Dear avid readers,

Inspired by our previous newsletter on fintech, we have published on a p e r t u r e| hub an article titled What is a challenger bank for? 

In it, my colleague Ben delves into the strategic objectives that should underpin the launch of a challenger brand by incumbent banks. We'd love to get your feedback on it.


We've also published our very first guest-article, kindly written by a p e r t u r e subscriber Bertrand Blancheton, a Swiss-based digital marketing consultant specializing in online client acquisition and lead generation strategies. The article is titled The 3 Rules That Will Help You Craft The Right Lead Magnet, and it provides valuable rules of thumb that will save a lot of time, money and effort in your journey to build online customer acquisition funnels.

🎙️ 🎙️  a p e r t u r e| Podcast
  • For episode #4, of our podcast - "Startup success recipes" - we had the pleasure of hosting and interviewing James Miners, an international innovator who has made the journey from science to startup founder.

    James founded and grew several companies, transforming scientific inventions into mass produced products. He is now focused on building the Swiss startup scene and supports fellow innovators through his roles at Fongit - Switzerland's premier startup incubator where he manages the coaching and incubation process, as well as at Innosuise — Switzerland’s innovation agency.

If you’ve wondered what it takes to turn an idea into an successful product, or the keys to startup success, this podcast is for you!  Available on Soundcloud, Apple Podcasts, Spotify, Buzzsprout, TuneIn, Stitcher, Pocket Casts, Overcast, as well as full text transcript (for the avid readers).

On to the other great content we recommend in this edition.
Hope you enjoy! 

The energy in direct-to-consumer is undeniable

This time last year, our newsletter was focused on the direct-to-consumer (D2C) startup space - and more specifically on the myth that marketing and advertising are dead - replaced by algorithmic adtech. The topic was sparked by Ian Leslie's excellent article title The Death of Don Draper. You can watch a great interview of Ian taken by our dear friends over at The Family. Together with Kyle Hall, they explore the alleged identity crisis in the advertising industry.

One year later, let's see what happened in the D2C space.

Why the IPO market for consumer startups is stronger than ever, and will it continue? — Eric Feng is definitely a voice to follow in the space, and his latest post is a great analysis looking at venture-backed consumer startups IPOs relative to venture-backed enterprise startup IPOs. He finds that more consumer companies go public now relative to enterprise companies, and they are IPO’ing at even higher valuations than before. But the questions arises -  is that just a lagging indicator, since current IPOs might only represent a golden echo of the golden age of consumer startup formation (2009-2012), as it is now much, much harder to break through the ranks in this space?

D2C 2.0: The Rise of Infrastructure
 — Even more, what's happening is a split in the value chain in the space. While incumbent D2C companies uniquely own every step of their production and distribution process — from product design to packaging to marketing to fulfillment, the challenger-D2C brands are operating on top of a massive network of D2C-infrastructure providers (which is also getting a lot of traction with VC funding lately). This is an excellent piece of research from Justine and Olivia Moore, that looks into the D2C-infrastructure providers landscape, from product design and development, to manufacturing, financing, inventory management, payments, fulfilling and shipping, brick&mortar space and branding and marketing. 

So what, then, are the D2C brands that operate on top of this infrastructure actually doing?

Bonsai Brands —Since these businesses see real revenue from real customers early on, the focus is growth, writes Simon Andrews. However, achieving $20m-$30m revenues is relatively easy, argues Simon, but getting from there to $200m is quite hard. The reason? Brands max out their marketing channels and customer-acquisition costs soar. That's why, many of these companies that sit on top of this infrastructure are, as per Simon, bonsai brands - they look very like big successful businesses. But they are a lot smaller and don’t grow beyond a certain size. 

And if you accept that, they are great businesses! (until the infrastructure players verticalize further in the value chain, but that's a topic for another discussion). I was much more intrigued by the ending conclusion, which is that the hyper growth play therefore is to build a modern holding company - use data to build a house of brands like P&G, LVMH and H&M have done. A topic we're very much interested here at a p e r t u r e | Hub.

Physical assets & leverage windows — this massive opportunity to create a new infrastructure to support the new D2C space means that techies have finally found their love for physical assets, and have put the asset-light theory to bed, writes Parth Sethi. The trick, however, is that this subset of tech businesses that hold physical assets for the long term (a year or more) as a core part of their business want to also have a direct consumer touchpoint - since they want to build a demand driven network effects business model on top of these assets. Too bad for asset-light brands. 

When enterprise companies look like their consumer counterparts

The Death of the SaaS LTV/CAC — Michael Gilroy writes an excellent piece on the implications brought by the new wave of SaaS enterprise companies that sell their software bottom up. More specifically, he argues that metrics such as LTV/CAC are, if not obsolete, then reminiscent of (already?) traditional SaaS enterprise players - a business model that employs a relatively rigid sales machine, with a relatively rigid cost structure, where a a marketing automation strategy sends qualified leads from the top of the funnel to a team of business development reps, who hopefully turn these into paying customers. On the other side, the second wave of enterprise SaaS products "are designed to be sold through a website and/or inside of the core product where software can be deployed on a self-serve basis. Given this dynamic, the key GTM priorities are filling top of funnel with high quality users and iterating on landing pages + product so that conversions are optimized (much like a consumer business). This means that sales reps are replaced by Product Marketers, and annual revenue (and the resulting gross margin) is highly variable depending on how much churn, up-sell and down-sell happen month-to-month. The correct primary framework, now becomes time to gross margin payback on a cohort basis, writes Michael. Recommended read!

Video: Growth, Sales, and a New Era of B2B  To get a quick overview of the new enterprise go-to-market combination of bottoms up growth and traditional sales that is changing the business model and the technology it sells, recommending this recent video from a16z with Martin Casado

The labour market's revolution

One of the strategic assumptions we work with here at a p e r t u r e is the fact that, as it is already happening, skilled workforce will sit outside organizations, rather than inside. As we wrote a while back in The Rise of the Growth Platform, in our networked world, what is inside and outside a company becomes increasingly fungible and it is clear that the bedrock of competitive advantage moves from how to scale internal organizations to how to orchestrate the most valuable talent ecosystem. This would imply that we are in a new paradigm, one in which mutual success depends on firms choosing what not to do (n.b. not to hire) and workers choosing what to do (which projects to work on, and which ones to pass). And so, with the un-bundling of every department, the need for talent discovery platforms increases.  

6 Lessons Learned From A Network Of Independent Professionals And since we're very fond of the topic, we appreciated a lot this post by Scott Belsky on the story of "Prefer", a startup that acted for a while in the growing economy of independent service providers, underpinned by a referral mechanism rather than star-reviews. These are fascinating strategy lessons from a failed startup in this space: from choosing between vertical vs horizontal marketplace in order to achieve liquidity, the difficulty in forcing new behaviours on a side of the marketplace, and more importantly, the acute need for the independent service providers to belong to a community in which to collaborate (despite the fact that they are independent) - peer support and best practice exchange, informal referral networks, periodic gatherings.

Interview with Fiverr’s Micha Kaufman — Interesting enough, Fiverr, the on-demand freelancing platform has understood that there is enough business value in assembling freelancers and independent consultants in teams to work on more complex projects - as opposed to current business model focused on micro-tasks - as this is a much higher value add proposition for companies landing on its website, and of course it can lead to higher margins for Fiverr via higher pricing power. This is an interesting interview taken by Sifted with Fiverr's CEO, in which he describes the rationale behind Fiverr Studios: "to create new ways for the freelancer community to connect, create and collaborate on a global scale... a natural evolution of the Fiverr platform, elevating the marketplace from a platform of single contributor Gigs to teams of talented freelancers collaborating as a small agency to serve all businesses, from small businesses to enterprises."

Past, Present, Future

I had a thought recently about Mary Meeker's famous Internet Trends Report - published in June this year - but it's not really about the report itself, but more of the fact that when she departed Kleiner Perkins, she was able to "take this IP" with her, and continue to publish under her name, under the brand of the new fund she launched. That's definitely a perk most traditional employees don't have today - but, maybe that power balance is slowly changing, considering what we've discussed above. 

Internet Trends 2019: Platforms, Technology & Cosmotechnics  I will mention, however, the review of Mary Meeker's report made by a p e r t u r e subscriber Simone Cicero, from Platform Design Toolkit. Quoting Simone, one of the conclusions from the report is that "the role of the Internet in modern society can be seen as representative of the role of technology and should make us think about how to see it integrated within our moral and epistemological frames to be used in the turbulence of current times." Highly recommended (along with pretty much everything that comes from Simone).

Five Lessons from History 
I've enjoyed this post from investor Morgan Housel, in which he argues that the most important lessons from history and from economic recessions are things that are so fundamental to the behaviors of so many people that they’re likely to apply to each of us in situations we’ll face in our own lifetime. Lesson #1 from the Great Depression: People suffering from sudden, unexpected hardship are likely to adopt views they previously thought unthinkable. Lesson #2 - the same personality traits that push people to the top also increase the odds of pushing them over the edge (true for people, countries, empires). Lesson #3 - Unsustainable things can last longer than you anticipate (especially if, through the power of storytelling, enough people believe those things are true or valuable. Lesson #4 - Progress happens too slowly for people to notice; setbacks happen too fast for people to ignore. Lesson #5 - Wounds heal, scars last.

Costs of recession Echoing some of the thoughts above, Chris Dillow on the fact that there is increasing evidence that recessions can do long-term damage, even if the economy appears to bounce back in the short-term. In fact, recessions might be more costly than most people previously thought, despite the theoretical positives (cleansing the market, preceding booms that provide the incentives to financiers to finance innovation at the edge). Chris mentions three main mechanisms of damage: 1/ Education; 2/ Productivity; 3/ Scarring - such as lower risk taking and entrepreneurship levels. 
Read Later
My name is Dan Colceriu, head of research at Pangea, and I hope you enjoyed this read. 
The a p e r t u r e | Newsletter is part of a broader community built on the exchange of ideas and practices around strategy, technology and the dynamics of the platform economy.

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