🤝 The Amazon squeeze


July 2, 2021

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The Hustle

Housekeeping: We’re giving our writers a well-deserved break this Sunday and Monday. Enjoy that sweet Independence Day BBQ and we’ll see you all on Tuesday!

The big idea
Amazon boxes

If you want to be an Amazon vendor, you may have to give up some equity

Scoring an Amazon contract can make or break a company.

Last year, the food distributor SpartanNash negotiated an agreement with the ecommerce giant that could be worth as much as $8B over 7 years.

According to a report by The Wall Street Journal, there was one big catch: if that target was met, Amazon could buy up to 15% of the company.

This type of arrangement…

… is becoming commonplace for Amazon and is the latest sign of its enormous market power.

In the last decade, the company has struck similar deals — where it receives rights to buy stock (called warrants) — with 75+ private companies and at least 12 public ones, per WSJ.

The warrants often allow Amazon to acquire parts of these vendor partners for below-market rates.

Amazon’s vendor stakes could be worth $8.4B

This is up 10x over the past 3 years, per WSJ. The investments run the gamut of industries:

  • Clean Energy Fuels Corp. is a natural gas supplier (Amazon can own as much as 20% of over the next decade).
  • Air Transport Services Group is an aircraft-leasing company (Amazon already owns 19.5% of it).
  • Startek Inc. is a call-center provider (Amazon can buy 20% of the company if the partners do $600m of business in 8 years).

No explicit ultimatum is made

But former Amazon execs tell the WSJ that vendors usually comply with warrant requests, not wanting to lose out on business.

The deals definitely can work for both sides: On the day that SpartanNash announced a deal with Amazon — including up to 15% of its company in warrants — its stock price jumped 26%.

Either way, Amazon is already facing antitrust pressure and these vendor deals could bring more scrutiny. No wonder Jeff Bezos is stepping down as CEO on July 5 and flying to space on July 20.

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SNIPPETS

A judge has blocked a Florida social media law that would put limits on how web services can kick off users. At issue: whether the proposed law violates the First Amendment. #privacy

CVs are out. Well, kind of… The rise of remote work is pushing employers to use skill tests to vet job candidates. Enter startup TestGorilla, which raised $10m for its skill test platform. #emerging-tech

Tesla is facing a China recall challenge… but may still have some positive news: an expected record 2nd quarter with 200k+ car deliveries. #clean-energy

Gap is shaking up its strategy: 1) it’s leaving the UK; 2) focusing on Italy and France; and 3) betting on its Athleta and Old Navy brands to drive future sales. #ecommerce-retail

Pharmacy chain Walgreens has administered 25m+ vaccine shots. All the extra foot traffic helped to pad profits (~$1.2B) in the latest quarter. #ecommerce-retail

Pinterest wants to promote body positivity… so it is banning all weight loss advertisements from its platform. #big-tech

SoftBank is getting into crypto: The investment firm will plough $200m into Brazil’s largest crypto exchange, Mercado Bitcoin. #fintech-cryptocurrency

Kikoff raises $30m to help users raise their credit scores and improve financial literacy. #fintech-cryptocurrency

Fintech
piggy banks

Digital banks are winning new customers by going niche

Traditional banking isn’t readily available to all customers.

So, a number of neobanks (AKA digital banks) are building products catered to very specific markets.

Among them: Daylight, a banking platform for LGBTQ+ people and allies that just raised $5m.

‘It is expensive to be a queer person’…

… Daylight co-founder and CEO Rob Curtis tells TechCrunch. Some lose family support when they come out, while others have additional health costs, like gender-affirming surgery or surrogacy.

Daylight will use the funding to expand its services, including a marketplace where members score discounts at businesses that support Daylight’s mission.

There are a number of US neobank startups:

  • Cheese serves the Asian American community. It raised $3.6m in March.
  • First Boulevard, which raised $5m earlier this year, is a platform built for Black Americans.
  • Greenwood is a bank for Black and Latino customers. It raised $40m in March.
  • CapWay, which has raised $145k via 6 seed rounds, is for unbanked or underbanked Americans.
  • Purple is for people with disabilities. It’s raised $60k so far and plans to close a pre-seed round by year-end.

Neobanks are going global

Market intelligence company CB Insights found that 6 European digital “challenger banks” have gained 30m+ customers and $4.2B in funding since 2014.

Meanwhile, Brazil has at least 19 neobanks, including Nubank, which raised $400m in Series G earlier this year. Others include Zippi for gig workers and ElasBank for women entrepreneurs.

But don’t let the word “niche” fool you. The old guard is taking notice: Earlier this week, US banking giant JPMorgan Chase acquired a 40% stake in Brazilian neobank C6.

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Macro Econ
alcohol bottles

Inflation is driving up booze costs, which may trickle down to consumers

Maybe don’t open a tab at the bar.

The cost of making, packaging, and distributing beer, wine, and liquor is going up, per The Wall Street Journal.

The buzzkill is the inflated cost of, well, everything.

According to data firm NielsenIQ, the 52 consumer food categories it tracks are all up due to factors like increased demand, labor shortages, and supply chain disruptions (e.g., inclement weather, hackers, and the pandemic).

When it comes to the alcohol industry, the rising inputs include cardboard, glass, barley, and energy:

  • One Atlanta brewer told WSJ that the cost of transporting a truckload of beer 600 miles has doubled to ~$2k for small and midsize brewers.
  • The cost of aluminum, which is used to make beer and seltzer cans, is up 70% since May 2020.

For now, the booze industry is eating those costs

… but that may soon change. Constellation Brands — its portfolio including Corona and Svedka — is already predicting a 1%-2% increase for consumers.

The good news is that economists say wonky prices will likely stabilize.

Members of the White House’s Council of Economic Advisers issued a release in April predicting inflation to rise modestly over the next several months and then “fade back to a lower pace.”

Cheers to that.

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Podcast

Want an inside look into how Sam and Shaan are investing their money?

Just this year alone, Sam has done nearly 30 angel investments.

In episode #196 Sam and Shaan break down all the deals they’re a part of.

They give an inside look to how much they invested, how they found each deal, and why they invested.

And that’s just a fraction of it, they reveal a whole ton more.

🎧 Listen here →
Meme of the day
4th of July meme

Well, that’s one way to get ready for the 4th of July BBQ (Source: Bored Panda)

Shower Thoughts

  1. “Co-workers in movies are co-workers in real life.”
  2. “Standing still for 1 hour straight is excruciating while walking for 1 hour straight is relaxing.”
  3. “Book covers are the original clickbait.”
  4. “All books are technically remixes of the dictionary.”
  5. “”You’ve probably never pressed number 9 on your microwave.”
  6. “Zoom is a brand that has become synonymous with its product, like Kleenex or Frisbee.”
via Reddit
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