Sometimes change takes time – online grocery edition

Consumer behavior changes slowly. According to Svensk Dagligvaruhandel (reported by Breakit, in Swedish) online sales of groceries dropped 20 % last year in Sweden. That obviously seems like a people “changing back” behavior as the covid pandemic ended.

But as interesting is that only 4.5 % of total grocery sales in Sweden were online, especially as other sectors (media including streaming and games in particular) have gone online and/or digital to very high degrees. The quote about the unevenly, even after 20+ years of widely available Internet, distributed future seems very relevant.

The pitch deck

As a venture investor, and previously as a CEO raising capital, the pitch deck is a central document to learn about a startup. Often it is the first introduction to a company, so saying it is important is to understate it.

The advice from venture capitalists on the content and structure of a good deck is quite similar and have been for a long time. See Inventure, Sequoia, Creandum and Local Globe.

Instead of reformulating all of this solid advice, I’d add some thoughts.

  • My personal preference is when the deck tells the reader on slide 1 or 2 what round/how much the company is raising. This helps me to evaluate the rest of the deck (which is different if you’re raising a pre-seed or Series A, don’t wait until the last slide to give the reader this information).
  • The team slide should go early, probably the first content slide, at pre-seed and seed. There’s no startup to invest in without the founders at those stages. And for a meeting it fits the normal flow of introducing yourself.
  • If you have traction, show it no later than slide 4 or 5. Especially in a deck you share to get a meeting. Traction says “this is working”, and that is an attention-grabber.
  • Keeping the deck short (12 slides) is a good way to keep it simple. Adding more slides often leads to more complexity, not more understanding. Once you have a meeting, have additional supporting slides in an appendix.
  • Even if you’re sharing via Docusend or Pitch, always provide a downloadable PDF option. It makes it easier for investors to share internally and move forward with a decision. It also makes it easier to invest in lines and not dots. Watermark the presentation if you’re concerned the investor will share the deck externally.

Activity is good, but not enough

Sifted lists the ten most active accelerators/early-stage investors in Europe in 2022. While activity is a good thing, there is a big difference between an active, high conviction early-stage investor and an accelerator/high volume-lower activity investor. Especially at seed stage.

A seed-stage startup is often best served by a combination of 1-2 more active investors and a handful of smaller angel investors. A large of cap table where no-one has real skin in the game is not the ideal situation.

US is now Klarna’s biggest market or Long-term vision required

According to a tweet by Klarna co-founder and CEO Sebastian Siemiatkowski, the US is now Klarna’s biggest individual market ahead of Germany.

Klarna is one of the largest BNPL players globally, and having the US be its biggest market is a healthy sign that expansion is working.

It’s also a reminder that building startups take a very long time. Klarna was founded in 2005, launched in the US in 2015 and in 2023 the US becomes its largest market.

An oral history of the video games business

My first job was writing about computer games in the late 1990s. Therefore the podcast Gamecraft by Mitch Lasky and Blake Robbins is enjoyable listening. It is a deep-dive into the games industry starting in the early 1990s with shareware and iD Software. I’m only a bit into the first episode, but am already looking forward to all eight episodes.

Games been culturally important for a long time, but how three different business models (free-to-play and “pay $60 upfront” and “pay $12 per month”) can all exist and be successful is worth learning from (especially if you’re in a different business). Also how the different models have allowed the industry to grow significantly and use the sheer size of the smartphone platforms to go beyond the PC and the console market (the PS5 has “only” sold 30 million units since its release in November 2020, while Apple sells more than 200 million iPhones per year).

10 % cut is managing expenses, 20-30 % is going for profitability

The number of announced personell reductions at larger US tech firms continue, just in the last day or so with Coinbase cutting 20 % (after cutting 18 % in June 2022), Flexport also cutting 20 % and Carta cutting 10 %.

It is new proof points of the reset many companies are doing, and probably a combination of cutting personell to get better financial results (duh!) and not getting bad press (“as everyone is cutting”).

For high growth tech businesses that have had the focus on revenue growth, there is quite significant difference between a 10 % cut and a 20-30 % cut.

A 10 % cut is in reality mostly a slightly more conservative way of managing overall expenses, and not enough to drive significant improvement to profitability. Profit improvements need to come from relatively significant revenue and gross profit growth.

A 20-30 % cut of all personell has more significant profit impact and combined with other savings measures can take a company closer to profitability alone. Even if some gross profit growth is often needed to.

Game on!

Adam Schaub and Marcus Jacobs have started Seider, a Stockhom-based games studio, and raised capital from A16Z Games. Video and mobile games is one of the sectors where Stockholm and the wider Nordic ecosystem have real depth from multiple large successes (King, Supercell, Unity and many others). “Standing of the shoulder of giants” is a strength of any ecosystem, and with the giants in the games space I expect many interesting gaming companies to be built in Stockholm going forward.

Games in an area where generative AI can be helpful, e.g. for things like outdoor world generation and creation of graphical assets. It might not be quite as good as AAA-work by specialists, but it can be quite close and probably take costs down 90 % over time for AA/AAA or improve the graphical quality of smaller productions. Which both are very interesting.

Storytel 742 MSEK in Q4 revenue

Storytel, the audiobook subscription company, has had a bumpy ride on the stock market the last 2 years, especially in 2022 after founder Jonas Tellander left his role as CEO in February 2022.

Founder leaving, somewhat of a reset in the growth/profitability trade-off and crashing tech valuations is an unpleasant combination. Still, the company managed to stay above two million subscribers in Q4 of 2022, of which a little more than half in the Nordic countries.

Two things worth noting:

  1. Despite losing subscribers during 2022, Storytel has grown revenue as the average revenue per user has increased
  2. Gross profit for non-Nordic countries was 47.3 % in Q3, compared to 41 % in the Nordic countries and the 25 % gross margin Spotify had in that period (across both Premium and ad-supported).

Going public, and then private

After a startup has grown larger (hopefully $100 million in revenue), a good way for founders and early investors to exit is via a listing on a stock exchange of the company. The overall leaders in this aspect is the Nasdaq and New York Stock Exchange, who really are the only western stock exchanges for very large companies ($10 billion+ in market capitalization) to list.

But for smaller companies there are many local/national stock exchanges to list at, and the Stockholm Stock Exchange and the affiliated First North are two good places for this.

One interesting aspect is when a company is not doing great and gets an acquisition offer to sell all shares and leave the stock exchange. One such example in Stockholm is Readly, a digital magazine service. The company listed in 2021 and have had a tough time growing (ca 30 % growth and significant losses planned for another 1-2 years). Local major publisher Bonnier offered to buy out Readly (as they would likely get economies of scope and a better licensing situation as they are a major magazine publisher), and now we’re seeing at last one major mutual fund (Robur) being against selling.

The main challenge with Readly for me is that founders have left and early investors seem to be willing to sell. That is not unlike TradeDoubler many years ago when they had an offer from AOL, and Swedish mutual funds declined to sell. It will be interesting to see if the result will be the same.