Every week, we bring you the top stories and analyses from the global Subscription Economy.
Shaving giants sweep up the disrupters
Excerpts from an article by Erica Pandey in Axios.
With a pair of improbable billion-dollar acquisitions, huge conglomerates have snapped up both of the cheap shaving startups that shook up the men’s grooming business.
The big picture: The deals — for Dollar Shave Club, Harry’s and yet a third startup called Bevel — reflect a trend in which new companies pop up and upend large industries, but don’t last long.
“What’s happening in the grooming category is a microcosm of bigger industry shifts,” says Robin Sherk, an analyst at CB Insights.
When it comes to shaving, the global industry is tens of millennia-old, going back to the cave days, and is now worth more than $20 billion a year. But there are just 5 major global razor manufacturers, including the startups, says David Pakman, a venture capitalist at Venrock Partners and an early Dollar Shave investor.
“It’s very, very hard to enter the razor business,” he says. “If you try, you will be sued for 3 to 5 years with a battery of patents. All the razor guys have tons of patents.”
Yet Harry’s and Dollar Shave instinctively sensed they were much more vulnerable than they looked.
Read the full article in Axios.
Adobe’s path from $200 million to $5 billion in recurring revenue
Excerpts from an article by John Koetsier in VentureBeat.
In 2013 when Adobe launched Creative Cloud, the company broke with selling boxes and refocused on selling subscriptions (software as a service). At the time, the company had about $200 million in annual recurring revenue. Today, Adobe has over $5 billion in recurring revenue.
That’s important, because from an investor standpoint, recurring revenue is twice as valuable as non-recurring. This is something that doubles its enterprise value compared to a company that has to sell a new widget every month, quarter, or year. The reason is simple: Keep your customers happy, and the money keeps flowing in. No further sales efforts are required. The story of how Adobe managed to accomplish that has been told, but what did the company learn in the process?
Read the full article in VentureBeat.
Why Robo Advisor Subscriptions are Good
Excerpts from an article by Barbara Friedberg in U.S. News & World Report.
In a recent interview by Jenny Luna for Stanford Business, Tien Tzuo, founder and CEO of Zuora, posits that the subscription model is the wave of the future and benefits corporations with a steady revenue stream. He suggests that any business can use this model.
A do-it-yourself investor, might begin with several thousand dollars and invest in stock and bond funds at Charles Schwab, Fidelity Investments, TD Ameritrade or another investment house. As the portfolio grows to five figures, the DIY investor may seek other financial guidance. That’s where low-cost financial planning comes in. In contrast with typical human advisors who require hundreds of thousands of dollars and charge 1% or more in management fees, paid subscription robo advisors offer a low-cost alternative.
“Subscriptions from a younger customer perspective are far easier to understand than basis point or percentage-based pricing. The idea of an all-you-can-eat fee is familiar to a generation of customers who have Spotify (SPOT) and Netflix (NFLX), but comparatively have very little in the way of savings,” says Simon Taylor, co-founder at 11:FS.
Overall, the subscription model is a win-win, for both consumers and businesses. For investors, subscription investing isn’t intimidating and allows newer investors to get into the markets, while the company gains a predictable revenue stream, Taylor says.
Read the full article in U.S. News & World Report.
Subscription Sofa? Rental Startup Feather Raises $12 Million To Fight ‘Fast Furniture’
Excerpts from an article by Amanda Lauren in Forbes.
Today furniture subscription startup Feather announced their expansion into two new markets, Los Angeles and Orange County California after securing $12 million in funding. The Series A was led by Spark Capital and had participation from Kleiner Perkins, Bain Capital Ventures, Y Combinator, PJC, Fuel Capital and Scott Belsky, among others. Spark Capital has helped fund other startups in the furniture industry including Wayfair, 1stdibs, and Everything But The House.
This brings Feather’s total funding to $16 million. The company plans to use this investment to become a leader in reverse logistics as well as increase headcount.
Feather launched in 2017 in the New York City market by three-time startup founder and Y Combinator alum, Jay Reno. Reno developed this business model to provide a solution to the problems caused by the rise of “fast furniture.” Much like fast fashion, fast furniture has a trendy look and low cost, but it isn’t designed to be used for the long haul. While some pieces are a great way to stay within a budget, especially for occasional furniture like side tables and accent chairs—there is a tendency to go overboard. While cheap clothing isn’t generally purchased out of necessity, everyone needs a sofa.
Read the full article in Forbes.
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