The DL - The Largest Software IPO Ever, the Biggest IPO You Haven't Heard About, Opendoor Investment Memo, and Competitive Farming

Would have been hard to miss this one… but Snowflake’s IPO last week was the largest software IPO ever. The IPO priced at $120, and the stock closed on the first day of trading at $250+, for a market cap of ~$70B!

(as a special DL side note, Snowflake was one of the first investment memos I worked on at Madrona! Nice to know that I peaked early - only downhill from here… 😝)

Generally, investors and executives can’t say much about their companies leading up to and post-IPO, but I loved this comment from CEO Frank Slootman, shortly after he became a billionaire as the stock started trading:

By the way, in case you want to get caught up on what Snowflake actually does, here are some great articles:

OK - so everyone is super pumped about Snowflake and the future of data in the cloud. But have you heard about this bottled water IPO? Nongfu Spring IPO-ed a couple weeks ago at a $50B market cap. And…

Nongfu’s founder, Zhong Shanshan, owns 84% of the company, a stake worth $42B. 🤯 That’s how much ALL of the investors in Snowflake made, and twice as much as the founders, executives, and employees combined.

If you’ve ever been to China, you’ve probably had Nongfu Spring, which is like the Dasani or Evian of China. Here’s a good summary on why this was such a hot deal:

Now, Zhong Shanshan is now worth more than the founders of Alibaba and Tencent. Time to pivot from tech to bottled water startups!

Last week, I shared Bessemer’s investment memo for Shopify with notes on interesting parts of the memo. People seemed to like that, so here’s another VC investment memo!

This memo was written by Chamath Palihapitiya, who is taking Opendoor public via a SPAC. Opendoor will be valued at ~$5B in this transaction, so it’s not the same as a Series A memo, but still an interesting view into how VC investors think. Here are some notes on the memo and investor deck:

Format - The first thing that jumps out at you when reading this memo, is that’s it’s less than one page long. There are only 23 bullet points and 11 numbers on the page to tell the story of the company! I like how this makes the key points, and then all of the backup is in a slide deck.

Team - In the Shopify memo, Bessemer summed up three trips to Ottawa to get to know Tobi Lutke by saying, “We have been impressed by Tobi.” Chamath is even more succinct - there is no mention of the team at all! Interestingly, however, the slide deck starts with a team page highlighting the team’s experiences at a bunch of brand name companies.

Trends / Why Now - Instead of talking about team, Chamath uses almost half of the memo to describe the numerous market trends driving this opportunity, and why now is a great time to invest in these trends.

Market - The Shopify memo pointed to related companies that had become big successes in order to demonstrate a big market. This memo takes a different approach by pointing to the $1.6T home buying market and then sizes the addressable opportunity by assuming Opendoor can continue expanding by running their playbook in new markets

Metrics / Traction - The section on quantitative metrics is hilariously short, just a valuation, 2019 revenue, and 2023 expected revenue. The growth from $4.7B to $9.8B over four years doesn’t look great, and it’s surprising that he doesn’t mention margins or COVID-adjusted numbers here.

LMK what you think of the $4.8B valuation for Opendoor, and if this will be a good SPAC deal! BTW, if you enjoyed this memo, Institutional Investor wrote a fantastic profile on Chamath that’s definitely worth reading.

👩 “Buying Myself Back” - Wow. Incredible essay by Emily Ratajkowski in The Cut on what it means to own your image and identity (and how easy it can be for someone to steal it from you). It would not be fun to be a celebrity

👓 VR > AR? - The Verge interviewed Mark Zuckerberg on VR. One interesting take: “A lot of people think that AR is the thing that matters, and VR is this niche, smaller thing. My outlook on that has shifted.”

🚜 Competitive farming - If you love computer games and gardening during COVID, you should check out the newest esports league: “Farming Simulator League.” Here’s a clip from this year’s finals (not a joke, I think)

🚒 C hook fire - Fascinating Twitter investigation on how no one replaced a 100+ year old hook on a power line, leading to the start of one of the California wildfires

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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