Challenging The Cult Of Fast Growth

Airbnb, the world's largest accommodation provider owns no real estate, as you know from my viral quote, but it also doesn't make any money. After squeezing out about $90m in profit in 2017 and something broadly similar (it seems) in 2018, it's now losing more that it's ever made ( $306m) as it chases the drug of the 21th century, unprofitable user growth.

How big is it reasonable to expect Airbnb to get? Is the future of Airbnb just in owning the marketplace for temporary peer to peer space rental, or should it branch out to own the marketplace for all human based efforts and become a thin horizontal company. Does it aim to become more verticalized and own the idea "space" and become a construction company, hotel chain, real estate agency? nobody seems to know, least of all them. When you've a $30bn valuation, have $1bn passing through your hands each year, but fail to make money, is an IPO the way to hand over the reigns before reality strikes. With 15 funding rounds, $4.4bn invested, and 54 investors, a lot of pressure if on. Companies like WeWork, Airbnb, Door Dash, Grab, Magic Leap, Blue Apron, Movie Pass etc, have had huge amounts of rocket fuel loaded, and must now escape the gravitational pull of unit economics, before crashing to earth when the fuel runs out. Airbnb, like any other on this list must rapidly grow a user base, reduce costs of acquisition, ensure customer churn is low, and all before investors get spooked. But why does it have to be this way?

Was it not enough to be profitable but smaller? To serve a massive niche, to have hosts who loved the extra income (and hosting) and guests who loved to stay in the spare assets of those who cared?

If there is one huge danger of the current realm of FAANG success, its the presumption that it's somehow normal to have 2bn users, it's somehow only success if you are worth $500bn, that in order to be a "winner", you have to be this size. Perish the thought of being a CEO who runs a company that makes $200m in revenue and $100m in profit per year, and not needing much of other peoples' cash to get there. Would growing slowly and profitably and never taking funding be a sign of stunted ambition?

The play of the day is now to scale fast, seek insane early valuations, get then burn vast amounts of VC money, who, having invested so deeply demand a huge return of capital in return.

But is it reasonable that a fashion brand like Allbirds that basically makes one pair of shoes for one niche demographic, in one country and sold slightly over 1 million pairs over 2 years should expect to scale and last long? It's $1.4bn of valuation in a lovely to walk in, great to look at, fad. Are Away suitcases going to ever be much more than deeply boring expensive suitcases for dull rich people, with no retailer markup to absorb but quite massive marketing and shopping costs, yes they can broaden to travel, to other types of cases, but does the world really care that much.

I’ve bootstrapped my way to creating a Smart Blind ( and Smart Curtain rail) that is Voice and/or remote controlled, motorized, is entirely invisible after a 1 minute installation and requires no wiring. It’s a product that I’ve tested for 2 years in 10 apartments & with zero failures. It just needs a recharge once every 4-6 months if used very frequently, which takes a stepladder.  My Net Promoter Score is a smile in my buildings' elevator most days.

It saves on energy costs in the Summer and Winter, it stops corded blinds being lethal to kids ( & illegal ) , and it’s rather fun to see working. It's genuinely a little piece of a Tony Park future most mornings when it allows you to wake up to light.

So far I’ve spent about $700 and earned $1400 from sales of the beta product. The unit economics scale to make a profit margin of 40% quite manageable, even with small numbers sold. My plan is to make the first 1,000 have terrible packaging, the app will be a hatchet job piggybacking other existing code. If I sell 10,000 I'll invest in a better app and bring down my costs of the Voice/RF blaster hardware. With 20,000 sold I can go to Shenzhen and start getting products made to order not off the shelf. And slowly the thing can take off or die.

And now I’m thinking of how to launch it properly it stuns me how many assumptions are made. People are concerned about the actual market size, because "it could only be a $500m per year market" , people think Investors wouldn't touch me because I have no history. People think I may not make an absolute fortune. Because it's hardware people share concerns that won't scale fast, and will require quite a lot of staff. And that a larger company can copy me.

It's odd to me because I have no desire to be rich from it, I just want it to be made, save some energy, make some people happy and finally give a reason for the Smart Home to get interesting. I'd love it to be copied by a company more skilled. I'd love to employ people and create valuable good jobs. To stop a few kids from injuries each year.

The accidental damage of Facebook, Amazon, Google,Netflix, WeWork, Tencent etc is that they’ve somehow made the world think that the only thing that matters is being sending a rocket into out of space, to burn huge sums of cash, to reach the stars at great velocity. They have playbooks from Investors which literally guarantee there can be nothing innovative actually made. Everything becomes derivative because the ROI's are more certain.

Why does it need to be so big. What's the problem with valuable niches? Why can’t the internet be a feast of innovation from well run small/ medium sized companies that make good stuff. Screw the rocket to the stars, let's fly a Kite.