August 1, 2020
Photo: Courtesy of Faire
Hello and welcome to Pipeline. Congrats on making it to August, and bonus points if you did so without launching a SPAC. This week: Facebook's "destroy mode," Apple's startup shakedown, and how Square alumni are emerging as a new network of founders.
Some quick housekeeping: Pipeline will be off next week as I copy the veritable VC tradition of taking the first week of August off. See you again on the 15th.
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Startup "mafias" are the stuff of legend in Silicon Valley. It started with Fairchild Semiconductor and the Traitorous Eight and continued with other networks like Netscape and Oracle. The best-known example, thanks to a Fortune photo shoot, is the PayPal Mafia, a group of early employees who went on to create companies like YouTube, LinkedIn and Yelp.
While investors have been excited about potential Uber and Airbnb alumni networks, complete with their own funding groups, there's a new emerging startup mafia: the alumni of Square.
Then there are the smaller Square mafia startups that are beginning to gain traction, and many have some association with fintech. "It's not just pure play fintech, but applying some sort of interesting innovation to a different industry," Rhodes said.
The Square startup growth spurt has meant growing investor attention, too.
Whether the emerging Square network turns into a "mafia" as iconic as PayPal's remains to be seen. After all, this could end up being another one of those articles that calls an early mafia network before it really develops into anything — or, these companies could turn into another Silicon Valley legend.
What's an idea you wish you had first?
One of my favorite ideas is prize-linked savings. It's a great example of social and psychological engineering to encourage positive financial choices. The simple concept is that every person who saves money in a given month is entered into a "lottery," where the winner receives the aggregate interest generated in that given month. Because these are small dollar amounts, the interest any individual account generates isn't meaningful, but in aggregate it can be. This idea has its roots in post-World War II England, where citizens were encouraged to save by purchasing premium bonds, and has been employed with great success many times since. I love this idea because it exploits our cognitive biases for our benefit!
What's one startup or product that failed that you wish were still here today?
One product that I miss a great deal is the cassette tape! The tape had many magical qualities, among them: For the first time, listeners could (easily) participate in the creation and distribution process by making their own mixtapes. This ushered in a whole generation of creativity (and awkward romantic gestures, but that is a different story).
More importantly, the medium doesn't lend itself to skipping ahead or behind in the way that playlists, CDs or vinyl readily do. So when you bought an album on cassette tape, you had to listen to the work linearly and largely in its entirety, which allowed artists to express themselves in ways that are much more interesting than they can on a radio single.
What's a secret obsession of yours that most people don't know about?
As you might have guessed, I'm a huge music person, and I've been spinning records as a DJ for about 25 years. I have an obsession with vinyl from the '90s, so you'll often find me either digging for records at the local record store or, more recently, online.
What's one of the worst predictions you've ever made?
I predicted that Android would be a huge flop after seeing the G1. It was a much, much worse product than the (original) iPhone! Despite being late to the game, Google caught up through speed of iteration and picking the exact right place to enter the value chain, which I think is a testament to the fact that being right often matters more than being first.
What's one problem you wish an entrepreneur would solve?
Music has the best product and the worst business model — artists end up capturing so little of the value they create both directly in the work they create and indirectly in the cultural influence they wield. So building a product or platform that allows artists to own and monetize their music and cultural influence is a product I'd love to see in the world.
The other product I'd love to see is a better rewards card for non-prime consumers. Consumers with prime credit scores (most of whom have rewards cards) effectively get a 2% "rebate" on all their purchases in the form of rewards, while those with non-prime credit do not. That means that everything is effectively 2% more expensive for folks with poor credit, which feels like a fundamental inequity that needs to be solved through product and technology.
Thanks for reading Protocol Pipeline. A special thank you to Tim Grieve for editing this week's edition. If you like what you're reading, sign up here to get it in your inbox. Send story tips and newsletter feedback to firstname.lastname@example.org.