Contrary Research Rundown #71
Building for platform potential, plus new memos on Verkada, Jasper, and more
Research Rundown
The valuations that companies raised at in 2021 were largely divorced from reality. Businesses that had achieved very little in terms of revenue, product depth, or customer buy-in were being valued at more than $1 billion. In large part, this was due to the potential size of public market outcomes. Public companies that had achieved revenue, product depth, and customer-buy were being valued at 50x their current revenue.
But as those public comparables came crashing down, private companies were left scrambling to justify their exorbitant valuations. For many of the businesses that will be successful in doing so, the answer will come from platform potential.
If a product offers one specific feature, or “job-to-be-done” for the customer, it can only become so big. There are only so many users, and there is only so much budget for that one piece of functionality. Expansion comes from a broader product platform. Companies like GitLab, Datadog, and Atlassian have built out expansive product suites.
One example to watch going forward is Figma. Since launching in 2012, the company has been primarily focused on product designers. The initial platform focused on visual design, prototyping, and collaborative editing. One of the biggest concerns many investors had about Figma’s potential was that there are only ~500K designers globally, compared to a category like software development where there are 26.9 million.
In June 2023, Figma announced Dev Mode. In that announcement, the company shared that more developers visit Figma than designers because they have to use the designs in coding a product. Dev Mode gives Figma users a more purpose-built tool for developers. This also enables Figma to more deeply serve developers, and potentially increase revenue per customer as the platform becomes more valuable.
The question, now, for companies like Figma, is how much can they broaden their product suites and better serve new subsets of users? Any company that raised at a meaningful valuation multiple will have to justify where the sources of future growth potential will come from. Where will their platforms go from here?
IPSY is a beauty subscription service that offers personalized monthly makeup and beauty samples. To learn more, read our full memo here and check out some open roles below:
Data Specialist - Commerce - Argentina
Head of Lifecycle Marketing - U.S. Remote
Verkada is a technology company that offers enterprise security systems that combine modern hardware with intelligent, cloud-based software. To learn more, read our full memo here and check out some open roles below:
Lead Industrial Designer - San Mateo, CA
Hardware Engineer - San Mateo, CA
Jasper has built one such application of generative AI specific to marketing — enabling the production of everything from AI-generated blog posts to ad copy and creative design. To learn more, read our full memo here and check out some open roles below:
Solutions Engineer (Pre-Sales) - U.S. Remote
Business Development Representative - U.S. Remote
Check out some standout roles from this week.
Railway | Remote - Senior Infrastructure Engineer, Senior Full-Stack Engineer, Support Engineer
Voltai | San Francisco - Founding ML Research Engineer, Founding Software Engineer
The FTC is reportedly launching an investigation into the “investments and partnerships being formed between AI developers and major cloud service providers,” such as OpenAI, Microsoft, Amazon, Anthropic, and others.
Flexport announced a layoff impacting 20% of its employees. This is the third cut since it previously cut 20% of its workforce in January and December 2023. For more on Flexport, see our memo.
OpenSea’s CEO indicated the company was open to acquisition offers. This comes after the company has seen a 96% decline in trading volumes since its high in January 2022.
Indian edtech company, Byju, had previously raised $5 billion in funding and had planned a potential SPAC at a $40 billion valuation. Since then, the company’s valuation has fallen by 99% to a proposed $220 million.
Elon Musk announced that Neuralink had performed its first implant in a human subject. To learn more about Neuralink, check out our memo.
Ramp announced the acquisition of Venue, which will broaden Ramp’s product platform deeper into procurement. To learn more about Ramp, check out our memo.
Fintech took a big hit, with layoffs announced across Block’s Cash App (1,000), PayPal (2,500), and Brex (282).
SpaceX’s Starlink detailed its ability to form a mesh network to transfer user-requested data from satellite-to-satellite in-space to maintain uninterrupted internet service. For more on Starlink, check out our memo on SpaceX.
Creator platform, Kajabi, released its annual State of the Creator Report.
Speaking of “State of X” reports, Nathan Benaich and Ian Hogarth released their 5th annual State of AI report, including a look back at the last 5 years of the report.
One more annual report! Nat Bullard, former Chief Content Officer for Bloomberg, released his annual decarbonization report. For more on decarbonization, check out our deep dive.
SMS platform, MessageBird announced it was rebranding to Bird and cutting prices by up to 90% to compete with other platforms, like Twilio. The company was also rumored to be considering acquiring Twilio.
Databricks announced its acquisition of Einblick, “an AI-native collaboration platform that helps users solve data problems with just one sentence.” For more on Databricks, check out our memo.
a16z published its American Dynamism 50 list of companies with a focus on AI, including names like AMP Robotics, Anduril, Applied Intuition, Flock Safety, Gecko Robotics, Locus Robotics, and Kobold Metals.