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The DL - How Tech Will Change Post-COVID, Expedia's New Funding, SaaS Trends during the Crisis, and How to Close a $10B Deal

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April 27 · Issue #45 · 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 how tech will change post-COVID, Expedia’s new funding round, SaaS trends during the crisis, and how the digital transformation process works at a large organization.

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How Will Tech Change Post-COVID?
For context, the S&P 500 is up 3x over this time period
For context, the S&P 500 is up 3x over this time period
I’m pretty tired about reading how THE FUTURE OF WORK IS ZOOM, but it really is insane how they’ve grown 30x to 300M+ daily active users in just four months. (Interestingly, Zoom stock is “only” up 2.5x over that time, which tells you how crazy high expectations were for this company already.)

Coming out of the last crisis, tech companies have done incredibly well, and COVID is driving every organization (and consumer) to adopt new technologies faster than they would have otherwise. So who is best positioned to win over the next economic cycle?

Here are some thoughts from Mary Meeker, author of the annual Internet Trends report, on what will change the most post-COVID:
  • Scientists and engineers will get more seats at the table
  • Companies will get comfortable with new work environments
  • Digital transformation will accelerate in all industries
  • On-demand services will continue to drive economic growth
  • Governments will become better technology consumers
  • Healthcare delivery will improve, and healthcare data will finally become useful
  • Media will become more social and engaging

Expedia Raises $3.2B and Gets a New CEO
In Expedia’s announcement about their $3.2B in new funding and new CEO, Barry Diller said, “We are unable to make any predictions as to when travel will rebound but we emphatically believe that it will.”

Despite the uncertainty, Silver Lake clearly thinks now is the time to invest in travel. Over the last few weeks, they announced a $1B investment in Airbnb and a $1.2B investment in Expedia.

The cool thing about PE firms investing in public companies is you can join them for the ride and buy $EXPE shares on the open market. What do you all think? Time to buy?

SaaS Trends during the Crisis
Chart from ProfitWell
Chart from ProfitWell
Last week at the SaaStr conference, ProfitWell shared data on how 10K+ SaaS companies are being impacted by COVID-19. Some of the takeaways:
  • B2C subscriptions dropped significantly in Feb/Mar but are starting to trend back up now (those MasterClass ads must be working)
  • B2B subscription revenue has not declined, but it is no longer growing
  • From Jan through today, new MRR for B2B has been relatively stable, but lost MRR (churn and contraction) has increased each month
  • Last year, buyers wanted software that helped them grow revenue. Now, they want software that helps them manage costs

How to Close a $10B Deal
A couple weeks ago, the Department of Defense released a 317 page report on the $10B JEDI contract. While the report was meant to investigate misconduct, it’s also a great look at how the digital transformation and procurement processes work at a large organization.

Here’s a summary of what happened over the 10 year process:
  • Dec 2011 - DoD begins developing their cloud transition strategy
  • Jan 2017 - Secretary Mattis learns the CIA moved to the cloud
  • Aug 2017 - Secretary Mattis visits tech companies in WA and CA
  • Oct 2017 - DoD releases the Cloud Request for Information (RFI)
  • Jul 2018 - DoD releases the final JEDI Cloud RFP
  • Dec 2018 - DoD publishes their Cloud Strategy (only took seven years!)
  • Apr 2019 - Source Selection officials finish rating RFP responses
  • Sep 2019 - DoD hosts meeting with members of Congress to hear their concerns about the JEDI contract
  • Oct 2019 - Microsoft wins the JEDI contract (two years after the RFI)

So basically, the timeline for a digital transformation is several years to research the market and speak to people who have done it before, another year to write strategy docs and meet potential vendors, and one year to refine strategy, review proposals, and get stakeholders on board.

The report also has some fun details like what Secretary Mattis and Jeff Bezos talk about at dinner. Apparently, Mattis loved Bezos’s thoughts on “failing fast,” and how in uncertain environments one should embrace failure and not worry about intelligent or cheap failures. Good advice!

Other stuff Dan's talking about
🎨 Museums in quarantine - If you’re lucky enough to own a Nintendo Switch, check out this very cool art generator from the Getty that allows you import any of their collection into your Animal Crossing game
📺 Some Good News - Rec of the week! John Krasinski started a new YouTube show, and you have to watch. The Hamilton segment is INCREDIBLE, and Joe Buck commentating “home sports” is hilarious
🎧 50x return on AirPods - AirPods are getting so much free air-time on these at-home TV shows like SGN. Here’s a Forbes story on the guy that owns the company that makes the batteries. He bought it in distress for $40M thirteen years ago, and it’s worth $3B today
🤖 Good business models are harder to build than good robots - The CEO of iRobot posted a fascinating LinkedIn article on the 14 (!) failed businesses that iRobot tried before finally landing on the Roomba

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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! If you’re new, check out some of the DL’s top articles from the last few months:
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