Tech Breakdowns Podcast

Read the complete post along with charts and infographics at: https://techbreakdowns.substack.com/p/timing-is-everything

I’ve been thinking a lot about timing. When you’re launching a new product, you have to know that the market is ready for it. The need to understand the market is especially important for innovative products since there are no data points to look at. Steve Jobs was good at figuring this out. During the go-go days in the late 90s, internet companies were forming left, right and centre and after the dot-com bust, most of them died. A lot of them were straight-up bad ideas and deserved to die. Among the ones that died, were a few outliers that had a good idea and a great vision but bad timing. Today, let’s look at two companies that were too early for their time and their modern counterparts.

Webvan

Webvan was a grocery delivery company that promised deliveries within 30 minutes. Further, the company offered premium-grade groceries at unbelievably low prices. The infrastructure that enabled this was way ahead of its time, the company invested in automated warehouses complete with miles of conveyor belts and robots as far as the eye could see. Following the mantra of the time to “Get big fast,” the company raised $396 million from blue-chip investors including Sequoia Capital, Benchmark Capital, Softbank, Goldman Sachs and Yahoo.

Today, online grocery delivery is a big business around the world. The world’s largest online grocery delivery company, Instacart has carefully avoided the traps that Webvan fell victim to. Instacart, instead of building its own infrastructure, relies on the existing grocery shops and chooses to focus on delivery and customer experience. Instacart has a better pricing strategy than Webvan too. Instacart charges a small delivery fee but that in and of itself does not support the unit economics of delivering groceries. So, the company also marks up the prices of the items, so the actual prices are not visible to the customer. The company targets consumers who prioritise the ease of shopping online over the marked-up prices.

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Pets.com

Do you own a pet? If so, you’ve probably ordered per supplies online. Julie Wainwright was approached by a VC to run Pets.com a new pet supplies company. The company’s first round was led by none other than Amazon! When the company launched, they had ads everywhere – TV, radio, print, outdoor. In November 1999, they even launched a magazine, the first edition of which was sent to one million pet owners in the US. At the heart of their marketing plan was a $1.2 million Super Bowl ad that aired in January 2000. The company was terrific at marketing and getting people to talk about it but not so much with developing a working business model.

Eleven years later, Ryan Cohen realised that the same model of delivering pet supplies online was now feasible and he founded Chewy. Chewy compared to Pets.com is founded on better unit economics. Also, more people are shopping online than ever before.

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So, as I said at the top, being early is just as bad as being late. Both these companies along with many others from that era (see: Boo.com, Heat.net, Beenz etc) were too optimistic about people’s willingness to switch to online alternatives. Also, the market for these companies was restricted to the limited portion of the population that had access to the internet. A case can be made that these companies could have survived the dot-com bust had they been diligent with their resources. Good timing is clearly important but it is no replacement for bad management.

Check out the newsletter here: https://techbreakdowns.substack.com

Now to address the elephant in the room – Facebook changed its name Meta last week. On the official announcement post on the Facebook blog, the company said its vision was to “bring the metaverse to life and help people connect, find communities and grow businesses.” Yeah, okay.

The pandemic, for better or for worse, forced a realisation that most of the day-to-day activities that what we thought required us to be present in person can be done from any corner of the world with an internet connection. While virtual communication has largely been limited to Zoom calls, it will not stay like this. I believe that Facebook even with all its resources will likely not be the company to build the metaverse.

Think about the audience on Facebook apps and consider this – who is more likely to participate in the metaverse – someone your dad’s age or a 5-year-old playing games on his mom’s iPad?

This week, let’s look at three companies that could build the metaverse instead.

Earlier this year, David Baszucki, CEO of Roblox, in a virtual meeting with the company’s investors said “Some people refer to what we’re building as the Metaverse.” Launched in 2006, Roblox is an intersection between gaming, programming and social networking. Roblox offers a set of tools to the users to create their own video games on top of the Roblox platform. Roblox designed these tools for rookie game developers, that is, these tools are easy to use compared to the other option of using professional game engines for development. These tools are also flexible and can be customised to create games or experiences in different genres like first-person shooting, simulators, puzzles among others. The genre we need to focus on here is – role-playing. In it, developers create whole worlds complete with cities, community centres, parks etc. along with other fantasy aspects like flying cars or building-sized worms.

Last week, I played an escape room from my browser with my friends in a different country. The game was hosted on a new service called Gather. Gather uses spatial audio technology where the audio of an object (or another user) fades out the further a user moves away from it. This way, a group of people standing in close proximity can see and talk to one another while someone else in the same space standing further away will not.

While my use case for the service has been mostly for social reasons, Gather’s real product is built for teams working remotely. Companies can design a virtual office, complete with workspaces, conference rooms, break rooms etc. The idea is that the employees will log in to their virtual office every day and will be able to interact through Gather for things that would otherwise require Zoom calls. Gather has tools that let you give presentations, whiteboard, take notes and collaborate on web-based documents. On their website, the company also showcases how the same feature sets can be used by schools and student clubs alike.

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Check out this edition of the newsletter with all references and Tech Under A Minute here: https://techbreakdowns.substack.com/p/understanding-crypto-yield-farming

The traditional form of investing in cryptocurrencies is buying them off an exchange, holding them in a digital wallet, and then if you’re lucky, selling them for a higher price than what you paid for it. There is nothing wrong with it, this is how most people also invest in stocks. But, imagine, a way that your crypto could make money while you hodl it.

You very likely understand how a bank works – depositors deposit; borrowers borrow; borrower pay interest; depositors get interest. In the end, for the depositors, their money makes them more money. That’s the whole idea behind banks – to not have money sit idle. Yield farming or liquidity harvesting is essentially the same thing with cryptocurrencies, except it’s decentralised and you get more than just interest on it.

Simply put, liquidity pools are a digital stockpile of funds. They are permissionless – anyone can deposit funds in these pools. Users, called liquidity providers (LP), deposit two different tokens (coins) of equal value in this stockpile. For example, in a liquidity pool made up of Solana (SOL) and Ethereum (ETH), you would have to deposit an equal amount of SOL and ETH to the pool.

What’s the use of the pool? Continuing the previous example, say someone holds SOL and wants to do a transaction on the Ethereum blockchain. Now this person can go to an exchange, sell his SOL and buy ETH, paying high gas prices (transaction fees) each time, or he could just go to a liquidity pool and swap his SOL for ETH, paying only a minor transaction fee. (The latter is also faster).

What’s in it for the liquidity providers (LP)? As you could guess, the transaction fees that someone pays to access the liquidity pool is paid out to the LPs. But that’s not all, additional rewards are paid to the LPs in the form of governance tokens.

Governance tokens, came into prominence when compound.finance started issuing COMP tokens (coins) to its users for every day’s participation in Compound’s services. Remember, a currency only has values if a large enough group of people use it. Soon, the value of COMP skyrocketed and yield farming became a thing. As an LP, you can then speculate and trade the value of the tokens you receive. Here’s the crazy part - you can pool these governance tokens too!