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The DL - An inside view into Pacific Northwest Tech

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Welcome to The DL, a weekly newsletter about tech, startups, and investing in the Pacific Northwest.
 
January 13 · Issue #30 · View online
The DL
Welcome to The DL, a weekly newsletter about tech, startups, and investing in the Pacific Northwest.

This week’s issue covers the disruption of disruption, how much money Twitch makes, Casper’s S-1 and the DTC economy, and my favorite new product from CES.

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The disruption of disruption
Last week Ben Thompson published an interesting article called “The End of the Beginning” where he lays out his vision for the future of the tech industry.

According to Thompson, the three main epochs in the tech industry were the era of the mainframe, the era of the personal computer, and the modern era of cloud and mobile. During each of these technology “paradigm shifts,” new companies rose to prominence by building new platforms.

The auto industry, on the other hand, looked very different. The first American auto maker was founded in 1895, but after an initial surge of new companies founded between 1900 and 1920, the number of car companies started each year dropped to zero, and the Big Three (GM, Ford, and Chrysler) dominated the industry for the next hundred years.

Thompson thinks that in the tech world today, there may not be another “significant paradigm shift,” and without a paradigm shift, today’s large tech companies have such insurmountable advantages that the future of tech might look more like the auto industry than the steady disruption we have seen in the tech industry.

But it isn’t necessarily a bad thing. Despite the early dominance of the Big Three car companies, the impact of the car was really felt in the second half of the century with the construction of highways, suburbs, and new businesses created for a world where everyone had access to automobiles. The ubiquity of cloud and mobile technologies will likely create many new business opportunities as well - they just won’t be as revolutionary.

Readers, what do you think about the disruption of disruption? Is the age of steady technology disruption over? (just click the link to answer)
  • No way - New startups will continue to get started every year to challenge the big tech companies
  • Maybe… - But I wouldn’t bet money either way
  • Yes - It’s impossible to compete with Amazon, Microsoft, Apple, Google, and Facebook today

How much money does Twitch make?
So we know that the highest paid YouTuber makes $25M+ per year (btw - he’s eight years old), and the biggest Twitch/Mixer streamer makes $1M per month, but how much does Twitch - the company - make?

Last week, The Information reported that Twitch brought in $230M of ad revenue in 2018 and $300M in 2019. Not bad - but the internal goal was $500-600M, so still a ways to go for Twitch to live up to expectations.

Interestingly, by the end of 2019, commerce (i.e., subscriptions) generated more revenue than ads, and for the full year 2020, Twitch is expecting to generate a total of $1B in advertising and commerce combined. Definitely a significant business but small compared to Amazon’s $10B+ marketplace advertising business.

Casper's S-1 and the DTC economy
^ Thanks Casper, for explaining how sleep works
^ Thanks Casper, for explaining how sleep works
Casper, the company fka as a mattress startup and now a “Sleep Economy” company, released their S-1 (document you file before an IPO) last week, and plenty of folks were dropping hot takes on Twitter. Here are a couple of good threads from @DKThomp, @danprimack, and @jstoffer.

The Casper S-1 chatter is interesting in the context of this Inc article about “the wild race to overthrow every consumer category.In case you want to get up to speed on the DTC economy, the article does a great job describing:
  • the history of the first DTC companies (including Warby Parker and Dollar Shave Club)
  • the best categories for DTC retail (products for millennials and products with “broken” supply chains)
  • how to find customers (from viral videos to Facebook and Google)
  • the two ways to make unit economics work (make a profit on the first sale or lock in subscriptions)
  • going back to physical retail (because it turns out stores work)
  • what’s next for all of these startups (become R&D investments for their legacy competitors)

Other stuff Dan's talking about
Looks like the future!
Looks like the future!
🛴 S-Pod - “The original Segway, which debuted in 2001, was supposed to replace walking. Obviously it didn’t.” Maybe the original Segway didn’t work out, but this thing looks amazing! Can’t wait to ride it around the office
🥾 Best hikes in every state - Outside Magazine says Yellow Aster Butte, Trail of Ten Falls Loop, and Hells Canyon are the best hikes in Washington, Oregon, and Idaho
💍 Best proposal of 2020 - Must-watch video of the week. Last month, some guy asked Reddit for help with his proposal and surprisingly it worked!
👪 Co-parenting startups - A couple of startups match people up who want to be co-parents but don’t want any romantic expectations. According to the WSJ, “It’s a lot like a divorce, without the wedding or the arguments.” Thoughts?

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!

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