Saying No to Venture Capital

Today’s Highlights: VCs discover women’s health. Calls grow to abandon regulations. And should you ask customers to prove they’ve been vaccinated?

VENTURE CAPITAL

Jason Fried, CEO of Basecamp, says he has no idea what Basecamp is worth: “The last time I considered Basecamp’s valuation was nearly 15 years ago. At that point, we'd been approached by dozens of VC firms looking to invest. But with a solid product, a growing consumer base, and increasing profitability, we didn’t entertain any offers. Then, in 2006, I got an email from Jeff Bezos’s personal assistant. Jeff wanted to meet. I took the meeting. After a visit to Seattle and a few more calls, Jeff bought a small piece of our company. We didn’t take the cash to turn Basecamp into something — we took risk off the table so we could keep it the same. In the years since, we’ve been approached by literally hundreds of private investors, VCs, and private equity firms. They want to put money into our company, but we don’t want it. It’s not hubris; it’s the cost that comes with the cash.”

• “Years ago, during the investment discussion with Jeff, we had to place a financial value on our company. The process of constructing a valuation was pretty silly, to be honest.”

• “We drew up charts, made some educated guesses, negotiated back and forth, and ultimately came up with a figure. We made it up, as everyone does.” READ MORE

Venture capitalists decide the next big thing in health care is health care for women: “In 2019, the ‘femtech’ industry — software and technology companies addressing women’s biological needs — generated $820.6 million in global revenue and received $592 million in venture capital investment, according to PitchBook, a financial data and research company. That same year, the ride-sharing app Uber alone raised $8.1 billion in an initial public offering. The difference in scale is staggering, especially when women spend an estimated $500 billion a year on medical expenses, according to PitchBook. Tapping into that spending power, a multitude of apps and tech companies have sprung up in the last decade to address women’s needs, including tracking menstruation and fertility, and offering solutions for pregnancy, breastfeeding and menopause. Medical start-ups also have stepped in to prevent or manage serious conditions such as cancer.”

• “‘The market potential is huge,’ said Michelle Tempest, a partner at the London-based health care consultancy Candesic and a psychiatrist by training. ‘There’s definitely an increasing appetite for anything in the world which is technology, and a realization that female consumer power has arrived — and that it’s arrived in health care.’” READ MORE

REGULATION

Calls are growing to completely abandon hundreds of regulations that were eased during the pandemic: “Lawmakers in Texas and at least 19 other states that let bars and restaurants sell to-go cocktails during the pandemic are moving to make those allowances permanent. Many states that made it easier for healthcare providers to work across state lines are considering bills to indefinitely ease interstate licensing rules. Lawmakers in Washington are pushing for Medicare to extend its policy of reimbursing for certain telehealth visits. States also are trying to lock in pandemic rules that spawned new online services, from document notarization to marijuana sales. Deregulation has long been a central tenet among Republican politicians, but many of the coronavirus-inspired changes have gained bipartisan support.”

• “‘I’m a Democrat. I’m not instinctively anti-regulation. But I think this pandemic reminds us that some regulations are from a bygone era and make no sense for anyone anymore,’’ said Sen. Brian Schatz (D., Hawaii), who is leading Senate efforts to permanently expand Medicare coverage for telehealth.”

• “Similarly, Republican Gov. Mike Dunleavy of Alaska said in his state of the state speech in January: ‘If a regulation needs to be suspended during a crisis, we have to ask ourselves, why was it there in the first place, and can we live without it?’”

• “The deregulation push is spawning a counter-effort by businesses and professional associations that stand to lose from the changes. Liquor and convenience stores, which take a financial hit when restaurants offer alcohol to go, are lobbying to prevent the long-term loosening of takeout booze rules.”  READ MORE

MARKETING

Amazon has seized more than 10 percent of the digital advertising market: “The report predicts that Amazon will continue to inch up on market leaders Google, part of Alphabet, and Facebook, a sign brands are increasingly turning to the e-commerce giant to help them reach an expanding base of online shoppers. Amazon’s U.S. ad revenue last year grew to $15.73 billion, up 52.5 percent from 2019, eMarketer estimates. The company’s U.S. digital ad share is still small relative to Google and Facebook’s, which accounted for 28.9 percent and 25.2 percent of the business, respectively, in 2020, according to the report.”

• “Nearly 90 percent of Amazon’s ad revenue was driven by ads that appeared on the company’s e-commerce platform, with search ads for sponsored products and brands accounting for a large percentage of that revenue, the report says.”

• “The company generates a smaller portion of ad revenue on its properties—such as Fire TV, a streaming media player, Twitch, a live streaming platform for gamers, and IMDb TV, an ad-supported streaming service—as well as from ads sold through Amazon’s advertising technology to run on other platforms.” READ MORE

REOPENING

Should you ask customers to prove they have been vaccinated? “In most states, there's legally nothing stopping you from requesting to see a customer's vaccine card, says Carrie Hoffman, a partner and employment lawyer at the Dallas-based law firm Foley & Lardner. On April 2, Florida Governor Ron DeSantis signed an executive order, banning state and local government agencies and businesses from requiring so-called vaccine passports, or documentation proving that an individual has been vaccinated against Covid-19. But everywhere else, checking customers' vaccine cards is up to the employer's discretion, says Hoffman. If people refuse to present vaccine documentation, you don't have to serve them.”

• “Wedding planners are running into this now, says Katherine Frost, CEO and founder of ORO, an all-in-one event planning software company based in Boston. As events start to come back, Frost says couples are leaning on the small vendors they work with to check vaccine cards of the venue staff and the guest list.”

• “Vaccine passports, tech-based proof that you've been vaccinated against Covid-19, may offer more security for businesses interestedin the technology but have yet to be widely adopted by the public.” READ MORE

Assuming there is enough supply of vaccine for everyone 16 and older, California plans to fully reopen its economy on June 15: “At a press conference Tuesday, Gov. Gavin Newsom said getting the vaccine out quickly was the key to reopening. So far, the state has administered more than 20 million doses. The Democrat said he expected that number would reach 30 million by the end of this month. ‘We can confidently say by June 15 that we can start to open up as business as usual, subject to ongoing mask wearing and ongoing vigilance,’ Mr. Newsom said.”

• “Buoyed by the vaccine rollout, California is now seeing an average of five new cases a week per 100,000 residents, down from a peak of more than 100 in January.” READ MORE

Vidiots, a video-rental store in Los Angeles is reopening: “After closing in 2017, Vidiots, the much-loved nonprofit video store formerly based in Santa Monica, will relaunch in Northeast LA early next year. The new store will take over an 11,000-square-foot community space. The revamp will include the restoration of Eagle Rock’s 100-year-old Eagle Theatre, and the additions of a 50,000-title video library plus a cafe. Visitors can see a movie, walk straight into a video store, and get a recommendation based on what they just saw.”

• “The space was set to open last year for the nonprofit’s 35th anniversary — until the COVID-19 pandemic closed down businesses.” READ MORE

Business is picking up at barber shops and salons, but it’s presenting some challenges: “Some Americans worried about contracting Covid-19 indoors skipped routine haircuts and other personal-care services after the pandemic began. With vaccine distribution picking up, and people venturing out, these customers are excitedly returning for cuts, manicures, waxes and facials. The reunions are a welcome boost for an industry that has faced tough restrictions in many states. But the months without the usual maintenance–or worse, botched at-home efforts–are presenting unique professional challenges.”

• “Home haircuts were a fun novelty at the start of the pandemic, but as restrictions dragged on, those do-it-yourself trims often turned into sad hack jobs. ‘A lot of people couldn’t get to the backs and just did the sides. If they tried to do the back it kind of looks like the map of Maine,’ Mr. Aboura said.”

•  Other men, he said, cut the very front of their hair too short but kept the back quite long, leaving them looking ‘like an exotic bird from the Amazon.’”

• “Sometimes Mr. Aboura has to break the bad news to clients that it will take multiple visits to fix their hair: ‘The damage has been done. I am a good barber but I’m not a magician.’” READ MORE

Group tour companies are offering local options: “Americans taking luxury group tours of America is not the norm; those are often designed for travelers going abroad. But with international tourism stalled by travel restrictions and border closures, some American operators are taking the opportunity to sell backyard travel to domestic travelers based on their expertise, secured access to popular things like national park lodges, and practical matters like flexible cancellation policies.”

• “Like a lot of tour operators, DuVine [Cycling + Adventure Co.], best known for food-centric cycling itineraries in Europe, has had to narrow its focus during the pandemic, adding domestic trips in Maui, Aspen, Colo., and New York’s Hudson Valley, among other places.”

• “The outdoor retailer REI is shifting all of its adventure trips to domestic destinations by June.”

• “Abercrombie & Kent, well known for its African safaris, will offer American safaris among its five new stateside itineraries.”

• The globe-trotting operator G Adventures created a “United States of Adventure” collection of 15 domestic itineraries, including three new trips in the Western national parks and Hawaii.” READ MORE

THE 21 HATS PODCAST

Episode 56: God, Loren, You Are Such a Jerk: This week with Paul Downs, William Vanderbloemen, and Laura Zander, the talk leaps from one plague to another—floods, power outages, cyber crime, employee churn, supplier price hikes, and vanished shipping containers—not to mention the actual plague. For Laura, whose wholesale yarn business keeps falling further behind on its orders, these events have necessitated a series of difficult conversations with customers: “They can't get mad about the pandemic,” she tells us. “And they're not going to get mad about the fact that we're moving. And they're not going to get mad about the fact that there's a deep freeze. But at some point, they're going to get tired, whether it's consciously or subconsciously.”

• Plus: a friendly discussion about whether raising your prices makes you a jerk. (Spoiler alert: It does not.)

• You can subscribe to The 21 Hats Podcast wherever you get podcasts.