👟Inside Allbirds’ IPO

The Hustle

Like much of the US, we’ll be taking Sunday and Monday off to rest and recharge. To those celebrating, enjoy the holiday!

Today’s rundown:

  • Comfy shoes go public: Allbirds’ “sustainable IPO,” explained.
  • The “cold start problem”: We spoke with Andrew Chen, a general partner at VC firm Andreessen Horowitz, about his new book.
  • You answered: Readers share their best purchases under $100.

Let’s do it.

The big idea
walking in Allbirds

Allbirds, Silicon Valley’s favorite shoe company, has filed for an IPO

Allbirds — maker of the official sneaker of Silicon Valley — has filed for an IPO, describing the event as the “first sustainable public equity offering.”

The company preemptively tapered expectations, claiming that, as a public benefit corporation, not all decisions it makes will maximize shareholder value.

Yet its sustainability focus hasn’t hindered growth

According to the numbers, Allbirds is firing on all cylinders:

  • Revenue: From $194m in 2019 to $219m in 2020
  • Stores: From 1 location in 2017 to 30 as of last month
  • Product: From strictly footwear to apparel, including casual, performance, and outdoor styles

Unfortunately, losses are growing as well

The company has posted a net loss each of the last 3 years and in the 1st half of 2021, and doesn’t expect the trend to end soon.

This is a common thread among D2C leaders:

  • Warby Parker (which filed for an IPO last week) reported a net loss of ~$56m in 2020
  • Casper (already public) posted a net loss of $89m for 2020

Both Warby Parker and Casper have expanded their physical footprint, a track Allbirds will likely follow.

It’s also unclear if Allbirds is truly sustainable…

… or just more sustainable than its competitors.

  • Allbirds says its supply chain has been carbon neutral since 2019 and its sneakers have 30% less carbon footprint than the average pair.
  • The company is also currently facing a class-action lawsuit for making misleading sustainability claims.

One way to silence the critics would be to go perfectly sustainable. According to 2PM’s Web Smith, that would mean having a circular supply chain and not making new products.

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SNIPPETS

Off the wall: Vans and Roblox are teaming up on a virtual Vans World full of online shops and skate parks. #ecommerce-retail

Solar power purchase agreements let you have a solar energy system without buying one. CNET explains how they work. #clean-energy

Robot stare: Researchers found that making eye contact with robots can affect human brains by slowing down decision-making. #emerging-tech

Ireland’s Data Protection Commission slapped Facebook’s WhatsApp with a $267m fine, saying it breached EU privacy rules by not being transparent enough about what it does with customer data. #privacy

Ask Jeeves: Jeeves, a “cross country, cross currency” expense management platform, just scored $57m and is now valued at $500m. #fintech-cryptocurrency

As the streaming wars intensify, Bank of America analysts say Netflix’s heavy hitters — including “Stranger Things,” “Ozark,” “Bridgerton,” and “The Witcher” — are key to compete. #big-tech

Spilt milk: After too many people got hurt falling off of stacked milk crates, TikTok has banned #milkcratechallenge videos. #big-tech

The Hustle‘s Brad Wolverton breaks down the quirkier things our readers click most, including dogs, parodies, and weird Airbnbs. #hustle-picks

Q&A
Andrew Chen and his book

How to start and scale network effects

What do Zoom, Slack, Tinder, Reddit, Uber, Airbnb, and Twitch have in common?

They all faced a seemingly impossible challenge at launch: create network effects by acquiring a critical mass of users and have the users interact with each other.

Andrew Chen, a general partner at VC firm Andreessen Horowitz, calls this the “cold start problem” and just wrote a book by the same name.

He interviewed 100s of tech leaders (including CEOs of the aforementioned companies) to uncover detailed frameworks and practical tips.

The Hustle spoke with him to find out more about The Cold Start Problem.

What’s a common theme for scaling network effects?

Start small.

All of these companies started with very simple products targeted at very niche markets, with the idea of gaining saturation and density before going to the next market.

For example, Slack started by testing its chat product inside a half dozen other startups. But once these initial networks are built, and people are engaging each other in your app, then what you see is that every one of these startups pivots into “win the entire market” mode.

What was the biggest surprise from your research?

One big surprise: “Network effects” is an old idea that appears over and over again in the best products over history.

It turns out, for example, that AT&T referenced the idea that its phones were only valuable when more people used them, back 100+ years ago.

What are your favorite business books?

  • Crossing the Chasm (Geoffrey Moore): a book about how products — mostly B2B — can go from early adopters to the mainstream market.
  • The Lean Startup (Eric Ries): The book taught an entire generation of entrepreneurs to iterate and learn quickly.

(You can read the full Q&A here.)

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You Answered
best purchases

What’s the best purchase you’ve ever made for $100 or less? Here’s what our readers said.

Earlier this week, we asked you about your best $100-or-less purchase ever. And by golly, you delivered.

Across 100s of responses, the average price per item was $46.

Some themes emerged, including:

10 water bottles, 9 air fryers, 8 instant pots, 7 massagers, 5 Yeti tumblers, 4 egg cookers, 4 blenders, 3 dogs, 3 bidets, 3 TSA PreChecks, and 2 fly swatters.

Here are a few answers that caught our eye:

  • A $100 Spanish radio station: “It hadn’t done anything except just played the same music over and over for years… I added a morning show and new modern music and now it’s generating a profit of $6k+ per month.” — Scott (London)
  • A $25 olive tree: “I purchased it ~20 years ago and it’s now a part of our landscape and our lives and will hopefully be around forever.” — Sally (San Diego)
  • $100 AMC stock: “ 🚀 ” — J (Durango, Mexico)
  • A $17.99 garlic press: “I heard my girlfriend complain about how long it took to prepare garlic. I got her the press for her birthday. She’s my wife now.” — Matt (Moscow, Indiana)
  • An $80 workout trampoline: “Fun low impact way to lose weight, relieve stress, and throw adult tantrums.” — LaShonda (Charleston)
  • A $40 bidet toilet attachment: “Can you really put a price on a clean tush?” — Brian (Seattle)
  • A $5 website domain: “I spent $5 registering the domain Nuclear.vc. A few months ago, a guy named Naga Kataru (he created Google Alerts) reached out and paid me $3.5k for it.” — Braden (Los Angeles)

Thanks to all who answered, and keep an eye out for more community polls.

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AROUND THE WEB

🍦 Hmm: The FTC is investigating why McDonald’s ice cream machines are always broken. And this site lets you know the status of your nearest machine.

🎷 Useful: Create the slickest, safest password out of jazz chords. And yes, the site lets you play them.

🤝 On this day: In 1783, the American Revolution ends as the US, Great Britain, Spain, and France sign the Treaty of Paris.

🦨 Wild Story: Scientists have confirmed 7 species of spotted skunks exist in the world. They’re cute — even when performing handstands to signal they’re about to spray.

How to: Are you taking on too much? The Guardian explains how to say no, set boundaries, and reclaim time for yourself.

Meme of the day
Allbirds meme

When you want all the colors! (Source: Reddit)

In Case You Missed It

(A roundup of our best reads from the last week…)

🕵️‍♂️ The family business that owns a share of the $7B James Bond franchise.

🏈 Our conversation with Super Bowl champ and investor Ndamukong Suh.

💀 A roundup of the best NFT tweets, as told by Dr. Parik Patel.

🚌 Electrifying chart: The number of EV school buses in the US, visualized.

💊 The man who accidentally found a way to potentially heal 400m people of disease.

Shower Thoughts
  1. “The ‘Falling Rocks’ road sign is less of a warning and more of a reminder to be lucky or die.”
  2. “A lot of people have probably tickled a dead person thinking they were faking.”
  3. “If you eat a peanut you become the shell.”
  4. “The most terrifying sound a homeowner can hear is dripping water where there shouldn’t be any.”
  5. “Schools advertise their small class sizes when they’re trying to increase their class sizes.”
  6. “We’re going to have the biggest percentage of long haired men since the late 1960s/early 1970s.”
via Reddit
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