Waiting for Fonzie

The term Jumping the Shark can be traced back to the fifth season of the celebrated sitcom Happy Days when one of the main characters, Arthur Fonzarelli (Fonzie) played by Henry Winkler, proved his toughness by jumping on water skis over a shark in a cage while the 50’s era group of friends were visiting Los Angeles.

While it is true that the show continued on for another seven seasons after this fateful event, any Happy Days aficionado (I know you’re out there) will tell you that the scene with Fonzie jumping the shark was the beginning of the end for arguably one of the most popular shows in network TV history.

Fonzie_jumps_the_shark

The term jumping the shark now signifies the moment when something has crested, a bad decision was made, we took a wrong turn, etc.

Have private company valuations jumped the shark?  Let’s review some of the recent largesse garnered by a few unicorns.

  • WeWork which provides office space to small companies in urban areas recently raised over $350 million, giving it a valuation of $5 billion
  • Snapchat, the mercurial disappearing picture company out of LA scooped up another $200 million in February giving it a valuation of $15 billion
  • Airbnb has a valuation of $20 billion after raising another $1 billion a month ago to grow the online rental platform
  • And the granddaddy of them all, Uber recently picked up another $1.6 billion (cuz they could) giving it total funds raised to date of roughly $6 billion and a valuation north of $42 billion

Call Captain Quint because the shark is circling!

Like Happy Days, I think this will be a gradual decline.

In 6, 12, 24 months (the longer the better), I think we will look back at this period and possibly some of the aforementioned deals as the point in time that marked the beginning of the downturn.

There are still enough of us around who remember March 10, 2000, the day that the Nasdaq peaked at 5048 (closing price).  It has taken 15 years for the market to tickle that number again.  The coming downturn will not reach similar apocalyptic proportions.  But, when the music stops, the guys and gals who wrote checks to Uber at a $40+ billion valuation may be looking for a chair.

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Feeling inadequate after CES 2015

My first visit to CES was a memorable one.  The stories about the taxi lines and sheer size of the showroom floor were all true.  But of course the best part was the cutting edge technology on display at every turn.  It was probably a good thing that the vendors were not allowed to sell products on the floor or else I would have likely needed to buy a new set of luggage to bring home all of the gear that I wanted to call my own.

Of course, seeing all of the shiny new technology also left me with a feeling of indequacy with regard to my own crop of (once) cool things.

This past holiday season I decided to splurge and upgrade 2 of the 3 TVs in our home.  I was pleasantly surprised by the quality and reduced prices since the last time I ventured into the TV section of Best Buy and Consumer Reports.  I ended up purchasing a couple of Samsung HDTVs, 32 inch (master BR) and 46 inch (family room).

I was feeling good about the purchases until I showed up at CES.  The size of the products on display were amazing-80 inch models were the rule not the exception-and then there was the technology.  The messaging I heard from most of the manufacturers was that HD is dead, in a year or so you will not even see any new HD TVs hit the market.  The new norm is 4K and many of the next-gen items on display were 8K models.  I humbly slinked away from the Samsung section of the show without sharing my recent purchases with any of the dozens of Samsung employees in attendance.CES Wearables

Then I hit the Wearables section of the show.  There were dozens of items on display; from the Google Glass wannabees, to the FitBark to track your dogs exercise regimen, to the $80 waterbottle that also serves as a holder and charger for your smartphone, the internet-connected binky (pacifier), to the posture trackers and GPS equipped insoles for your running shoes.  But when talking Wearables, most people immediately think about the variety of wrist devices that track steps, blood pressure, calories, body mass index and sleep patterns more and more prevalent in offices and schools around the country.

I proudly rolled up my sleeves and entered the Wearables section sporting the FitBit Flex that my wife gave me as a holiday gift, feeling like one of the ‘In’ folks at the show.  But that feeling of belonging was soon replaced by a feeling of indequacy when I realized that my technology was on the low end of the cool spectrum on display all around me.  After all, the Flex has the adorable feature of adding a new blinking light every time you take another 2000 steps-up to 5 lights in all.  It also does….oh yeah and it shows…almost forgot its ability to….    No, all it does is show up to 5 blinking lights.  By the time I passed the 8th different booth showing stylish and creative ‘watches’ that do everything the Flex does and a whole lot more, I had rolled my sleeves down so as not to conceal my ‘technology’.

Attending CES was an eye opening experience and I am very glad I was able to go.  Unfortunately, my kids’ college fund is going to take a serious hit as I upgrade my door locks, thermostat, sound system, window treatments, home security system and cars in order to keep up with the Joneses.CES character

Are we finally moving from sock puppets to paper bag puppets

I awoke on New Year’s eve to the news that Instacart has raised over $200 million in a new round of funding, giving it a valuation of close to $2 billion.

I did a double take as I verified it was 2014/2015 and not 1999/2000.  You may recall that it was 15 years ago that Pets.com and it’s simple (yet brilliant) mascot appeared in a Super Bowl advertisement, not to mention on good Morning America.  The dot-com bubble and bust were epitomized by many epic failures and poor decisions-remember when Excite@Home acquired Blue Mountain Arts (online greeting cards) for $780 million representing $71 per unique visitor and sold it less than 2 years later (weeks before its own bankruptcy) for $35 million representing $3.23 per unique visitor-but no one industry captured the magic of the period like the online pet food market.

sock puppet

In the S-1 filing for Pets.com’s IPO on Feb 10, 2000, the company reported a loss of $42.4 million during the 4th quarter on $5.2 million in sales and included this little nugget, Pets.com is operating on negative gross margins, meaning that the goods and services it sells cost the company more than it earns back in revenue. 

This was by no means the exception, as Pets.com was fighting to gain market share from worthy adversaries such as: Petopia.com, PetsMart.com and of course PetStore.com.  We all know the fate of Pets.com and its brethren, most went belly-up soon after the Super Bowl with the most desirable, eye-catching urls getting scooped up by large brick-and-mortar retailers for pennies on the dollar.

Needless to say, the concept of selling pet food online AND making money was ahead of its time.

Which brings me back to InstaCart and the insta-delivery business model.  Speaking of poster-children from the dot-bomb period, many refer to Webvan as the biggest example of how to raise a lot of money based on a flawed business plan and then spend it as fast as possible-Brewster’s Millions style.  brewster-s-millions-poster-112581

InstaCart has now built a formidable war chest but they are playing in a crowded field that includes:  FreshDirect, Postmates, Seamless, Peapod, EAT24, not to mention a couple of companies named Amazon and Google.

Have we reached our sock puppet moment in the current business cycle?  Only time will tell.

I do feel like enough of us were around (and conscious) during the dot-com bubble to make better decisions about the current state of affairs but I am concerned that we may look back on the time that very smart investors like Sequoia Capital, Canaan Partners, Khosla Ventures and Andreesen-Horowitz made a $200+ million bet on making money delivering groceries on-demand while competing with some deep-pocketed foes.

Fandango puppet