Joel's Notes: Fast Funding of Science, VC for Individuals, Buy Nothing Groups and more
Plus: Walmart Drone Delivery, Stay at Home Stocks fall and the Government Unicorn
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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Fast Grants: Fast Funding Science
We need to fund more scientific research and fund them faster than we do now. Fast Grants was an interesting experiment. The org provided $10k to $500k in funding and decisions were available within 14 days.
From Atlantic:
Last year, in the chaotic opening innings of the coronavirus pandemic, the George Mason University economist Tyler Cowen and Patrick Collison, the CEO of the payment-processing company Stripe, co-founded a new program for quickly funding scientific research on COVID-19. They called it Fast Grants. Pulling together a small team of early-career scientists to vet several thousand ideas, they sent out the first round of money in about 48 hours. In 2020, they raised more than $50 million and awarded more than 260 grants that supported research on saliva-based tests, long COVID, and clinical trials for repurposed drugs—including fluvoxamine.
Most scientific funding in the United States flows from federal agencies such as the National Institutes of Health and the National Science Foundation. This funding is famously luxurious; the NIH and NSF allocate about $50 billion a year. It is also infamously laborious and slow. Scientists spend up to 40 percent of their time working on research grants rather than on research. And funding agencies sometimes take seven months (or longer) to review an application, respond, or request a resubmission. Anything we can do to accelerate the grant-application process could hugely increase the productivity of science.
They also have subtle costs in creativity. The NIH’s pre-grant peer-review process requires that many reviewers approve of an application. This consensus-oriented style can be a check against novelty—what if one scientist sees extraordinary promise in a wacky idea but the rest of the board sees only its wackiness? The sheer amount of work required to get a grant also penalizes radical creativity. Many scientists, anticipating the turgidity and conservatism of the NIH’s approval system, apply for projects that they anticipate will appeal to the board rather than pour their energies into a truly new idea that, after a 500-day waiting period, might get rejected. This is happening in an academic industry where securing NIH funding can be make-or-break: Since the 1960s, doctoral programs have gotten longer and longer, while the share of Ph.D. holders getting tenure has declined by 40 percent.
Fast Grants aimed to solve the speed problem in several ways. Its application process was designed to take half an hour, and many funding decisions were made within a few days. This wasn’t business as usual. It was Operation Warp Speed for science.
In a survey of researchers who received Fast Grants, almost 80 percent said that they would change their focus “a lot” if they could deploy their grant money however they liked; more than 60 percent said they would pursue work outside their field of expertise, against the norms of the NIH.
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VC Funding for Individuals
Slow Ventures has started investing directly in individuals rather than a company with an income share agreement (which doesn’t kick in until the creator earns a minimum amount of money). It’s an interesting model and gives creative highly talented individuals a large sum of money they can use to accelerate outcomes.
From Vice:
And as the creator economy began to evolve into a real industry in recent years, he saw his chance to put his idea into motion. Earlier this year, his venture firm, Slow Ventures, set aside $20 million to invest in creators themselves. Now the firm has gone and done it, joining a few individual investors in spending $1.7 million in the future of Marina Mogilko, a 31-year-old YouTube personality with multiple popular channels that touch on topics like life in Silicon Valley and learning new languages.
Mogilko is free to do whatever she wants with the money, which she received right away, she told me. “This is the Silicon Valley approach to investing in people,” Mogilko said. “Here in Silicon Valley, people are just betting on you to become the next unicorn, and they don't want to control your journey.” In exchange, Mogilko enters into what Lessin described as a “career-long deal,” forking over 5 percent of her creator-related earnings for the next 30 years, plus a percentage from any IP she develops, even beyond that three-decade timeline.
There are a few notable caveats. Slow Ventures and its fellow investors don’t start taking back a percentage unless she’s making good money—in the range of “hundreds of thousands of dollars,” Lessin told me, adding that number will adjust with inflation as well. (“We don't want to make this a burden to people who can't afford it,” Lessin said.) And the investors only get a percentage of the money she earns as a creator, which leads to some squishy definitional questions, best explained to me like this: If she decides to become a lawyer or flames out, she can take the $1.7 million with her, no questions asked. But if she gets a Netflix deal or a job with YouTube related to the creator economy, she still forks over 5 percent.
Lessin thinks applying the venture model is a “super powerful” idea, allowing talented young people to obtain upfront venture financing and grow their careers and invest in one another instead of operating off of their cash flow or entering into contracts to take on debt. “Debt, you need to get repaid. Because the model is predicated on really getting repaid,” Lessin said. “VC, the model really is … 80 percent of things are write-offs, 20 percent work, and then 5 percent drive everything.” He envisions a world where there will be a “full capital ecosystem for this type of investing for sure,” complete with multiple rounds for the next hot human.
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Stay-at-Home Stocks fall as people go out
Stocks like Zoom and Peleton fell while events ticketing platform Livenation and fitness centers operator Planet Fitness have surged. Zoom is still 4x vs. Mar’20 while Peleton is very close to where it was in Mar’20.
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Rivian - The Government Unicorn
Rivian, the electric vehicle maker recently went public and is currently valued at around 100bn USD. By any reasonable metric comparison, the valuation seems insanely euphoric. As Wall Street Journal notes, the likely reason is due to too much money sloshing around with endless quantitative easing in the past decade.
We live in the age of free money and endless government subsidy, which is the only way to explain the $100 billion public stock offering by Rivian this week. The electric truck maker has delivered a mere 156 vehicles, but investors are betting government won’t let it fail.
Twelve-year-old Rivian is being hailed as the next Tesla. Yet when Tesla went public in 2010 it reported $93 million in revenue and was valued at $1.7 billion. Rivian’s sales are almost all to its own employees and it projected at most $1 million in revenue in the third quarter. On Wednesday it nonetheless raised nearly $12 billion. Shares later surged as euphoric investors rushed in, and at $120.5 billion Rivian is the fifth largest auto maker in the world by market value. Ponder that one.
General Motors recorded $122 billion in revenue and sold 6.8 million vehicles last year. Its market cap: $89 billion. CEO Mary Barra seems baffled by the market disparity
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Buy Nothing Groups
The Internet enables community formation at scale. One interesting trend is what is called ‘Buy Nothing Groups’ where people can dispose off what they don’t need for free and can also ask large groups of people for something they need. The ‘buyer’ usually picks up the item from the ‘seller’. One of the largest groups is the Buy Nothing Project which boasts more than 4mn members.
From WSJ:
Millions of people are joining groups that help them acquire the things they need—without paying a cent.
With inflation hitting a 31-year high and supply-chain issues making it difficult for people to get the goods they want on time, some have found an answer in online groups where members give things away free. Such groups have risen in popularity in recent months, and one effort known as the Buy Nothing Project hit 4.27 million members as of August.
Members post items to give away or lend, or post for items they are seeking. Items in Buy Nothing groups range from food to furniture to, in at least one case, hair clippings. Buying, selling and bartering aren’t allowed. Most groups are hosted on Facebook.
The growth of these groups now is partly fueled by people’s desire to reduce waste, connect with neighbors and trim some spending as consumer prices rise sharply. Members may check out their local group for items, such as children’s toys, for which they may have limited use. Or they may log on to see if items they need—say accent pillows or a cellphone charger—are available before ordering one on Amazon.com Inc.
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Walmart Drone Delivery Pilot
Walmart and drone maker Zipline announced a drone delivery service in Arkansas.
From Axios:
Starting today, drones shaped like miniature airplanes will drop packages of 4 pounds or less in customers' yards when they order from a Walmart Neighborhood Market in Northwest Arkansas.
Walmart and its partner, the drone-maker Zipline, announced their new service Thursday. It will operate from a 25-foot takeoff and landing platform behind a Neighborhood Market in rural Pea Ridge, Arkansas, about 20 minutes from the retailer's home office.
The companies will use the results of the trial program to figure out how — or if — to expand the service to other markets.
Customers within the service area place and schedule an online order — for now, nonprescription drugstore items and some types of (lightweight) food are allowed. A Walmart employee bundles it up and hands it off to a Zipline staffer.
Zipline preps and launches the drone, which drops the package with a biodegradable parachute. The drone returns to the platform for another order.
Officials told Axios that packages consistently land in an area the size of two parking spots.
Zipline preps and launches the drone, which drops the package with a biodegradable parachute. The drone returns to the platform for another order.
Officials told Axios that packages consistently land in an area the size of two parking spots.