Joel's Notes: API Economy, Crypto Cities, Deep Job Platforms
Plus: Crypto and Social Buzzwords and Metaverse
Joel’s Notes section is a once in a week or so emailer of excerpts and notes from articles and reports about trends, technology, startups and business models. I also frequently write about High Potential Startups in this newsletter - check out my write ups on MicroAcquire, Plum Insurance, Lean Financial, Maven.
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API-First Businesses
I’ve been a little late to understand how transformational this is but we will be living in a digital economy powered by APIs. Packy McCormick wrote a great definitive article that I highly recommend.
When a company chooses to plug in a third-party API, it’s essentially deciding to hire that entire company to handle a whole function within its business. Imagine copying in some code and getting the Collison brothers to run your Finance team. Just like in traditional hiring, the impact of that decision compounds over time, for better or for worse, but at full company scale.
…“There’s an app for that” is now “there’s an API for that.” For almost anything that a business needs to do, there’s an API-first company with a product or suite of products they can plug in. What’s incredible to me about this graphic is that each logo represents something that a company would have had to build on its own previously, that it can now do by writing a few lines of code, and do better than they would have ever been able to in-house.
There are two main reasons for that: focus and scale.
Focus. API-first companies focus on solving a very specific problem. Stripe started with payments, and put all of their efforts into building the best payments solution. Twilio started with messaging and calling. Plaid does bank data, Algolia does search, Shippo does shipping, Checkr does background checks. That focus means that everything the company does is oriented towards solving all of the problems related to that particular area.
Importantly, it means that everyone who works for those companies went there to solve those problems. Whereas an engineer at Uber who signed up to change transportation would be pissed off if she were assigned to work on background checks, because it’s not the company’s core product, an engineer at Checkr is stoked to work on background checks, because that’s what the company is all about!
Scale. API-first companies serve thousands or millions of customers, so they’re able to justify small improvements that build up to an incredible product over time. Plaid can spend the effort to integrate with even very small financial institutions, for example, since there will likely be thousands of people who use that bank across all of the products that use Plaid.
API-first companies’ focus and scale give their software-building customers best-in-class products that constantly improve at costs that scale with their business. From the product side, they can be godsends. They’re also fascinating strategically in two ways: the competitive advantages of the API-first companies themselves and the impact they have on their customers’ competitive advantages. Let’s start with their customers.
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Crypto Cities
Vitalik Buterin (Ethereum) has painted a vision on how cities and their governance can be transformed using Crypto. Also gives the reader a good overview of various ‘crypto cities’ efforts happening around the world. Worth reading in its entirety.
I would argue that there are two distinct categories of blockchain ideas that make sense:
Using blockchains to create more trusted, transparent and verifiable versions of existing processes.
Using blockchains to implement new and experimental forms of ownership for land and other scarce assets, as well as new and experimental forms of democratic governance.
There's a natural fit between blockchains and both of these categories. Anything happening on a blockchain is very easy to publicly verify, with lots of ready-made freely available tools to help people do that. Any application built on a blockchain can immediately plug in to and interface with other applications in the entire global blockchain ecosystem. Blockchain-based systems are efficient in a way that paper is not, and publicly verifiable in a way that centralized computing systems are not - a necessary combination if you want to, say, make a new form of voting that allows citizens to give high-volume real-time feedback on hundreds or thousands of different issues.
First, let's start with some possible objectives. Not all are necessary; a token that accomplishes only three of the five is already a big step forward. But we'll try to hit as many of them as possible:
Get sustainable sources of revenue for the government. The city token economic model should avoid redirecting existing tax revenue; instead, it should find new sources of revenue.
Create economic alignment between residents and the city. This means first of all that the coin itself should clearly become more valuable as the city becomes more attractive. But it also means that the economics should actively encourage residents to hold the coin more than faraway hedge funds.
Promote saving and wealth-building. Home ownership does this: as home owners make mortgage payments, they build up their net worth by default. City tokens could do this too, making it attractive to accumulate coins over time, and even gamifying the experience.
Encourage more pro-social activity, such as positive actions that help the city and more sustainable use of resources.
Be egalitarian. Don't unduly favor wealthy people over poor people (as badly designed economic mechanisms often do accidentally). A token's divisibility, avoiding a sharp binary divide between haves and have-nots, does a lot already, but we can go further, eg. by allocating a large portion of new issuance to residents as a UBI.
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Deep Job Platforms
A16Z has an interesting thesis on ‘Deep Jobs Platforms’. Basically there are multiple jobs/roles for which traditional horizontal hiring platforms like LinkedIn are not good for. When these roles employ millions of people, there is potential to build a large ‘Deep Job Platform’ that does more than just ‘job matching’ - there can be compliance, vetting, payments, community and a lot more.
One example of a Deep Job Platform is Incredible Health - a hiring platform for nurses in the US. Nursing is a category in which a Deep Job Platform makes sense: There are 4mn to 5mn nurses in the US and the hiring needs are very complex and involves a lot of compliance and vetting.
Incredible Health not only matches nurses and hospitals but helps nurses upskill and get credentials for free or at low cost. The company is on a rocket ship trajectory.
This is a major moment for the platform, which raised its Series A financing round 18 months ago and has seen rapid expansion. Since the Series A, the company saw a 1000% increase in revenue, a 500% increase in nurse job placements, 100% customer retention, and net revenue retention of 200%, as existing customers doubled their hiring and spend on the platform.
At the end of 2019, Incredible Health was only available in Texas and California. Today, more than 350 hospitals nationwide, including major health systems such as Johns Hopkins Health System, HCA Healthcare, Stanford Health Care, Kaiser Permanente, Providence St. Joseph, Jefferson Health, Houston Methodist, Cedars-Sinai Medical Center and many others rely on Incredible Health to hire the best permanent nursing staff. Hospitals send an interview request every four minutes on the platform, flipping the script and giving healthcare workers unprecedented control over their careers.
I think this thesis will continue to play out in multiple roles. We will be seeing a clear unbundling of LinkedIn and the creation of multiple billion-dollar new job platforms.
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Buzzword Explainers in Social and Crypto
Red Woodbury has written a great piece covering many buzzword themes being talked about today in Social and Crypto and many of which in my view will be very impactful. Read here.
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Twitter Thread: What is Metaverse
An excellent twitter thread by Shaan Puri on what is Metaverse and why.
Every important part of life is going digital.
Work --> from factories to laptops. boardrooms to zooms.
Friends --> from neighbors to followers. Where do you find like minded people? Twitter. Reddit. etc.
Games --> more kids play fortnite than basketball & football combined.
Identity --> filters are the new makeup. Stories are your personal billboard to broadcast who you are.
Everything goes digital. Your friends, your job, your identity.
And now with crypto, your assets are online too.
Bored Apes are the new Rolex.
Fortnite skins are the new skinny jeans.
If everyone hangs out online all the time, then your flexes need to be digital.
So if you play this forward another 10-20 years - we will cross into the metaverse
The moment in time where digital matters more to us than physical.
So if you play this forward another 10-20 years - we will cross into the metaverse
The moment in time where digital matters more to us than physical.
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That’s it for today. There are a bunch of High Potential Startups I have been reading on. Will share writeups on them in the coming weeks.