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Jon Bradshaw & Peter Harris

Peter Harris shares an update on what investments his firm, University Growth Fund, has made in the recent months of 2021.

2021 Investment Updates for University Growth Fund

Peter Harris shares an update on what investments his firm, University Growth Fund, has made in the recent months of 2021.

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Episode Transcript

Jon: Hey, so, Peter, I know it's been, like, about a month. What big things have been happening? Your space. I do see a new logo on the wall. Gorillas back here. What do you think about the hyper localized delivery space?
Peter: Yeah, I think it's super fascinating. So we just invested in gorillas. What they do is they will deliver anything from, like, a convenience store in 10 minutes or less, and the delivery charge is really low. And the way they do that is they have these small warehouses and they have lots of them all over the city. So they operate today in Europe.
Peter: So they'll have these warehouses everywhere. And then they just have people on bicycles.
Jon: I was wondering why I hadn't heard of them. Is it gorillas? Dot EU?
Peter: I don't remember the address. Okay. I think it's just gorillas.
Jon: But how would they be different from like an Amazon competitor here?
Peter: Big competitor in the U.S. is probably Instacart and also Gopuff. The big difference is, is that Gopuff and especially Instacart, they don't go to a localized warehouse that's owned by the company. They go to the grocery store. And so when you add in this layer of like. Okay, I got to go to the grocery store, I'm going to load everything up at the grocery store.
Peter: And then I got to haul it all over to this person's place. That's like a minimum, like 45 minutes. But if you have the warehouse and it's really close because you're in a, you know, urban environment with dense populations, they don't have to go very far. Right. It's it's a few blocks. And if you limit the things that they're buying to convenience store items, so so sodas, chips, milk, eggs, that kind of stuff, then you can you can operate out of these really small warehouses and you can do delivery really fast.
Peter: And so all of it and you can do it at very low cost per per delivery. Right. Because you're not taking 40 minutes of somebody else's time. You're only taking like 10 minutes. And so what you have is like, yeah, I kind of feel like I want a Coke right now and it's going to cost me like, you know, the $2 for the Coke plus a dollar delivery fee.
Peter: I'm going to do that.
Jon: And a person delivers it.
Peter: And a person delivers it. Yep. And you get it. 10 minutes.
Jon: Every time.
Peter: Every time. Okay. So what's happened? What's fascinating is that people start using they try it out once or twice, whatever, and then they get hooked. Right now, like, man, I'm hungry. I could really go for blah, blah, blah. But I don't want to wait 2 hours for it to show up if I use like Uber Eats or I use DoorDash or some of these others.
Peter: Which is interesting though, as DoorDash knows this. And so if you pay attention when you're driving around in some of their larger urban environments, you can actually see what are called dark stores, which is a mini warehouse where DoorDash is now starting to offer the same service. So it's kind of this new l'évolution and what's happening with on demand delivery that I think is super fascinating.
Jon: Will drone delivery ever be a thing?
Peter: I think it could be, but I think there are so many things we got to figure out before it is that I think it's a ways out. I mean, there's a regulatory, there's a technology, there's the actual just like mechanics of how it all works.
Jon: How safe it actually.
Peter: Is. How safe is it? Yeah, You know, I think it's already functioning in certain environments. Like I know there are companies that deliver like medical supplies via drone in Africa because you can deliver medical supplies very quickly in, you know, high need situations via drone that would be very, very difficult to do any other way. So like, clearly it can work.
Peter: Can it work at like at scale and everything else? I don't know. Probably someday.
Jon: Okay. What about some of these other logos on your wall? Maybe stop asking my question. We should go through. What are the new logos? Why did you make these investments? Let's pull of your investment thesis. I saw you had one from 2012. There. Look really interesting.
Peter: That's a really old one. So we just also invested in a company called Arcadia down there in the corner. They have a really interesting solution around solar and community solar. So what happens is in the U.S., if you don't own your home or you don't live in a place with a lot of sunlight or your roof is not optimally positioned for the sun, or you live in an apartment or a condo, solar is not really an option for you, like on the roof solar.
Peter: And so there's that disconnect, right? There are people that want access to solar power because they want the cost savings and they want the environmental feel good story about it and.
Jon: The tax benefits. Right.
Peter: Well, and maybe they want tax benefits where they're included. So you have that issue on one hand. And then on the other issue, you have this whole new concept was not super new, but this thing called community solar, where a developer would go in, they buy a track tracker land, they dump a bunch of solar panels on there and they connect it up to the grid.
Peter: They now need to sell that power to consumers, whether they're businesses or residential. And so what Arcadia does is they become the link between those two. They work with the solar developers and sign them up and then they go and work with them, just people on the residential space and they get them signed up. And the benefit is you get the cost savings of using solar.
Peter: If you live in a condo and you're able to point to, Hey, my power comes from this community solar farm and the community solar farm is able to sell their power and then Arcadia sits in between and becomes kind of the payment gateway between the.
Jon: Two of them are the solar farms or the community. Solar farms nearby, or what could it in theory be in another state?
Peter: Theoretically, it could be in another state, but for the most part they are somewhat close. Yeah. Okay. Yeah. Now they do also have another program where they actually charge a fee to. So it's not really a cost savings thing, but you do get to say like, Hey, my power is supplied by solar and that's a nationwide product that's also been really effective for them as well.
Jon: Okay. What was the deciding factor for each for guerilla and Arcadia? Was there like one or two, like points where you said we invested because we saw, you know, our growth of 200 plus percent per year for the last three years. Was it just.
Peter: Guerrillas? The thing that really sealed it for us is that people love the product. Scores are incredibly high people, but the more telling factor is not like an MPC score. It's that people come back and they buy again and again and again and they buy more every subsequent time. So that was like kind of the big thing for gorillas is like this is a service people really, really love, right?
Peter: I think for Arcadia there are a lot of things, but for the most part it was just like, Hey, this is like the future, right? They are solving a massive pain point on two sides of this marketplace. And from what we can tell, they are the leader in the space doing it. And and so yeah, that's kind of how we got conviction there.
Peter: And what you're seeing is like there's some regulatory issues that Arcadia faces as this whole community solar thing starts to really take off. But the trends are that, you know, the tailwinds are all in their favor, right? Every state is opening up more and doing more with alternative energy and renewable energy and those types of things. So it just seemed like, hey, everything's headed this way and this appears to be the lead horse, so let's bet on that on them.
Jon: If you had to pick the future of clean energy, would you pick solar? Would you pick nuclear?
Peter: I think both have a very important role to play. I have solar on my roof. That said, I think nuclear is a is a really good option and probably a superior one that we should take more seriously than we currently do, but for a lot of reasons, fear and regulatory and so on and so forth, we're probably not using it to its maximum potential and I don't know if that ultimately changes.
Jon: Okay.
Peter: In which case I think solar, you know, becomes probably a more dominant long term solution.
Jon: Perfect. What other logos are going to pop up on your wall? Are there more.
Peter: So other deals that we're really excited about that are new or we invest in a company called Trade X? Okay. Trade X is solving the global inefficiencies that exist within global auto trade. So if you live in Nigeria, for example, there are no cars manufactured that I know of in Africa. Everything has to be imported. You can think about like what are the challenges of getting a car in Nigeria?
Peter: Well, you got to go to a market that has cars, right? So maybe you go to China, maybe you go to the U.S. I mean, you go to Europe, you then have to pay the money upfront, right? Because people aren't going to trust you with credit. Most likely right by the car. You've got to ship it to Nigeria.
Peter: You have to get it through customs duties. You have to have it registered and on the road right before you can start using it. And and so these vehicles, they end up costing as much as like two times what they would cost in a more developed market. What trade X is doing is basically saying, hey, look, we'll handle all of that for you.
Peter: We'll bring the cars to you, you buy them from us and country, and thereby they can reduce the cost of that vehicle drastically compared to what be through kind of traditional sourcing methods. But it's still higher than what it would sell for in a domestic in a more market like the U.S. or like Europe. And so they they're able to make money on that arbitrage opportunity, if that makes sense.
Peter: And so they're opening it up because there are all these vehicles that all around the world that are more valuable in some markets than others. And they're basically unlocking all of that value by creating a platform that makes it very easy to buy and sell cars internationally.
Jon: And you said there's no ones manufacturing cars in Africa that you're aware of. That I'm aware like blows my mind.
Peter: Yeah, it's kind of crazy. Guess how many people live in Nigeria. I didn't know this half million.
Jon: Half a billion.
Peter: Sorry. Well, anyways, there's 200 million people in Nigeria, okay? And in a country that's like the size of it's like smaller than Texas. Okay. And no cars manufactured there.
Jon: Crazy.
Peter: So you can think about, like, the demand that exists. And that's just Nigeria. That's like, let alone Kenya, South Africa, Zambia. I mean, all those other countries, right? There's, I believe, 1.2 billion people that live in Africa. So there's huge markets. And it's not just Africa and South America. It's it's Southeast Asia. There's a huge trade just between the U.S. and Canada where they're huge efficiencies.
Peter: Right. So that's great access. That's what they do. Really excited about what they're doing and their growth is phenomenal.
Jon: And you've got to build up there. I know, Darrell, do come, Darrell or Kevin? Darrell, Darrell.
Peter: What do you know all about Darrell and Tyler? Why don't you tell us?
Jon: I don't know all about them. Love Darrell as a friend. I wish he was a better friend. Not that he's a bad friend, but just talk him off wrong where he's like as. So the way I would put it, Darrell, is as you you know, as we left BYU, I don't think I took him as seriously as I should have because, you know, you've got your clicks of like people who are wannabe entrepreneurs.
Jon: And then Darrell was the quiet person quietly doing this. I think he had a he had a kiosk business at weddings. He was actually probably one of the the few entrepreneur students who were actually he was actually an actual doer. And I met him at a pitch conference right towards the end of graduate. But I wish I would have like been more friends with him then.
Jon: I'm the one who introduced him to Lucid chart, so I think I should get like a finder's fee for that. He made some pretty coin there, but tailed the way I look at Tyler. What can I say or not say? The way I look at Tailed is the things and the vision he had for lucid. He is rolling forward entitled be a fair?
Peter: Yeah, I think so. I mean Tiled is a really interesting platform. So if you think about how content is created and then distributed, one of the big innovations is the PDF write that Adobe really pioneered. And what Tyler is trying to do is bring PDFs into the 21st century by saying, okay, we don't live in a stagnant static environment like a PDF, right?
Peter: We live in a dynamic environment today where we're used to videos and polls and pictures and and the ability to manipulate content on the fly. And so that's what Tyler is building. They're building this low code, no code solution that allows people to create highly engaging, dynamic content that served in a platform that's similar to a PDF in that like a designer can come in, they can create an amazing piece of content that's highly interactive, and then they can push it out to thousands, millions of people to consume that content and they can make changes quickly on the fly.
Jon: How are they different than Prezi?
Peter: So Prezi, I mean.
Jon: Because he's like the one in my mind. You're the PowerPoint for years. And then at least when I was in college I became big. And then since then I apologize. Darrell I don't use, I don't use tiled. But my understand it's more for like Salesforce is at larger companies like Vivint where they want to control, where they want to change content on the fly.
Jon: Hey, there's a new alert or something happens. Instead of chasing down every PDF, they can just change everything retroactively. And so I don't think I mean, the ideal market space right now for what tile is targeting.
Peter: Yeah, I mean, you're probably not right and you're right. Like that is some of the functionality is the ability to make changes to that content on the fly and in effect those changes for thousands of people that are viewing and consuming that content. But there's also an element of like the content delivery through it, through tiled is so much better than just a standard PDF, right?
Peter: Like I can click and see videos, I can I can manipulate some of the data, I can move through it and navigate through it in a way that's more like a website type experience rather than just scrolling.
Jon: Why would I just not create a Shopify store or not like a Shopify but like a square site?
Peter: So why not just create a website period? Right. Well, the problem though is that if you create a website, you have to have connection to the Internet. Okay? You may have to have some sort of restrictions on who can see it. How do you make it more how do you create every website to be personalized and individual? Right?
Peter: So there certainly a lot of similarities to having a website, but there's a lot more control and customization and individualization that occurs with tiled and tiled.
Jon: Why did you invest? Are you looking for like, what was it that media that pushed you over the edge?
Peter: So we're tiled again. This is kind of like Arcadia and that, you know, we looked at everything that was happening and said, Hey, this seems to be the future, right? Like PDFs, you know, ten years from now are PDFs really going to be the way that we consume content, or are there going to be other content delivery forms that are more interactive, more engaging, more like what we're used to seeing everywhere else than a PDF?
Peter: And it seemed like that's the direction that everything's every everything is heading. And so we're tiled, you know, they've built a really compelling product. They've got incredible customers and growth there. And then they have support from, from large companies like Adobe who have actually put money behind the company and said, hey, you know, we think what they're doing is super interesting and has the potential to be majorly disruptive as this kind of like new content delivery methodology.
Jon: Okay. Combined all three of them, how much revenue are they doing That way you can still be anonymous. The people want to know. I want to know, but you guys do later stage. Every company on there probably is doing north of million in revenue per year right?
Peter: Yeah, they're all doing north of a million.
Jon: Are they doing.
Peter: Somewhere between a million and a billion in revenue.
Jon: A million and a bit. You got it. Like this is like the population of Nigeria. We got to like narrow it down.
Peter: They're all doing very well.
Jon: Why are you so confidential with that.
Peter: Number in this case? Because I'm actually friends with all of them.
Jon: Okay, that's fair.
Peter: The other two deals we did that are kind of fun is a company called Car Putty and then next insurance. So a lot of a lot of people may be familiar next insurance. It's if you're a small business, you need insurance, business, insurance. Next is a really fast, easy and affordable way to get insurance.
Jon: Coverage so I can get my Adobe insurance directors and executive insurance.
Peter: Yeah I think they offer that and just general liability, those types of things.
Jon: Those are some of the internal discussions I could face this past month.
Peter: I should check out next. Okay. And then car party is super interesting. So they are trying to disrupt auto financing.
Jon: Okay.
Peter: So if you look in fintech, this is really interesting. Everyone has really focused on like discretionary credit mortgages, right? Like all these other things. Nobody spend a lot of time on auto financing, and yet auto financing is gigantic. It is like this massive, massive market in terms of the volume of loans that go out every year. And there really has been like zero innovation.
Peter: And so that's what Car Party is doing. It's it's a some of the founding team of Sofi plus the CEO who is who's owned a number of Nissan dealerships and bring and so it's the marriage of like his expertise running dealerships and understanding the auto industry from soup to nuts as well as the team from Sofi who understands you know, fintech and how to bring products to market.
Peter: And what they're doing is they're creating an auto line of credit. So rather than every time you buy a car, you go through the process of applying for a loan, getting a loan, and then buying the car. Right. Whether you do it through the dealership or you get your own financing, what they do is you apply once they give you a line of credit, you know, it's 50000 to 100000, whatever you qualify for based on your income.
Peter: And then you can just walk into the dealership and say, I want to buy that car all cash. Right. And use your line of credit to pay for the car. Okay. And then what they do, which I think is super interesting, is they'll pull a ton of data on the car you just buy and they'll keep you updated on the value of the car over time.
Peter: So if the car is going to hit a valuation cliff, they'll notify you and say, Hey, John, you know that rap for you. But it's really cool. But it's going to hit this valuation cliff where it's going to drop in value like in three months. You may want to sell it now before it hits that cliff and then go buy something else with it.
Peter: Okay. So they provide all this like really interesting data to help you make better informed decisions, both when you purchase as well as like when you come off of a lease, for example, should you buy out the lease or not? Right. They'll give you the data you need to know for that and then you only apply once for this line of credit.
Peter: So, you know, you sell the car and use the line of credit to buy something else. So it makes it really easy.
Jon: They focus in on the new car market or the used car market.
Peter: Both.
Jon: Okay. How has COVID affected them? Because I know some other players in the space and it just devastated their business. Like if you drive by, most dealers don't have inventory. And when we purchase a car from my wife, like it was almost like, show me, you know, give me a sheet of what cars are coming in in the next two months.
Jon: And then we're going to go look, we're going to test drive something similar. And then by that, by the time we come back after test driving, a lot of those cars have been picked off.
Peter: Yeah.
Jon: Even with like 30 minutes. Like it's crazy right now.
Peter: Yeah, it is nuts. There's huge supply shortages, you know, for them, they just barely started. So they're relatively new company. They're working on refinancing your car, so allowing you to get into a better rate. They're working on lease buyouts. So helping people kind of decide whether or not they want to buy out that lease and then helping people that want to buy new cars.
Jon: Yeah. Blossom. Well, it sounds like you've had a busy quarter. Are these busy have this all been done in the third quarter?
Peter: Yeah.
Jon: Okay. Well, congrats. Thanks. All right. Well, let's wrap up this podcast. Join us next week as we talk through different VC related questions. This is Peter Harris University Growth Fund. Thanks for watching like and subscribe. Thanks, guys.