👂 Facebook’s big audio play


April 21, 2021

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The Hustle

Apple announced a bunch of new products yesterday.

We are announcing that we’ll complain about the pricing for a few weeks, then buy 10 of each.

The big idea
whispering in ear

Facebook wants to be all up in your ear

The audio space has seen a flurry of activity in recent months:

  • Clubhouse just raised at a $4B valuation (mere months after notching unicorn status)
  • Spotify acquired live audio startup Locker Room
  • Apple rolled out a subscription tool for podcast creators at its event yesterday

Meanwhile, every tech co. with a pulse has a Clubhouse clone: Reddit, LinkedIn, Twitter, and — history’s greatest copycat — Facebook.

Zuck isn’t just dipping his toe in the water, though

Unsatisfied with owning a large majority of our screen time — Facebook, Messenger, WhatsApp, and Instagram each have 1B+ users — the social giant is going after our ears with 3 new products, per The Verge:

  • Live Audio Rooms: FB’s Clubhouse knockoff. It will be available this summer, and the feature will also be integrated into Messenger.
  • Soundbites: A feature that allows users to create, share, and remix short audio clips (think TikTok for audio). This content will end up in Facebook’s news feed.
  • Podcasts: A new partnership with Spotify will allow people to stream podcasts directly from their news feeds (where they can also receive recommendations).

Will Facebook’s all-in audio push work?

Back in 2016, Facebook famously did a “pivot to video,” where Zuck talked a big game of making the platform all video all the time.

Many media firms reallocated resources to video, only to find that Facebook was juking its engagement stats. The pivot was short-lived, but many were burned in the process.

A key part of the audio push is a tipping system called Stars…

… which allows fans to pay creators for their content. Tech reporter Casey Newton interviewed Zuck Daddy for the launch and notes that this “audio play is much more about helping the little guy.”

With that said, none of the products are yet available.

Facebook is telling audio creators what they want to hear, but the verdict is still out.

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SNIPPETS
  • Apple roundup: New goodies from the iPhone maker include: iPad and iMac updates (both with its own M1 chip); AirTag device trackers (like Tile); new Apple TV remote; and, most importantly, season 2 of Ted Lasso on July 23.
  • Netflix shares slumped 10% after it reported a down quarter. The streaming service added 4m subs vs. a projection of 6m. The issue: Many subscribers were pulled forward into the prior quarters by the pandemic.
  • Space wars: Amazon signed on with ULA (a Boeing / Lockheed Martin rocket venture) to send 3k+ satellites into orbit. Amazon will spend $10B+ in an effort to provide high-speed broadband everywhere (like a certain competitor that rhymes with AceX).
Beach Bod
exercise equipment

Home fitness startups are getting buff

For home fitness, the timing of a pandemic couldn’t have been more perfect.

Pioneered by Peloton, on-demand home exercise was already popular pre world-falling-apart — the space raised $1.8B in 2019.

But come 2020, home exercise startups have grown from a somewhat scrawny bunch into a squad whose muscles have muscles — the space raised $3B last year.

2021 is looking to get even bigger

Tonal, a weights-on-a-wall startup whose revenue grew 8x in 2020, recently closed a $250m funding round. The company is also partnering with the Mayo Clinic for physical therapy trials, as well as with hotels and resorts.

Tempo, which is like Peloton for free weights, raised $220m led by SoftBank. Sales have jumped 1,000% since pre-orders began in 2020, and users have collectively done 5m workouts on the platform.

Today, it seems, there’s a Peloton for everything

Tonal and Tempo occupy the home weights arena, but startups are operating in a variety of other sports, too:

  • Rowing: Hydrow has raised $65.8m for its Peloton-like rower
  • Boxing: FightCamp is backed by Y Combinator, and Quell has raised $3m
  • Aerobics: Lululemon acquired Mirror last year for $500m
  • Climbing: Vertical climber startup Clmbr has raised $3.4m
  • Cycling: The multiplayer gaming cycling platform Zwift has raised $619.5m

Bottom line: For homebody athletes, it’s quite a time to be alive. Unless you’re Joe Biden, that is, who couldn’t bring his Peloton to the White House for security reasons (Peloton offered a customized bike but no word if it came).

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New Funding Alert

Clearco co-founders: Andrew D’Souza (L) and Michele Romanow (R)

Clearco created a new way to fund ecommerce businesses. Now, it’s expanding.

Here is a stylized framework for how a new business can raise funds:

  • Debt: You borrow money from a lender but have to give a personal guarantee and lien on your assets. In the event your business fails and you can’t repay the loan, you declare bankruptcy.
  • Equity: You sell a % of your business to an investor. If the business fails, you don’t “owe” the investor any more money. But if the business succeeds, that equity can end up being very expensive.

There are clear trade-offs between these funding options

In 2015, Clearco — an Ontario-based startup previously named Clearbanc — created another funding model for the internet age. With an abundance of data and AI-powered analytics, the startup unveiled the revenue-share agreement (RSA).

Initially, the startup targeted ecommerce businesses with the model.

Think of a direct-to-consumer (D2C) mattress startup. You acquire customers for $X using Facebook and Google ads and have an expected lifetime value of $Y.

Clearco will invest funds — from $10k to $10m — for you to spend on ads. In return, Clearco plugs into your payment system and takes a percentage of sales until it recoups the investment + 6% (however long that takes).

Unlike lengthy bank or VC negotiations…

… the Clearco application process takes 20 minutes, and it doesn’t ask for a credit check, personal guarantee, board seat, or fixed payment timeline.

There’s also no risk of ruin (like with debt) and the funding is non-dilutive (like with equity).

To date, Clearco has used the RSA model to deploy $2B+ across 4.5k+ businesses. The startup says its data-driven approach supports diversity: 13% of its funds have gone to Black or Latino founders (vs. 2.6% of the broader VC industry).

Yesterday, Clearbanc officially rebranded to Clearco

And it raised $100m (at a $2B valuation) as it pursues a number of new opportunities:

  • ClearInventory Capital: Funding inventory.
  • ClearRunway: Funding up to 24 months of SaaS runway costs.
  • ClearAngel: A program for early stage founders that have as little as $2k of monthly revenue.

The Hustle recently spoke with Clearco’s co-founders Andrew D’Souza and Michele Romanow to find out more (full Q&A here).

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Podcast

Making $12m/yr with no employees?

We love, love, love high-margin, low-overhead businesses on “My First Million.” We break down a few businesses doing big numbers, with few to no employees. We also look at opportunities ripe for this — and how we would pull it off.

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