Discover more from The Split
OpenStore Drive: “Passive Income” for Shopify Brands
Plus dozens of new AI products from OpenAI, Microsoft, Adobe, Canva, and Zapier
Keith Rabois new company OpenStore just launched a new initiative, OpenStore Drive. I’ll talk through it, plus hit on nearly a dozen new AI products launched in the past few days, including OpenAI Plugins and Zapier’s API.
I’ll be on our first family vacation since our second child was born almost three years ago. Don’t expect The Split in your inbox this upcoming week.
And one correction: I was able to confirm with the source that the chart in last issue showing Temu getting more traffic than Shein in December was as of January 2nd, not December 2nd.
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OpenStore Drive: “Passive Income” for Shopify Brands
OpenStore, the company that buys and operates Shopify brands, just announced Drive. The new product from Opendoor co-founder Keith Rabois’ new company allows Shopify merchants to sell a portion of their company instead of the entire thing. Well, sort of.
With Drive, instead of purchasing the business outright like OpenStore has been doing for the past two years, it instead gives entrepreneurs 12 fixed monthly payments based on initial projections at the time of sale. Then, in return for a 10% management fee, it takes over things like marketing, fulfillment, customer service, and inventory management. Basically, all the hard stuff. OpenStore also takes all excess profits earned above the initial projections.
It’s probably not the best deal if you’re an entrepreneur trying to optimize your financial outcome. But all the marketing is around “passive income” for entrepreneurs. And the agreement is only for one year, at which point OpenStore may no longer involved in the business. I’m sure there’s opportunities to extend or renew the contract, or even have OpenStore acquire the business outright.
Is this an evolution of OpenStore’s business? Or just a creative lead gen to ultimately acquire it’s best Drive clients over time? I might be missing things, but my guess is it sits somewhere in the middle.
I assume OpenStore built software to automate many of the things these Shopify entrepreneurs currently do manually (and God help them if they haven’t). If this assumption is true, bolting on a new business would be straight forward (relatively speaking) and, combined with the additional scale, would likely increase the margins of OpenStore’s and each individual “brand under management” over time as long as the functions its taking over are heavily automated by software. It also lets the entrepreneur step back from the day-to-day, hence the “passive income” pitch. You could hire more employees. Or, you could just “hire” OpenStore.
I’ve always been intrigued by the concept of consolidating online brands to build a modern brand holding company. Especially if there’s an opportunity to launch a consumer-facing marketplace with all the brands down the road. Thrasio always seemed a little too capital intensive without gaining control of the end-customer relationship for my taste. This move from OpenStore seems like a step in the right direction.
🚀 Product Launches
Mercury Launches Support for VC Funds + Increases FDIC Insurance Coverage to $5 Million: We’ve used Mercury personally at Banana since inception, and I’m always impressed with how simple the product is to use and how fast they’ve executed over the past few years. The magic is that its not technically a bank. Instead, it’s a software company that works with a network of partner banks. This is what allows it to spread deposits across them all, $250k per customer, per banking partner.
We’re one of 2,500+ VC funds that bank with Mercury, and its just now officially “launched” its VC-focused product. I’ve recommended it to every fund manager that’s asked about banking over the past two years. And you can apply in less than 10 minutes.
What this means is a line as simple as “Book me a flight around 1pm to NYC. Book three nights at the nicest hotel in Midtown. Make dinner and lunch reservations at six different vegan restaurants. And order me a new dress shirt for the meeting on Tuesday.” means OpenAI actually does it all for you.
I’ll admit I didn’t see this coming. I’m still not sure how broadly the conversational chat interface scales, and I'd assume this means OpenAI has more consumer-facing products in the pipeline.
Microsoft Releases Copilot for Office: The launch “in the months ahead” will roll out generative AI across Microsoft’s entire product suite - in Word, Excel, Powerpoint, Outlook, and Teams.
GitHub Copilot Adds Chat-Based Assistant: I meant it when I said “Microsoft’s entire product suite”. It’s developer-facing products are getting similar capabilities. Microsoft claims Copilot, which is essentially a coding assistant for developers, already has a million users. And it’s essentially already a text-based product. These new capabilities will likely slot right into existing use cases and build an even better user experience.
Adobe Launches Firefly Beta: It’s new generative AI creation tool runs the gamut of image and video creation. Text to image, text to effects, sketch to image, vector creation, and much more. Screenshots don’t do it justice, and I’d recommend this 70 second video for the full overview.
Adobe continues taking aspects of its desktop-native Photoshop and bringing it to web, similar to Canva. If you remember, back in September I wrote all about Canva’s new visual worksuite and how it used Search and SEO to pass Adobe in many regards. Generative AI could be the opening Adobe needs to catch up, but…
Canva Just Added New AI Tools: Similar to the others above, it touches nearly every aspect of Canva’s product.
Google Workspace Adds Generative AI: I’m a broken record on this, but expect every scaled product that can incorporate generative AI to do so. Here’s a 2-minute video from Google + more from Ben Parr here.
Zapier’s New Natural Language Actions API: This one is pretty cool - it essentially uses LLMs to make LLM API's easier for developers to use. If you’re not familiar with Zapier, they create tools that enable their customers to build automations between various pieces of software. This new API allows developers to incorporate Zapier workflows into any text-based interface. Of all these recent launches, this probably opens up the most new use cases and most exciting for startups.
Overall, what does this past week of new AI-based product launches mean? Expect nearly every product capable of incorporating AI to do so. If you scan through all the latest from these workspace and collaboration tools, they appear to all be adding the same features and are starting to look very similar. It makes incumbents with distribution even stronger, while also opening up opportunities in new categories and customer bases that previously couldn’t be served by software. Anyone building an interface that doesn’t look like all the others *ahem, ChatGPT* is probably setting up strong counter-positioning compared to the rest.
🔗 Links and Charts
Credit Suisse Saw $119 Billion Withdrawn in One Day in October: This happened after a viral tweet, without much backing it up, claiming that the bank was “probably going bankrupt”. And it looks like another $150 billion was pulled on Thursday, March 16th (approx 15% of its assets) per the WSJ.
My biggest takeaway from the past few weeks is that “deposits are sticky” is no longer true for financial institutions. And frankly, it’s simply the wrong assumption (one that could kill your business). Banks will need to find new ways to lock-in customers. My guess is that means building an ecosystem of adjacent products and integrations, and then enabling customers to build workflows on top of them.
Modern Bank Failures by Size: I’m on the record in a soon-to-be-published podcast saying something along the lines of “bank failures rarely happen”. Turns out, that’s wrong. Prior to this year, there had been 511 bank failtures since 2009 and 29 since 2015. Thankfully, most between the financial crisis and 2023 had been fairly small. h/t Nik Milanovic for sharing this pic of recent bank failures by size!
Just How Stressed Was the Banking System?: This doesn’t paint the full picture. But the Fed’s direct lending facility provides 90-day loans to financial institutions. According to the numbers, last week had the highest volume since 2008.
More on TikTok’s Current Shareholders: According to The Information, Sequoia continued doubling down on ByteDance, buying shares from other investors despite regulatory uncertainty over the past few years, to now own around 15% of the company. Sellers included Qiming Venture Partners and the Flipagram co-founders (acquired by Bytedance in 2017). Tiger Global also bought shares in multiple secondary transactions over the past two years, as high as a $400 billion valuation in the first half of 2021.
CapCut Hits 200 Million Monthly Active Users: Speaking of ByteDance, CapCut would be its third app to reach 100 million MAUs. It also brings up the question: what happens to CapCut if TikTok actually gets banned?
TikTok Now Reports 150 Million Monthly US Users: The new stat was just officially disclosed when new TikTok CEO Shou Zi testified before Congress earlier today.
Per The Information, “TikTok CEO Shou Zi Chew is set to testify Thursday [yesterday] before the House Committee on Energy and Commerce on the company’s privacy practices and relationship with Beijing”. We’re still starting to see the fallout, and next week touch on anything that stands out.
YouTube Shorts Pulls Ahead of Reels: For content creators, I think Shorts (consumer) and LinkedIn (for B2B) will turn out to be the best channels of 2023. h/t Isaac for sharing.
Kajabi Creators Average $37,000 in Annual Income: According to a March 2023 report from Citi, Kajabi’s $37,000 is higher than Substack and 6x higher than Patreon’s ~$6k average annual earnings. According to Citi, 70% of Patreon’s revenue comes from 3% of creators, and 90% of Substack revenues come from less than 10% of the writers.
AI CEO Outperforms: In a wild story I didn’t think we’d see for at least a few more years, Hong Kong-based gaming company NetDragon Websoft installed an AI-based CEO named "Tang Yu” in August of 2022. Over the next six months (the labeling and scale on this chart appears to be incorrect), the stock price of it’s $2.1 billion revenue business outperformed the broader index by over 20%, or 2,000 bps.
Tang Yu makes all the typical high-level CEO-type decisions, but also works 24/7 and is paid $0 per year. It poses the question… would you work for an AI CEO?
TV Series IMDB Rankings by Season: A lot to take away from this chart. Impressive how Seinfeld and Big Bang Theory lasted through their first few seasons, and how The Simpsons has hung on for TWENTY years of meh ratings. How does American Dad still exist? And it would be great if we could just re-do that last season of Game of Thrones. h/t Trung Phan for sharing.
Gen Z More Likely to Date a Friend: And up to 50% of women below 30 were friends before committing to a relationship with their partner! Anyone have thoughts on why this is? And is the large skew between genders is related to same sex/gendered relationships?
Media-Induced Hysterias Over Time: I’m just impressed at the consistent commitment to Killer Wasp stories over the years.
Rising Rates Are Improving Pension Funding Statuses: After over a decade of funding deficits, higher rates have decreased the liabilities pensions owe to retirees and improved their funding positions. 2022 was the first year since 2007 where they added more assets than liabilities. As some of the largest financial institutions in the world, this is certainly one reason The Fed needs to nail the next few years of interest rate management. h/t Modest Proposal.
Harvard Physicist Thinks Meteor Was Alien Probe: A meteor crashed off the coast of Papa New Guinea in 2014. Harvard physicist Avi Leob says there’s compelling evidence it was an alien probe, and is organizing a $1.5 million expedition (basically a pre-seed round) to search for fragments that are mere millimeters in size, within a 1 kilometer square area, 2 kilometers deep. Sounds like the plot of a sci-fi movie…
📚 Long Reads
How Rippling Raised $500 Million in 12 Hours as SVB Was Melting Down: If you read one link in today’s newsletter, make it this one.
How the Swiss ‘Trinity’ Forced UBS to Save Credit Suisse: If you’re gonna read two, make this the second one. The inside story behind that single tweet that led to nearly $120 billion in deposit withdrawals.
It Wasn’t Just Credit Suisse. Switzerland Itself Needed Rescuing: Another behind the scenes of the Credit Suisse + UBS merger from the WSJ.
a16z’s Marketplace 100 (2023): I always look forward to this annual report highlights the fastest growing marketplaces according to credit card data. This year, most surprising to me is that three of the top 10 largest are resale or secondhand marketplaces. 👀 (StockX at #6, Goat at #8, and Whatnot at #9)
How Goldman’s Plan to Shore Up Silicon Valley Bank Crumbled: Only to be undone by $42 billion of withdrawals in a single day.
The Remaking of Kleiner Perkins: A deep dive into the history and current state of affairs at Kleiner from my friend Mario Gabriele.
An Explanation of Stripe’s Latest $6.5 Billion Fundraise: You’ve probably read about Stripe’s recent fundraise to cover tax payments for employees, and this post from Tanay Jaipuria goes into exactly why they needed to do so. (it was essentially a secondary round)
The Complete History & Strategy of Nintendo: The 130-year old story that started with gambling and playing cards, involved the Yakuza, and was led by a older man who never once played a video game.
💼 Career Services
We paused the Talent Drops last week with the state of the market, but Banana Talent Drop #13 will go live this upcoming Sunday, March 26th. Join below if you’re exploring a new role and want to passively and anonymously get in front of hiring managers at startups!
The Banana Talent Collective now has 220+ candidates hailing from the companies below + more.
If you're hiring, join below to start getting a feed of pre-vetted candidates every two weeks (and as always, reach out for free access if you're at a Banana portfolio company).
🍌 Monkey Business
How long until the sand is more intelligent than us?