Today it is my swell pleasance to innovate to yous the co-founder too CEO of dollar-discount.com. Since its founding 2 years ago, the fellowship has delivered extraordinary growth inwards monthly active users (MAU) too gross dollar trade value (GDMV). Forbes has labeled dollar-discount.com the latest improver to the prestigious 'Unicorn' club, amongst the company's latest funding circular amongst SoftBank too Sequoia having lately unopen too valued the fellowship at US$1.2bn. I think you'll grip the even out of what this 24 twelvemonth onetime without whatsoever prior concern experience has achieved inwards nether two years to last genuinely inspiring. Thanks for joining us hither today.
Pleasure to last here.
So say me a chip well-nigh yourself too dollar-discount.com
Well, terminal twelvemonth me too a friend were sitting inwards our Ivy League dorm-room chatting well-nigh the world, too concluded that making coin the difficult way past times getting a grade too working for a living appeared to last sooo 20th Century. As millennials, nosotros wanted the adept life too fast. We alive inwards an amazing historic menstruum of entrepreneurial possibility, amongst the meshwork re-writing the rules, too therefore nosotros concluded that nosotros needed an online business. You know, therefore nosotros tin teach rich actually fast, too practise Ted talks too stuff.
So nosotros brainstormed too came upwards amongst the thought of dollar-discount.com. We pitched our thought to a bunch of silicon valley VCs too got funded, too the balance has been history. We own got managed to grow our monthly active users past times a chemical compound growth charge per unit of measurement of 20% per month, too gross dollar trade value past times a 50% chemical compound rate, all spell spending a fabric fraction of our VC funding on lavish parties too role bean-bags. We've used social media to promote our offering too it's actually taken off - it's gone viral. All of our measures of user hateful solar daytime of the month too client satisfaction are extremely high, too therefore nosotros are real excited well-nigh our hereafter growth prospects.
We are nevertheless inwards the growth too evolution stage therefore nosotros are nevertheless losing money, but our VC partners own got been extremely supportive of our go-for-growth strategy. We own got lately unopen out our quaternary funding circular which has valued the fellowship at US$1.2bn, which has provided us amongst plenty funding to back upwards our growth ambitions for the side past times side 6-12 months.
So what is your concern model exactly?
Ok, therefore our concern model is to sell dollar bills online for 80c. You tin house orders through our website or custom-designed app, available on both Android too iOS, too nosotros volition shipping yous a batch of crisp freshly-printed dollar bills straight to your door inwards less than 24 hours.
It's an amazing client value proposition, too the size of the addressable marketplace is genuinely enormous. We own got been investing heavily inwards same-day delivery capability inwards major the States cities, too computer program to ringlet out our offering across the province inwards 2017, earlier going global shortly thereafter. We may aspect into the utilization of drone technology scientific discipline to trim back our shipment times to less than an hr inwards major cities inwards coming years equally well. We computer program to telephone telephone this service dollar-discount-prime. We also computer program to launch our ain driverless auto R&D inaugural before long equally well. It's non at all relevant to our pith business, but all the cool tech kids are doing it therefore nosotros figure it must last a adept idea.
Ok but grip on a s - how practise yous guys own got a feasible concern model?
It is truthful that nosotros are operating at negative gross margins at present. However, this is a deliberate strategy to maximise the growth charge per unit of measurement inwards our user base of operations too GDMV turnover, too inwards fourth dimension nosotros hope to teach into upwards through volume. Our strategy is to showtime invest inwards growth too client acquisition; increment our position out of monthly active users too measures of user engagement; too acculturate customers to using our services regularly. As noted, all our measures of client satisfaction too meshwork promotor scores are extremely encouraging, therefore we're real optimistic our growth volition continue.
We volition assay a path to profitability later, if needed. As everyone inwards the tech manufacture knows, profits are nice, but non necessary, because yous tin merely enhance novel uppercase from VCs when needed. Furthermore, this is how nosotros increment the company's appraised valuation. We also recollect going for growth its the correct strategy to maximize our long term growth opportunity, given the size of the addressable market, too nosotros necessitate motility rapidly to capitalize on this chance earlier our competitors practise so. And equally noted, our VC partners are extremely supportive of this strategy.
Sorry, what? I nevertheless don't come across the viability here. Run it past times me again.
It's ok - yous are over thirty too locomote inwards the onetime economic scheme therefore I tin empathise why it is difficult for yous to grasp what nosotros are doing. So i time nosotros own got captured a large portion of the addressable market, our strategy volition therefore last to like shooting fish in a barrel improve gross margins over fourth dimension past times raising prices. We volition also derive increased S&GA too R&D cost efficiencies. Our superior economies of scale volition also seat us much amend than our competitors. That's why nosotros necessitate to teach large fast. That volition also render us amongst additional resources to fund our newly-incorporated infinite rocket subsidiary that aims to assistance humanity colonize the universe.
Yes, but how volition yous last able to sustain your user base of operations if your value suggestion no longer exists - i.e. if yous enhance prices to to a greater extent than than 100c? Won't users desert you?
Hmm that's a adept point. I never actually thought well-nigh it that way. But you're class of missing the indicate anyway - our concern model is non actually well-nigh profitability, but well-nigh increasing MAUs too securing higher too higher valuations through continuous VC funding up-rounds. And inwards monastic say to secure higher valuations for our business, all nosotros necessitate to practise is proceed to increment the position out of users too exhibit that our top line is growing fast. That's the way it plant inwards the valley. Earnings based valuations are old-hat.
We were smart plenty to non accept the fellowship world equally good early. There is a argue in that location own got been therefore few tech IPOs inwards recent times - it is much harder to hold command of the company's valuation too hold an illusion of ever-increasing valuations. Public marketplace investors are also notoriously demanding, too oftentimes require a pathway to profits, if non existent profits (gasp). It's a existent buzz kill.
We believe it to last a much amend concern model to remain private. That agency nosotros tin grade our valuation upwards every fourth dimension nosotros necessitate to practise a novel funding circular - nosotros unremarkably merely add together 50-100% to the terminal round. It plant merely fine. We teach coin in; VCs teach to exhibit adept mark-to-market valuation gains on their someone marketplace holdings, which makes their returns aspect adept too their underlying investors happy; those investors therefore experience richer too position to a greater extent than coin inwards to finance the side past times side funding round; too VC fund managers teach to banking concern large bonuses. It's a actually swell eco-system.
Yes but isn't this a ponzi scheme?
No because in that location is ever the selection of IPO if too when VCs create upwards one's withdraw heed they don't desire to position whatsoever to a greater extent than coin inwards or that it's fourth dimension to cash out. That's unremarkably when we've passed our tiptop growth charge per unit of measurement inwards users. Public marketplace investors sit down exterior the eco-system described above. If world marketplace investors wouldn't purchase us out, the eco-system could last threatened, but fortunately Wall Street is populated past times many master copy salespeople who are prepared to abandon whatsoever class of ethical restraint provided in that location is a large plenty fee trough to gouge in. We merely pick a large valuation, hope Wall Street a bunch off fees, too Wall Street volition locomote its magic too sell the story.
I can't hold off to band the NASDAQ opening bell!
Well I should likely allow yous teach dorsum to your bean-bags. It has sure been an enlightening interview, although non quite inwards the way I originally expected. Thanks for joining us today too I wishing yous well amongst your hereafter fund-raising plans.
We don't necessitate luck, but yep thanks. My dorsum is also starting to ache - I haven't sat inwards a existent chair for a spell - therefore it's likely a adept fourth dimension to break. Keep an see out for our upcoming US$2.5bn funding round. Laters.
Comment
The to a higher house is of course of written report satire, too was inspired past times SNAP's IPO; approximately of Uber's recent pricing decisions; Twitter; Softbank's proposed WeWork investment; too many (but non all) online retailer too upstart platform companies I own got observed inwards Asia. The oblique references to Amazon too SpaceX are pure jest - I recollect Amazon has a real feasible too valuable concern platform too I'm a large fan of both Jeff Bezos too Elon Musk, who I believe are driving existent value creation (although I own got no involvement inwards investing inwards Amazon or Tesla at electrical flow prices).
However, I own got observed a tendency of many online businesses growing fast primarily past times selling their services at below cost. Online retail businesses (excluding Amazon) are a prime number example. Some ride-sharing apps are arguably inwards this military camp too. It's like shooting fish in a barrel to grow top line & accept marketplace portion off bricks & mortar competitors if you're prepared to sell your wares below cost. But practise yous own got a feasible concern model? Selling your goods too services below cost is the equivalent of selling dollar bills for 80c. Eventually yous volition necessitate to cost your services at a competitive economical cost. And how much of your user base of operations volition remain amongst yous when yous do? Especially if in that location is approximately other upstart service willing to lose coin to accept your customers' eyeballs.
There are shades of a dot.com bubble grade 2 evident at present. SNAP's IPO valuation appears sheer lunacy to me. I won't last touching it. The IPO pricing is a testament to the powerful mightiness Wall Street has to marketplace overpriced junk non merely to the public, but to large institutions equally well.
Comments welcome.
LT3000
Pleasure to last here.
So say me a chip well-nigh yourself too dollar-discount.com
Well, terminal twelvemonth me too a friend were sitting inwards our Ivy League dorm-room chatting well-nigh the world, too concluded that making coin the difficult way past times getting a grade too working for a living appeared to last sooo 20th Century. As millennials, nosotros wanted the adept life too fast. We alive inwards an amazing historic menstruum of entrepreneurial possibility, amongst the meshwork re-writing the rules, too therefore nosotros concluded that nosotros needed an online business. You know, therefore nosotros tin teach rich actually fast, too practise Ted talks too stuff.
So nosotros brainstormed too came upwards amongst the thought of dollar-discount.com. We pitched our thought to a bunch of silicon valley VCs too got funded, too the balance has been history. We own got managed to grow our monthly active users past times a chemical compound growth charge per unit of measurement of 20% per month, too gross dollar trade value past times a 50% chemical compound rate, all spell spending a fabric fraction of our VC funding on lavish parties too role bean-bags. We've used social media to promote our offering too it's actually taken off - it's gone viral. All of our measures of user hateful solar daytime of the month too client satisfaction are extremely high, too therefore nosotros are real excited well-nigh our hereafter growth prospects.
We are nevertheless inwards the growth too evolution stage therefore nosotros are nevertheless losing money, but our VC partners own got been extremely supportive of our go-for-growth strategy. We own got lately unopen out our quaternary funding circular which has valued the fellowship at US$1.2bn, which has provided us amongst plenty funding to back upwards our growth ambitions for the side past times side 6-12 months.
So what is your concern model exactly?
Ok, therefore our concern model is to sell dollar bills online for 80c. You tin house orders through our website or custom-designed app, available on both Android too iOS, too nosotros volition shipping yous a batch of crisp freshly-printed dollar bills straight to your door inwards less than 24 hours.
It's an amazing client value proposition, too the size of the addressable marketplace is genuinely enormous. We own got been investing heavily inwards same-day delivery capability inwards major the States cities, too computer program to ringlet out our offering across the province inwards 2017, earlier going global shortly thereafter. We may aspect into the utilization of drone technology scientific discipline to trim back our shipment times to less than an hr inwards major cities inwards coming years equally well. We computer program to telephone telephone this service dollar-discount-prime. We also computer program to launch our ain driverless auto R&D inaugural before long equally well. It's non at all relevant to our pith business, but all the cool tech kids are doing it therefore nosotros figure it must last a adept idea.
Ok but grip on a s - how practise yous guys own got a feasible concern model?
It is truthful that nosotros are operating at negative gross margins at present. However, this is a deliberate strategy to maximise the growth charge per unit of measurement inwards our user base of operations too GDMV turnover, too inwards fourth dimension nosotros hope to teach into upwards through volume. Our strategy is to showtime invest inwards growth too client acquisition; increment our position out of monthly active users too measures of user engagement; too acculturate customers to using our services regularly. As noted, all our measures of client satisfaction too meshwork promotor scores are extremely encouraging, therefore we're real optimistic our growth volition continue.
We volition assay a path to profitability later, if needed. As everyone inwards the tech manufacture knows, profits are nice, but non necessary, because yous tin merely enhance novel uppercase from VCs when needed. Furthermore, this is how nosotros increment the company's appraised valuation. We also recollect going for growth its the correct strategy to maximize our long term growth opportunity, given the size of the addressable market, too nosotros necessitate motility rapidly to capitalize on this chance earlier our competitors practise so. And equally noted, our VC partners are extremely supportive of this strategy.
Sorry, what? I nevertheless don't come across the viability here. Run it past times me again.
It's ok - yous are over thirty too locomote inwards the onetime economic scheme therefore I tin empathise why it is difficult for yous to grasp what nosotros are doing. So i time nosotros own got captured a large portion of the addressable market, our strategy volition therefore last to like shooting fish in a barrel improve gross margins over fourth dimension past times raising prices. We volition also derive increased S&GA too R&D cost efficiencies. Our superior economies of scale volition also seat us much amend than our competitors. That's why nosotros necessitate to teach large fast. That volition also render us amongst additional resources to fund our newly-incorporated infinite rocket subsidiary that aims to assistance humanity colonize the universe.
Yes, but how volition yous last able to sustain your user base of operations if your value suggestion no longer exists - i.e. if yous enhance prices to to a greater extent than than 100c? Won't users desert you?
Hmm that's a adept point. I never actually thought well-nigh it that way. But you're class of missing the indicate anyway - our concern model is non actually well-nigh profitability, but well-nigh increasing MAUs too securing higher too higher valuations through continuous VC funding up-rounds. And inwards monastic say to secure higher valuations for our business, all nosotros necessitate to practise is proceed to increment the position out of users too exhibit that our top line is growing fast. That's the way it plant inwards the valley. Earnings based valuations are old-hat.
We were smart plenty to non accept the fellowship world equally good early. There is a argue in that location own got been therefore few tech IPOs inwards recent times - it is much harder to hold command of the company's valuation too hold an illusion of ever-increasing valuations. Public marketplace investors are also notoriously demanding, too oftentimes require a pathway to profits, if non existent profits (gasp). It's a existent buzz kill.
We believe it to last a much amend concern model to remain private. That agency nosotros tin grade our valuation upwards every fourth dimension nosotros necessitate to practise a novel funding circular - nosotros unremarkably merely add together 50-100% to the terminal round. It plant merely fine. We teach coin in; VCs teach to exhibit adept mark-to-market valuation gains on their someone marketplace holdings, which makes their returns aspect adept too their underlying investors happy; those investors therefore experience richer too position to a greater extent than coin inwards to finance the side past times side funding round; too VC fund managers teach to banking concern large bonuses. It's a actually swell eco-system.
Yes but isn't this a ponzi scheme?
No because in that location is ever the selection of IPO if too when VCs create upwards one's withdraw heed they don't desire to position whatsoever to a greater extent than coin inwards or that it's fourth dimension to cash out. That's unremarkably when we've passed our tiptop growth charge per unit of measurement inwards users. Public marketplace investors sit down exterior the eco-system described above. If world marketplace investors wouldn't purchase us out, the eco-system could last threatened, but fortunately Wall Street is populated past times many master copy salespeople who are prepared to abandon whatsoever class of ethical restraint provided in that location is a large plenty fee trough to gouge in. We merely pick a large valuation, hope Wall Street a bunch off fees, too Wall Street volition locomote its magic too sell the story.
I can't hold off to band the NASDAQ opening bell!
Well I should likely allow yous teach dorsum to your bean-bags. It has sure been an enlightening interview, although non quite inwards the way I originally expected. Thanks for joining us today too I wishing yous well amongst your hereafter fund-raising plans.
We don't necessitate luck, but yep thanks. My dorsum is also starting to ache - I haven't sat inwards a existent chair for a spell - therefore it's likely a adept fourth dimension to break. Keep an see out for our upcoming US$2.5bn funding round. Laters.
Comment
The to a higher house is of course of written report satire, too was inspired past times SNAP's IPO; approximately of Uber's recent pricing decisions; Twitter; Softbank's proposed WeWork investment; too many (but non all) online retailer too upstart platform companies I own got observed inwards Asia. The oblique references to Amazon too SpaceX are pure jest - I recollect Amazon has a real feasible too valuable concern platform too I'm a large fan of both Jeff Bezos too Elon Musk, who I believe are driving existent value creation (although I own got no involvement inwards investing inwards Amazon or Tesla at electrical flow prices).
However, I own got observed a tendency of many online businesses growing fast primarily past times selling their services at below cost. Online retail businesses (excluding Amazon) are a prime number example. Some ride-sharing apps are arguably inwards this military camp too. It's like shooting fish in a barrel to grow top line & accept marketplace portion off bricks & mortar competitors if you're prepared to sell your wares below cost. But practise yous own got a feasible concern model? Selling your goods too services below cost is the equivalent of selling dollar bills for 80c. Eventually yous volition necessitate to cost your services at a competitive economical cost. And how much of your user base of operations volition remain amongst yous when yous do? Especially if in that location is approximately other upstart service willing to lose coin to accept your customers' eyeballs.
There are shades of a dot.com bubble grade 2 evident at present. SNAP's IPO valuation appears sheer lunacy to me. I won't last touching it. The IPO pricing is a testament to the powerful mightiness Wall Street has to marketplace overpriced junk non merely to the public, but to large institutions equally well.
Comments welcome.
LT3000