When one size fits all doesn’t work

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Hello and welcome (back) to Pipeline. I hope you all had a good Thanksgiving! This week: Remembering Tony Hsieh, the creator of @VCBrags and why you're seeing a wave of specialized startups solving big problems.
"The world lost you way too soon," Jeff Bezos said. It was shocking and tragic to hear of the death of Tony Hsieh last weekend. He was a universally loved figure in the tech community who was renowned for his kindness and vision, but also one who had struggled in his final months. He had a pretty incredible path through the tech industry, and one of my favorite things to learn, thanks to a tweet thread from Sheel Mohnot, was about the restaurant he owned, run by his mom, that served dishes like SoftBank Satay, Business 2.0 Bok Choy and CNET Salmon. My sympathies to his family and friends and the many members of the startup and venture community who are grieving his loss. You can find a collection of memories being compiled by his friends and family here.
Ask many startup founders what their total addressable market is, and they'll come back with some comically big statements: Anyone with an email account! Anyone who moves! Anyone with blood! (OK, that one is from a TikTok meme and hopefully not actually used by an entrepreneur.) Still, the idea stands that, for a lot of startups, the opportunity is capturing as big a market as possible.
But more and more startups are going for targeted solutions for specific communities rather than trying to build the next one-size-fits-all company.
The opportunity couldn't be more clear in health care, a system where primary care has traditionally followed the "general store owner on the prairie" model of trying to be everything to anyone, Folx founder A.G. Breitenstein told me this week. The explosion of femtech companies is just one example of where we're already seeing startups try to target communities with unmet and underserved needs. Breitenstein's startup, Folx Health, launched on Thursday for the queer and trans community.
There's two things at work here:
The main reason Folx stood out to me is that once someone can see and understand the problem Folx is solving, you don't wonder whether people will need this kind of service. The real question is why hasn't it existed sooner. And Breitenstein thinks it's an opportunity that can be repeated over and over again, from specializing on Black women's health to senior care.
Plus, limiting a startup's focus doesn't mean closing the doors to a large market. While Folx launched with a DTC platform for things like PrEP, STI testing and hormone replacement therapy, there are more services Folx can layer in, from mental care to even pediatrics. And Breitenstein's experience in the insurance industry has her thinking about ways she could also build an insurance product tailored to the LGBTQ community. It may not be a TAM of anyone who needs health care, but narrowly focused communities can be novel businesses.
At Micron, we see an opportunity to establish memory and storage platform capabilities that will unleash software developers to deliver solutions that speed insight and ultimately support emerging customer requirements. The data-centric era has ushered in a new opportunity to tap data for business growth, but many companies continue to struggle to transform mounting data stores into competitive advantage.
A self-described "honey badger," Garry Tan is the founder and managing partner of Initialized Capital, a seed firm that raised $230 million for its fifth fund in August. Some of his latest investments include agriculture supply chain company Silo and videoconferencing startup Around.
What product or service are you totally, even irrationally, loyal to?
I'm definitely addicted to YouTube! Which is funny, I normally am an early adopter, but in this case I feel like I was a very late adopter. I underestimated how powerful video is as a medium, and luckily my AV nerd/photography skills translated well to start my YouTube channel in 2019. 50,000 subscribers and 1 million views later, I am still blown away at how powerful that channel is, even in 2020. I think COVID made YouTube grow 15% instantly, which is crazy because they're already at tremendous scale.
SPACs: Overrated or underrated?
Underrated. SPACs are a release valve. We've seen a steady increase in valuations over the last decade in private markets, but it's not a democracy, and it's a closed system. Too often, the private capital markets are made inefficient by cabal-like behavior where one or two startups are blessed with insane amounts of capital. One good example of this is Blue Apron: Look at how it raised money faster than everyone, but then soured the space, even as European-based HelloFresh or Initialized-funded company Gobble shows you can absolutely create a meal kit that is high retention and a great business that generates earnings.
More often than not, the cabal chooses the wrong company. I predict that SPAC-ed companies will be able to bypass the cabal, which can lead to inefficiency, and, in some cases, outperform its peers. The world is so full of capital, and it is seeking yield. Microsoft IPO-ed at $700 million market cap, and now it is worth $1.6 trillion — all of that was accessible to normal investors with no special access. More access to better startups and a more level playing field through the public markets is absolutely a great thing for the investing public.
What problem do you want to see a startup solve?
The process of becoming a YouTube creator was long, there are very few resources, and then you are basically flying blind. I think there is a large opportunity in making that path a lot simpler. Online teaching and entertainment remain the biggest opportunities for people on the internet, and I've been interested in seeing the whole stack develop. Whether it is creating the next version of Final Cut Pro X but focused on spoken word (like what Andrew Mason is doing with Descript) or creating new communities for fostering creation, like 368 — there are going to be new models for this, and I'm interested in seeing startups bring content creation to the next level.
What's a pitching pet peeve?
Sometimes founders come in and are a mile-a-minute brag-fest. Nonstop name-dropping. I think that works for some founders and some investors, but my sense is it tends to only work with the lowest tier of investor. The best investors I know and have worked with are pretty much focused on bottom-up-first principles. It matters a lot less whether you went to Stanford or worked at Google. It matters a lot more that you created something people want, and that you learned something that other people didn't know from direct experience. The worst pitches are basically just checking the box on saying buzzwords and credentials. The best pitches are stories that teach me about a part of the world I might not know about yet, but present a clear and large opportunity.
What's one of the worst predictions you've ever made?
I was working with the meal replacement company Soylent at Y Combinator. They originally were working on networking hardware, and then the founder started working on Soylent in his spare time, and it hit a nerve in the community. I told them they shouldn't name it Soylent — but in the end I now realize I was wrong. People talked about Soylent, and that was worth perhaps tens of millions of dollars of earned media all acquired organically for free. It didn't matter if most people hated the name: The one out of 10 people who heard about it [and] wanted it loved it and bought it. It was a big lesson for me around marketing and the nature of creating brands in 2020. The opposite of love is not hate, it is indifference. The true lesson is that the ultimate nature of brands, regardless of how you feel about Soylent, is that you need to make consumers feel something. Every business is a meme now. For founders, what will your meme be?
At Micron, we see an opportunity to establish memory and storage platform capabilities that will unleash software developers to deliver solutions that speed insight and ultimately support emerging customer requirements. The data-centric era has ushered in a new opportunity to tap data for business growth, but many companies continue to struggle to transform mounting data stores into competitive advantage.
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