Congratulations to Wish on its initial public offering today! I enjoyed speaking with Jon Fortt and Carl Quintanilla this morning on CNBC’s Squawk Alley on my earlier investment in Wish.
Wish was one of my biggest investments at 137 Ventures, where I previously served as a Managing Director. 137 Ventures is a growth-stage venture firm that focuses on providing liquidity to founders, executives and early investors. In 2015, I initially identified the company as extremely promising and brought it to the firm. I co-led the Wish investment while I was there. Thereafter, the firm continued to build its position to become one of the top 5 investors in the company. At the IPO price, the Wish investments made while I was there will return more than 4.5x to the firm.
What excited me about the company then was the opportunity to bring a dollar store-like experience to your phone with glossy photos and faux diamond rings available for 85 cents plus shipping, of course. I grew up in Oklahoma and East Texas, and I know where normal people shop. Wish is a tiny bit of Pinterest, a smidge K-Mart, a little bit Forever 21 and a lot of swap meet. The opportunity to try out a dozen new and fashionable things for just a few dollars would be well worth the two to three week wait for their arrival.
The only downside to the business model was that time delivery of the product because the goods were often being shipped directly from overseas manufacturers. The company has now worked to reduce that wait time by keeping popular inventory in U.S. warehouses and has also built a new, in-store pickup business by partnering with local small businesses.
The opportunity for e-commerce
In 2015, there were many successful e-commerce companies, but there was still a huge opportunity for up-and-comers. Alibaba was a monster; Amazon was still Amazon, but people were more excited about AWS; and Shopify wasn’t today’s Shopify yet. The global brands that we know about now were still developing, from FlipKart to JD.com to Coupang – another investment that I sourced and led.
Walmart’s purchase of Jet.com for $3.3 billion in 2016 was widely seen as a validation of the e-commerce market. Walmart paid handsomely for the company and its team because it realized that it needed a strong e-commerce strategy to remain competitive. Since then, Walmart has continued to be forward-thinking about the way it deploys technology both in its stores and online. Obviously, in-person shopping isn’t going away, and Wish’s partnerships for in-store pick-ups are a perfect way to give consumers the benefits of shopping online without having to pay for costly shipping – in one form or another.
Continuing to invest in e-commerce
The opportunity for e-commerce has never been better; COVID-19 has massively accelerated the growth of e-commerce spending. Total online spending in the middle of 2020 was up 77% year-over-year to more than $80 billion a month in the U.S. Initialized has cultivated an active e-commerce portfolio for the past decade, from our early investments in focused marketplaces like GOAT to our more recent investment in technologies that support e-commerce. When I invest in marketplace companies, the first question I ask myself is what motivates each side of the marketplace to join. For Wish, consumers get entertainment plus they can experiment with different items for a very low cost, and wholesalers can get rid of extra inventory and cut out the middle man. For GOAT, it was the cult of the sneakerheads and the rise in popularity of streetwear which produced both sellers and buyers on the platform.
Shoppers have come to expect the same type of experience online that they get in stores, whether that be a store clerk who makes suggestions of what to buy or an app that makes flipping through pictures as fast as thumbing through a sale rack. Initialized has made investments in companies that do just that. For example, Shogun offers a drag-and-drop page builder and a speedy experience platform for e-commerce, and Depict.ai provides an AI-powered recommendation engine.
These investments support e-commerce across brands and all have founders that are strong on technical and product talent with a unique perspective on the markets they are tackling.
While much of the run up in online spending this year can be attributed to COVID-19, it’s clear to me that consumer behaviour has permanently shifted. We’re now spoiled by the affordability and convenience of online shopping. Initialized has seen many companies that are focused on solving last mile delivery, which will continue to shorten delivery times. We’ll continue to invest in founders that improve consumer experiences through technology because at the end of the day, everyone is a shopper, even when they aren’t in lockdown.