View profile

The DL - An inside view into Pacific Northwest Tech

Revue
 
Welcome to The DL, a weekly newsletter about tech, startups, and investing in the Pacific Northwest.
 
September 16 · Issue #13 · View online
The DL
Welcome to The DL, a weekly newsletter about tech, startups, and investing in the Pacific Northwest.
This week’s issue has an update on Seattle’s other retail behemoth, the DL’s first ever job posting (it’s a good one!), everything you need to know about Gen Z’s tech habits, and one of WhatsApp’s first marketing campaigns.

👋 Referred by a friend? Sign up here.

"Please don't come" -Costco 😘
I thought Costco in SoDo was bad 😂
I thought Costco in SoDo was bad 😂
A few weeks ago, Costco opened its first store in China, and it was so popular they had to close the store and send a message to customers that said “Please don’t come.” Here’s a pretty crazy video of people waiting three hours for parking, sneaking under the barricade, and clamoring for rotisserie chicken 🍗.

When Costco enters a new market, they want ~5% of the population to sign up for memberships. In this suburb of Shanghai, there are 2M people, and Costco signed up 139K members in one day (that’s 7% if you do the math – not bad!).

It’s easy to forget that 90% of retail still happens offline, and Costco is one of the leaders in building a stellar offline retail business. How does their model work? Here’s a quick summary:
  • Offer the lowest prices by keeping product markups to 15% or less
  • Charge an annual membership fee of $60 (and sign up 53M members)
  • Aim to break even on products but have all membership revenue drop straight to the “bottom line”
  • Make $142B in total revenue, $3.1B in membership revenue, and $3.1B in profit
Check out this fantastic investment “memo” if you’re interested in how Costco has been so successful in the age of online retail. And read Madrona’s Future of Retail investment theme if you want more info on how we’re thinking about innovation in this market.

Help us out!
Madrona is hiring associates to join our investment team! If you love tech, startups, and the Pacific Northwest (✅, ✅, and ✅ for DL readers), please check out our Associate job posting, and share with friends or colleagues that might be interested!

Gen Z Survey from Morgan Stanley 👻
Quiz - how many of these things do you know?
Quiz - how many of these things do you know?
Morgan Stanley does a survey with all of their ~20 year old interns at the end of the summer, and it’s a super interesting view into the world of Gen Z (under age 24). Here are my key takeaways:

  1. 📸 Instagram remains the most popular app, but usage is focused on Stories and DMs, not posting in the feed. Snap is popular for group chats, Twitter is good for sports, and TikTok is for younger siblings
  2. 📺 Netflix is #1, but HBO, Hulu, and Amazon are catching up. Password sharing and trading are universal. Top shows are Game of Thrones, Breaking Bad, Big Little Lies, the Office, and Billions
  3. 🎧 Spotify is twice as popular as Apple Music because of the UI/UX, playlists, and social features. Top artists are Drake, Future and Kanye; top podcasts are NYT The Daily, WSJ What’s News, and Joe Rogan
  4. 📱 iPhones have nearly 100% market share, and almost everyone mentioned iMessage lock-in (don’t want to be left out of group texts). No one cares about 5G
  5. ❤️ Three relevant dating apps are Tinder, Bumble, and Hinge. Bumble and Hinge are better for ‘serious relationships.’ The League was relevant last year, but now the 'fad is over’
  6. 🔫 Fortnite is losing traction. NBA 2K and FIFA are the dominant games on college campuses, followed by Call of Duty and GTA. Most anticipated games are Cyberpunk 2077 and Borderlands 3
  7. 💸 Venmo is still the “must download” app for college students, and Apple Pay is becoming more popular at point-of-sale. No one uses Venmo for merchant transactions except for linking Venmo to Uber
  8. ☝️ Other stuff: Uber and Lyft are interchangeable; everyone has Amazon Prime; Uber Eats vs. Grubhub vs. DoorDash depends on geography; Google flights is most popular travel site; Twitter and Reddit are most popular news sites; vast majority of interns say phone addiction is a problem; Juul is ubiquitous
  9. New apps: VSCO is huge, Hopper is good for cheap flights, and Picolo is a fun drinking game app

Speaking of summer interns… 150+ Microsoft interns put together an epic end of summer music video. It’s really good!

Other stuff I've been talking about
✈️ “Hit or miss?” - One of WhatsApp’s first marketing posts was Jan Koum asking FlyerTalk users to try a new app he built for people who travel a lot. Fun to read through because no one wrote back to him for four years!
🐙 $325M - Also super cool. The listing for Paul Allen’s yacht, Octopus
☀️ Caroline Calloway - “For some people on the internet, this article was akin to the Pentagon Papers or the Super Bowl.” If you enjoyed Fyre Fest, this is another “scam” happening live on Instagram. Here’s the story
👶 “AI-savvy” kids - According to the WSJ, if you want to raise an AI-savvy child, you should tell them to use the pronoun “it” when referring to a robot and explain that humans are the source of robots’ intelligence

Please hit reply! (Or subscribe or forward!)
About me: I work as an investor at Madrona Venture Group, a Seattle-based venture capital firm that has been early partners with companies like Amazon, Smartsheet, Apptio, and Redfin.
If you have thoughts, questions, or comments, hit reply!
👋 Referred by a friend? Sign up here.
Did you enjoy this issue?
If you don't want these updates anymore, please unsubscribe here.
If you were forwarded this newsletter and you like it, you can subscribe here.
Powered by Revue
Seattle, WA