A week in summary: Hype = Value? Hyper hype VS Hyper growth

A bit of market frenzy this week and US election conspiracy with the timing of Pfizer and BioNTech announcement of a COVID-19 vaccine. A vaccine that could bank them $13 billion next year and speed of development. The FTSE 100 jumped by 5% whilst Zoom (-15%), Peloton (-7%) and Netflix (-5%) fell. Perhaps more people would still prefer to go back to their Friday night drinks and in-person gym experiences over online Beyonce X Peloton classes.

Hyper hype hype

On the other side of the market, Supreme was acquired this week for $2.1 billion by VF Corp. This brings them into the fold of a company who owns Timberland, The North Face and Vans. They are a firm with experience in extending the shelf of mass market brands but it is to be seen whether Supreme’s brand will extend well into the mass market. Whilst resale prices may be high for Supreme products on the secondary market, going to the masses can be profitable. Last year when Yeezy began to go to the mass market they saw a 500% increase in sales and also a $1.3 billion deal with GAP this year.

The market continued as a hypebeast continued this week with viral digital products studio MSCHF claiming to raise a seed round of $200 million for PushParty, an app with a FOCUS on doing one thing only. If you press the big red button on the app, you send a notification to everyone with the app installed. Perhaps being a hypebeast can be quite a lucrative career option. MSCHF previously raised $11.5 million and who can forget, Push Pizza, the equally minimalist startup that lets you do only one thing - push a button for pizza.

Hyper growth

Whilst Supreme and MSCHF command the attention of Gen-Z, UK startup Hopin has been facing super hypergrowth. The startup has raised $125 million in a Series B since raising $40 million in a Series A only a few months ago in the summer. Hopin is now at a $2.25 billion valuation whilst having $20million Annual Recurring Revenue (ARR). The startup is only 2 years old. Solo founder Johnny Boufarhat created the startup from a desire to improve the events networking business after falling seriously ill after a food poisoning experience. Johnny shares some of his insights on how he has managed to raise capital as a solo founder and how to manage viral growth.

Hopin’s valuation at 100x its current ARR display some of the investor optimism in having a ‘really good’ product market fit for Software as a Service (SaaS) businesses and an extreme outlier. As a benchmark, slower growing SaaS companies trade at 3-5x next year’s revenue (e.g. Zuora and Dropbox) whilst fast growing ones (and outliers) like Zoom and Datago trade at a valuation that is 40x the ARR.

Growth premium in SaaS. Source: SeriouslySaaS

Product to Market Hype - Veblen Goods

What we are seeing in the market with hype products is a phenomenon called a Veblen good. What this means is that unlike consumer interest for traditional goods which falls as price increases, increasing the price for a Veblen product creates an exclusive ‘luxury’ effect that increases demand. In the case of Supreme, there’s a perceived value in the hype for a good whether it be resale values or to own something exclusive. How this works for content or digital media which is less scarce and more infinitely scalable is less certain (although blockchain firms are trying for digital art). MSCHF is a media based company and it is working for them.

Normal Good vs Veblen Good

Perhaps this hype is part of a wider cultural shift of spending patterns. According to Future Cast, Gen Z’s have an enormous influence on spend. They spend $44 billion for themselves and influence $600 billion in spending by others. It is well documented that both Gen Z’s and Millenials have a greater weighting on value in paying for experiences. Perhaps being a part of a meme or consuming content as an experience is worth hyping and paying for.

Brain Gems

The Digital Nomads Did Not Prepare for This (by Erin Griffith)

Paradise lost. Digital nomads who have been chilling in exotic locales getting good pay and low costs of living are now feeling the effects of COVID-19 travel restrictions, stress in their relationships and stress that they thought they’d escaped.

Love Is Medicine For Fear (Arthur Brooks)

We are living in a time where the media, immediate knowledge consumption and the craziness of how an event can have a butterfly effect across the world is making us a bit more anxious than usual. In a time of anxiety, we can look to love as an antidote in dealing with such stresses.

Engineered Tissue Interfaces for in vitro and in vivo Bioengineering [Creating LEGO-like brick cells] (Pelling, Harden, Hickey, Latour)

Creating complex living interfaces through manufacturing of modular “blocks” of deceullarised plant-derived scaffolds using computer numerical controlled mills (CNC machines) that can be used as seeds for different cell types and assemble them similar to LEGO bricks for engineered tissue interfaces  (ETI).

It feels better to warm yourself with a blanket in a cold room than being in a warm room”.