Final Niantic EC-1 lessons, F8 call, Slack, WeWork and TED

Live Conference Call: Josh Constine and Frederic Lardinois talk all things F8 in just a bit

Facebook’s annual F8 conference is in full swing, with major redesigns of the company’s apps and all sorts of news trickling out of San Jose. We have Josh Constine and Frederic Lardinois on the ground talking to everyone, and now we invite all EC members to join us for a live conference call today at 5pm EST / 2pm PST (i.e. about an hour or so from now).

Dial-in information will be sent to all Extra Crunch members an hour before the call.

Niantic EC-1, Part 4: Nine lessons on growth

Greg Kumparak wraps up his massive dive into the (virtual) world of Niantic, the producer behind Pokémon GO and Harry Potter: Wizards Unite. In this, the conclusion, he takes stock of all the lessons learned from the company and how Niantic’s methods turned it into a $4 billion AR behemoth:

Most people would probably say whoever owns the physical space should command what happens in the virtual equivalent, as the latter has much grander impacts on the former. Within weeks of GO’s launch, Niantic had a page setup for property owners to submit requests for the removal of Pokéstops and Gyms in a location.

But a page like that can only do as much as the team monitoring it, and they couldn’t keep up. Property owners sued Niantic, arguing that requests weren’t honored quickly enough; in February of 2019, Niantic settled by promising to resolve all complaints within 15 days and set up a blacklist that prevents those in-game spots from springing back up within 40 meters of the property.

“Making sure that we have all the operations tools and support surrounding our games, so that, when people write in, or property owners write in and say, ‘Hey, we love your game, but we need to move this in this direction a bit’ or to make sure that the data being presented is the right set of data being presented… making sure that we’re completely and utterly prepared for that I think is a key lesson,” says Edward Wu.

“I will say that I feel extremely fortunate working with incredibly experienced hands at this with John [Hanke], and Phil [Keslin], and our VP of operations Lenette [Posada Howard], who have deep experience on how geodata interacts with the real world” he adds, “and how we have to make sure we listen to all of our constituents, not just our players. We were fairly prepared for that the first time around, but just knowing the scale at which it happens is important.”

In case you missed them

Here are the first three parts of the Niantic EC-1:

• How a Google side project evolved into a $4B company
• Pokémon GO and the April Fools’ joke that made billions
• Harry Potter, the Platform, and the Future of Niantic

Plus Arman put together a great reading guide on all things Niantic.

The curious case of Slack’s missing $162 million

As many of you who have been EC members for a while know, I have been discussing the changing status of Form D filings with the SEC for quite some time. Well, Slack’s recent S-1 filing provided much more fodder for the discussion.

Arman and I analyzed the security filing and compared the actual fundraising numbers reported in the S-1 to the news published by the tech press since Slack was founded in 2009. A lot of the numbers were reasonably accurate (I’ll assume PR people love to round to big, whole numbers), minus a huge discrepancy in the Series G round:

The big mother of gaps in coverage, though, concerns the Series G. TechCrunch, Reuters and Bloomberg reported that the company raised $250 million from SoftBank with Accel as a co-lead, with participation from other investors. That’s the value of the company’s reported Series G and Series G-1 rounds put together.

But then, the company seems to have raised another $162 million on top of that in Series G-2 and G-3 rounds exclusively led by SoftBank just weeks later, which was never reported from what we can tell from searching.

It’s a reminder that without proper disclosure (Slack has never filed a Form D from what I can find), all the numbers reported publicly have to be taken with a grain of (sometimes very expensive) salt.

What we want to know in the We Company (WeWork) S-1

WeWork has been one of the most polarizing companies among financial analysts. So what does a purported S-1 filing allow us to learn about the company? We already know that it is going to lose a gargantuan amount of capital, but what else should we be seeking in its forthcoming filing?

I wrote up some of the key narratives that will need to be checked in the S-1:

To understand WeWork’s economics, we have to comprehend the baseline unit economics of its individual office leases. Unfortunately, this is gloriously complicated. First, we need to understand the lease structure of a building — does WeWork pay a flat rent per month, or does its rent balloon in later years? Does it get improvement incentives that depreciate over time? Does it revenue share with landlords or have other performance-based language in the contract?

While we have a little leaked data to go on, my guess is: all of the above and more. WeWork now operates in hundreds of cities in dozens of countries. The real estate laws in each of these locales is different, and WeWork no doubt negotiated unique leases for each building it captured. Sure, it had a model/template for how it wanted to structure these leases. But at the end of the day, real estate deals are particular and not perfectly repeatable across hundreds of properties.

And so the first thing I would want to see in the S-1 is how its property profitability changes over the course of a 10-year, 15-year or potentially longer-term lease. If early buildings in WeWork’s network are insanely profitable, then that might lead us to conclude that its losses today are truly investments in growth for the future.

Verified Expert Brand Designer: The Working Assembly

We are continuing to profile great brand designers identified by founders. This week, we have NYC-based The Working Assembly, a design firm that has worked with Compass, Rent the Runway and Zola. We interviewed creative director Jolene Delisle about her vision and how her team works with startups:

Jolene Delisle: Relationships we find to be powerful are the ones where we have a natural alignment and affinity for what they’re doing. Branding, especially at the early stage, can be like getting into a relationship. It’s part therapy as much as it is about brand development. There are so many components, from an emotional, outlook, and creative level, that have to come together. So it’s important for us to establish those relationships, especially since we’re a small team and my co-founder and I oversee every project. We’re highly involved. We’re only able to take on a certain amount of projects at a time so we look for brands that we have a natural akin to.

All things TED 2019

We’ve transcribed last week’s conference call with Anthony Ha, who covered this year’s TED conference for us (and who also managed to get kicked out of the room for a bit due to his infamously loud typing):

Anthony Ha: In fact there was this really interesting metaphor that Chris Anderson used at one point which was, “The reason why people are so frustrated with Twitter and with Jack [Dorsey]”…

…The way Chris Anderson explained it was, this argument that, “Twitter is like the Titanic and everyone complaining about it. All of these people are in steerage on the Titanic and they’re saying, there’s an iceberg up ahead, turn this ship around,” and Jack Dorsey is saying, “I hear you, that’s a very good point,” and he goes back to the bridge and he’s very calm, and nothing happens.

The passengers, again this is Chris Anderson’s phrase, are shouting, “Turn this fucking ship around,” and nothing is happening. Dorsey’s argument was essentially that it is happening, but it requires a fundamental re-thinking of Twitter. A changing of the dynamic of how Twitter works instead of just applying all these band-aid solutions, which certainly have been rolling out in smaller upgrades. The big fix is going to be a fundamental re-thinking of Twitter and that’s not something that happens quickly.”

Equity Transcribed

Our latest Equity Shot has been transcribed, featuring the inestimable Alex Wilhelm and Kate Clark discussing Uber’s IPO terms and Slack’s S-1:

Alex Wilhelm: So right now at 84 billion for Uber, it’s priced almost exactly the same as Lyft is using 2018 degenerate revenue multiples. Now, is Uber worth more per dollar of revenue than Lyft? Maybe, maybe not. We presume that Uber is going to make that point because they own shares in a number of other ride hailing companies around the world and maybe that means they’re worth more in terms revenue, I don’t know, but we were kind of surprised to see how close they are currently trading, but it’s almost not surprising given that Lyft is liquid and Uber is setting some kind of market benchmarks so to see them kind of in sync isn’t a huge shock.