David, fair point on millenials, and the reason why they are the initial target market. That said, until advisors can lower their fees or demonstrate more consistent success, automated investing seems like it will continue to see an uptick, even if that is just via ETFs. If that is the case, the masses will move further away from customization to some extent, and we will see a bigger divide in wealth management by demographics. This is where I see Wealthfront making a play – as Will mentioned below, they will be able to use scale to offer more nuanced investments to their customers. This could form a middle ground for people, and a moat for the company. As for trust, that will be the issue with expanding to GenX, I see that as a play that can only happen over time with a proven track record and smart partnerships.
Sarah – great piece! While the business and operating model alignment here is clear, I was left wondering one thing: with only 35k restaurants across 900 cities — less than 40 per city on average — how much of a marketplace liquidity moat have they really built? I assume there is a significantly higher concentration of restaurants in certain cities, but that only leaves open a wider door for competitive entrants in the other less well served areas.
Delivery Hero, a Rocket Internet group spin off, has already raised $1.4bn in equity financing to target international expansion. That’s nearly the $2bn market cap of Grubhub — but in capital. There are a slew of new, well-funded entrants into the space in the US, from DoorDash, Postmates, and UberEats doing similar delivery plays to vertically integrated D2C restaurants without physical presences like Munchery, Maple, and Sprig.
It will be interesting to see how this very well aligned, large TAM space plays out!
Hi Caitlin – love this post, as an ex-user myself. The operating model is fascinating because of the points you mention – they segment the market for studios, and they increase engagement and accountability for users (which keeps you fit!). That said, I wonder how this model will scale, as demand becomes too big for non-primetime studio supply. As it stands currently, the premier classes (like those $40 pilates classes after work) get booked immediately. Will they find a way to increase the supply part of the equation? Or will they lose too many disillusioned users along the way?
Love this post – great example of a true marketplace working well at scale. Etsy is especially interesting in that space, given that so much of their branding seems to rest on the community aspect, as opposed to other e-marketplaces like eBay, AirBnB, etc.
Question for you – given the fragmentation of Etsy’s target community, how do they source new designers? Do they have any scalable model for that once organic growth lapses?
Hi Kie – great question! I agree that for automated investment that is a serious concern, especially as they prove the economics behind their model for others to copy. Two aspects that I left out might clarify that – (i) they offer more Private Wealth Management adapted services than competitors do, and those typically require scale meaning only 1-2 players can win in that space (to your point). (ii) Wealthfront has a killer team, including Dr. Malkiel of “The Random Walk Guide to Investing” and Andy Rachleff of Benchmark Capital – those two add credibility to the product from both a financial and technological standpoint, and allow the company to recruit the best talent in the field.
Love this post, as a great example of aligned operating and business models which allow for flexibility over time. The guideshops are a necessary source of growth past early adopters, but remain true to the original seamless experience. This is especially relevant as many new CPG/retail companies struggle to balance e-commerce with brick and mortar presences (Birchbox, Warby Parker, Harry’s).