Ecommerce is not slowing down
Visa lost out on a major deal
The shift to online has benefitted many industries, online payments being the biggest one. Last year Visa made a $5.3 billion deal to acquire Plaid, the back-end interface for financial accounts.
Plaid was founded in 2013 with $2.8m. The founders were challenged with connecting different backends of consumer financial products. Soon enough Plaid created the backend software interface for banking. This has been one of the most successful fintech companies this decade.
2020 boosted online payments, Big
So being acquired by Visa was a no-brainer, right? Nope. You see, the global economy changed since the original $5.3 billion offer last January.
First, everyone shifted online when the lockdowns began. Then e-commerce experienced ten years of growth in three months. Even with record growth, Plaid & Visa continued with the due diligence process [hint: deal due diligence can take away management’s focus on bigger internal projects].
But walks in the DOJ
The Department of Justice has been tough on Big Tech. In November, the department filed a lawsuit seeking to block the acquisition. It believed Visa would have a monopoly on the payments industry with this deal.
True or not, this created an obstacle for both parties. But it was a real opportunity for Plaid.
This holiday season saw record ecommerce sales again. Plaid must have experienced even more growth, undervaluing the original $5.3 billion offer from Visa pre-Covid. After the DOJ obstacle, Plaid’s management team decided to terminate the Visa deal this week.
Here are the reasons why: First, the company may be worth twice as much after all this ecommerce growth. Second, the company now has multiple liquidity options to go public through a SPAC or an IPO.
Walmart is entering the payments arena
You can find everyone’s favorite big box retailer in every corner of the world. In fact, there are 4,756 Walmart stores in America alone. Almost 100 stores in each state! The company has the local real estate to compete with every bank in America.
On the heels of this Visa-Plaid deal, Walmart decided to launch a fintech startup. Walmart already offers money orders, check cashing, and credit cards. It’s unclear what this startup may offer but it will improve the customer experience at the lowest cost. That's what Walmart does best. Plus Walmart already has a deep relationship with lower income America.
But to be honest I suspect this startup will be a failed venture. Walmart will learn a lot from this deal but won't be successful with it. Finance is not a core competency for the retailer. So I believe Walmart will acquire someone else in the space. At their scale it will be easier to buy rather than build.
Billions in Virtual events
StreamYard was sold to Hopin this month. A major deal for the video stream business.
Stream yard has been the market leader and bootstrapped to $30 million dollars in revenue. While Hopin raised $165 million last year to achieve the same run rate. Now the combined entities will become the major event platform online.
I love StreamYard
I’ve been multi-streaming on StreamYard since November. It is the best video streaming tool for LinkedIn and other social networks. Since November I've been doing at least one live stream covering finance and technology, interviewing guests, and hosting live events.
This week I held several events online. The most popular was my interview with Jason, the founder of Dealmakers. A dozen people watched it live and hundreds watched it afterwards. Live Streams provide more functionality in social media. Now imagine combining this with ecommerce and it will become a multi-billion dollar market overnight.
Two Stimulus Events Coming Soon
This month I’m hosting two events on the new stimulus package announced. The first is on January 21st with the Punjabi Chamber of Commerce for the New York regions. The second on January 27th, with TiE New Jersey to discuss the latest New Jersey tax policies. This is a continuation from my previous stimulus related event we held last spring.
The panelists include tech executives, bankers, and the team from the NJEDA. We’ll cover a variety of topics for small businesses again. This time it will include tax credits, how to buy operating losses, and Evergreen fund launched in New Jersey.
Your Investment Checklist
Starting today I'll begin adding due diligence questions that may help you when making an investment. This may be a good way to get insight into the world of finance. Plus it'll help you think outside of the box.
First up, Do you understand the product or service offered by the company?
Simple yet elegant. People make dozens of investments into stocks, real estate and other businesses but may never understand true customer demand. Yesterday I posted about the transition of the Intel CEO. The primary reason for this change was the shift from a business CEO to an engineering CEO. An executive who understands technology and consumer demand will have a better time building the best products. I believe investors need to have a good understanding of a company's product too.
For example, Tesla and Nikola Motors are both in the electric vehicle industry. But one company sells +500k cars and the other hasn’t released a single product. Yet both companies are worth billions of dollars of dollars. If you were to invest in either company, you may want to test drive both the electric cars. But you would immediately find out that Nikola has nothing to offer and may not be worth billions of dollars….
Follow the Oracle of Omaha
So to begin, ask yourself if you would buy the product. If the answer is no, then pass on the deal. Warren Buffett has the same strategy for Berkshire.
You want to invest within your circle of competence. Although it can be easy to fall out of your lane if you like shiny products. To start I recommend investigating one idea. For example, let’s use Tesla again. Have you test driven an electric car? Do you know somebody who owns the car? If not, these are steps you can to begin your due diligence.
It’s best to begin this process from the ground up. You wont understand a product by reading the news. Go touch and feel the product yourself. If the product is a rocket ship, then accelerate your investment decision and buy stock.
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