💰How Microsoft does VC

The Hustle

Calling all Canadians: A TikToker trading her way from a bobby pin to a house recently swapped the rights to a year’s worth of unlimited Chipotle for a $40k trailer cabin. But for legal reasons, she can’t get it out of Canada — and she’s now looking to make a trade there.

Today’s rundown:

  • M12: Here’s one way Microsoft spends its $130B pile of cash.
  • Chart: RVs are flying off the shelves.
  • Five-Dollar Store? Dollar General’s new format is poppin’.

Let’s do it.

The big idea
Microsoft dangling cash

Meet M12: Microsoft’s venture capital arm

Other than “Do we need a beer pong table?,” one of the most common questions that a corporation asks is “What do we do with our cash”?

The team at Microsoft asks that question while looking at a money pile that now clocks in at an absurd ~$130B.

One way Microsoft deploys the cash…

… is via its venture arm M12

According to Crunchbase, M12 was launched in 2016 and — investing only Microsoft’s money — has done 107 deals.

Here are the rules it currently runs by:

  • Financial returns: While some corporate VC firms may acquire startups for strategic reasons, Microsoft is focused on achieving a high return.
  • Clean term sheets: Microsoft puts almost no restrictions on its investments (it used to include a “right of first” term that allowed it to buy out the startup first, but no longer does).
  • Main investor: Microsoft is leading more investment rounds (and it’s increased its check size to $20m vs. $10m in the first 3 years)

Startups benefit from the Microsoft machine

M12 invests in cutting-edge technology across industries from biotech to robotics to productivity to cybersecurity.

Per Crunchbase, a startup that receives a check gets “Microsoft muscle” behind it, including:

  • Buying the startup’s services
  • Integrating the technology into Microsoft’s existing ecosystem (Azure, Office)

Microsoft isn’t the only Big Tech VC

Google (GV), Salesforce (Salesforce Ventures), Qualcomm (Qualcomm Ventures), and Intel (Intel Capital) have all done more deals than M12 in the past 5 years.

With a $2.2T market cap, it’s also hard for a VC deal to move the needle.

To date, M12 has invested in 13 unicorns ($1B+ valuation). If it really wants to make a splash, we think Excel-themed bedding fabric is the next frontier:

Source: Redbubble

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SNIPPETS

Poop sensor: iRobot’s newest release, the Roomba j7+, will use machine learning to avoid running into pet poop. #ecommerce-retail

Next up, EVs: Sila, a materials company whose products help extend the range of lithium-ion batteries, helped pack more energy into Whoop’s newest release, the Whoop 4.0 wearable. #emerging-tech

Security unicorn: Snyk, a startup that offers security products for software companies, raised $300m at an $8.5B valuation. #privacy

Fake PR: The Litecoin cryptocurrency spiked 20% on news that Walmart would begin accepting it, but the news came from a fake press release. #fintech-cryptocurrency

Bad vibrations: Apple published a warning to customers that big vibrations can damage the iPhone camera by harming the gyroscopes and magnetic sensors. #big-tech

Charted
RV Sales chart

Zachary Crockett / The Hustle

RVs are flying off the shelves

RV sales in the US are expected to grow 34% this year, per the RV Industry Association.

The association projects that 600k RVs will be sold in 2022, up from 140k units 40 years ago.

The second-hand RV market is no less bountiful: Outdoorsy, which capitalizes on the 17m+ North American RVs that sit unused for 95% of the year, raised $120m in June.

We’re curious: Are we the only ones who remember the movie RV with Robin Williams, JoJo, and Josh Hutcherson?

Seems relevant right about now.

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Brick and Mortar
Popshelf

Dollar General wants to go upmarket with Popshelf. So far, it’s working.

While other retailers were shuttering during the pandemic, Dollar General bucked the trend by launching an entirely new store format.

Popshelf is targeted toward suburban women with household income between $50k and $125k and primarily offers items for $5 or less across a range of categories, including:

  • Seasonal and home decor
  • Health and beauty
  • Cleaning supplies
  • Party goods

The concept has been likened to Five Below for adults…

… and so far, results are promising. Dollar General opened 8 Popshelf stores between October 2020 and May 2021, with impressive metrics across the board:

  • Annualized sales ranged from $1.7m to $2m per store, compared with $1.4m for first-year sales at a standard Dollar General
  • Gross margin is ~40%, 8 points higher than a traditional Dollar General
  • Promoter scores have climbed into the 80%-90% range, a rarity in retail

This early success has led to aggressive growth plans

The top brass at Dollar General sees an opportunity to open 3k Popshelf stores nationwide, but one challenge may lie in the store format.

Executives have hinted that some Popshelf locations may be opened as a “shop-in-shop” within traditional Dollar General stores, which some analysts believe could tarnish the Popshelf brand.

To learn more about the economics of Dollar General and its competitors, check out our visual explainer.

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TRENDS

Over in the Trends Facebook group, 15k+ members of the Trends community connect every day and discuss new ideas, opportunities, and challenges.

They also let us know when they’re hiring, so here’s a few cool gigs you may be interested in:

  • JUICE is looking to hire for several high-level positions. If you’re a beast at pulverizing media ads and ecommerce strategy — this one’s for you. They need creative types, strategy types, and more. (👀 Looks for a way to squeeze in a pulp joke. Fails.)
  • Endurance Tap Inc. is seeking a curious Padawan eager to learn all things business as a Jr. Growth and Ops Manager.
  • Italic is seeking a talented product designer to work a little Extreme Home Makeover on its overall digital experience and storefront.

If you want your company’s jobs shared with 1.5m+ bada** people (like yourself), we prioritize Trends members. Join us!

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AROUND THE WEB

🇺🇸 On this day: In 1814, Francis Scott Key wrote the poem “The Star-Spangled Banner” based on a flag he saw flying over Fort McHenry in Maryland during the War of 1812. It would not become the US’s national anthem until 1931.

🤑 Wow: They say insanity is doing the same thing repeatedly, expecting a different result. Unless you’re this woman, who won $1.2m after playing the same numbers in the lottery for a year.

🐕 Haha: The International Cricket Council named a dog “player of the month” after he interrupted a women’s cricket match by snagging the ball.

🎖️ How to: It’s crunchtime, but you don’t want to burn out your team. Harvard Business Review studied US Army leaders for top tips.

🏈 That’s cool: The Carolina Panthers have a new mixed-reality panther that leaped throughout the stadium for the team’s home opener.

🦉 Wild story: These were the top picks for the Bird Photographer of the Year, a prize that ultimately went to Alejandro Prieto’s picture of a roadrunner at the US-Mexico border wall.

Meme of the day
RV meme

Is this even camping? (Source: Peanuts or Pretzels

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Damn, you’re on a roll. You’ve got the pint glass. You’ve got the hat. It’s time to complete your collection, don’t you think?

Get {50 – referral_count} more referrals and we’ll send you our favorite piece of Hustle swag: The Startup Sweatshirt. Slipping into this piece of fleece might just transport you to Silicon Valley (or maybe somewhere better, your pick).

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