Black Friday Evidence Retailers Lead With Apple; iPhone X M.I.A.

Conclusion. We meticulously went through Black Friday deals to see how major retailers (Best Buy, Target, Walmart) were using Apple products to drive in-store and online traffic and found discounts ranging between 6%-36%.  Apple also weighed in on Black Friday with their once a year “sale” (gift card) offering of 5-15% savings, inline with Apple’s 2016 Black Friday promo. Not surprising, retailers are taking a loss on many Apple products today and Monday (typically retailers have an average 15% margin on Apple products) to drive traffic and build brand.

iPhone X missing in action. While iPhone 8 is being discounted, we saw no discounting of iPhone X, which remains in tight supply.

Target is most aggressive. Target is offering the most aggressive discounts with their $250 iPhone 8 gift card offer yielding an average savings of 31%, along with other discounts including Watch Series 1 of 20% and iPad of 17%. Best Buy was second most aggressive, discounting iPad by an average of 21%, iPhone’s (excluding iPhone X) by 19%, Watch by 19%, and Macs by 11%. Apple not surprising was third with an average “savings” (gift card) on iPads of 12%, Watches of 10%, Macs of 9%, and iPhones (excluding iPhone X) of 7%. Walmart’s Black Friday Apple discounts were somewhere between confusing and misleading. More below.

Walmart’s mystery Apple deals. At first glance, Walmart seemed to be most aggressive with Apple products on Black Friday, leading with an iPhone SE for $99 ($349 retail) on a Walmart Family Mobile Plan and a $300 Walmart gift card for in-store only on select iPhones. We spoke to 2 Walmart stores to get details on the $300 offer, and were told it was for only a fractional number of contracts that quickly got purchased Thanksgiving night. Fractional number of contracts for the ad below feels misleading. What also feels misleading was the advertised iPhone 7 savings of $49 when it fact it was $49 over retail price, and a $250 savings on an iPad Mini when the actual savings was $50. Pull it together Walmart.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Posted in Apple  • 

Value Chain: Intentional Generosity Starts with Gratitude

This note is the first in a series of four that detail Loup Ventures’ core values. These values drive how we operate, who we hire, and ultimately, what we look for in founders. We believe that vibrant culture driven by shared values separates the best companies from the rest. We meet with hundreds of startups a year and one of the common gaps that we see is a lack of focus on culture building. In an effort to bring our values to life, we’re sharing them in our Value Chain series.

We believe in the power of generosity – both as a means of fostering a positive environment for team members to do their best work, and as a powerful business tool that generates a virtuous cycle for stakeholders.

The Golden Rule. Treat others the way you want to be treated. By giving more than you receive, you place your faith in the fact that others will return the favor. Generosity, however, is not quid pro quo – rather, each generous action pays into a culture that you hope will benefit you indirectly. So, if you want to be treated generously, act that way toward everyone – including bosses, employees, investors, co-workers, and partners.

Internally, intentional generosity creates a virtuous cycle of supporting one another, and yields better work through true collaboration. The byproduct is a positive environment of abundance – not scarcity – maximizing everyone’s benefit rather than defending individual territory.

This plays out at Loup Ventures in a powerful way: compensation. As a startup venture fund, our operating budget doesn’t support a big team. But our research-driven strategy requires lots of hard work. So, we’ve all committed to below-market pay near-term in hopes of above-market returns long-term. This is basic risk-reward, but the risk is also mitigated by the choice to be generous with each other in terms of time, learning, and development, not just foregone wages.

Externally, we try to live out the same generosity across all stakeholders. While we only invest in 1% of the startups we meet, many of the no’s have a continued relationship with us as we look for unique ways we can help them. Remember, however, that intentional generosity is also a tool – and the continued relationship could benefit us down the road if and when we get another opportunity to invest.

It feels better to give than to receive. Too many people have this backwards. The satisfaction of giving is much greater than receiving. Giving is accompanied by a sense of accomplishment and fulfillment because, put simply, you have something to give. While giving is more rewarding, the model does not work unless you also receive generously. And part of being a generous person is receiving generously. The combination of giving and receiving fosters a culture of abundance over scarcity – an abundance of teamwork, support, and thoughtfulness – We think it’s a better way to work.

To Our Readers: Thank You. If you’ve read this far, we appreciate your interest in our work. Giving and receiving generously starts with the daily practice of generosity and gratitude. We’re grateful for your support, your interest in our work, and your role in getting Loup Ventures off the ground in 2017.

We’re grateful for your support, your interest in our work, and your role in getting Loup Ventures off the ground in 2017.

You’ve been helpful beyond measure and we hope you’ve found our insights to be helpful, too. Happy Thanksgiving.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

2017 Loup Ventures Holiday Gift Guide

Here are a few gift recommendations for the 2017 holiday season:

And here’s a look ahead to 2018 with some of the products we’re hoping for:

  • Apple HomePod | Apple’s foray into the smart speaker market.
  • Apple iPhone X Plus | We’d love a larger screen for our iPhone Xs.
  • Oculus Go | Oculus’ $199 standalone VR headset.
  • Magic Leap | Augmented Reality glasses.
  • Tesla Model 3 | Already on the market, we’re hoping to see shorter reservation times.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Nvidia Foundational Player In Future of Tech; Introducing 5-Yr Model

Today we’re rolling out our 5-year model for Nvidia, joining Loup Ventures’ Apple, Tesla, and iRobot model coverage. It’s important we write on Nvidia given its products are an integral part of the future of technology, based on their use in datacenters, autonomous vehicles, virtual and augmented reality platforms, cryptocurrency mining and eSports. We’re believers in the long-term story of Nvidia. While shares of NVDA has performed exceptionally well this year, up 100% YTD (market cap of $129 billion), we think there is further upside given Nvidia’s foundational exposure to frontier technologies.

25+% CAGR Story Through 2023. We expect Nvidia’s core gaming business to continue to grow, but decrease as an overall percentage of revenue (57% today, to 41% by 2023). In addition, we see Nvidia’s datacenter and automotive segments taking second and third place, growing to 36% and 14% of revenues respectively.  We believe Nvidia will see 20+% annual revenue growth through 2023, driven primarily by four catalysts:

Catalyst #1 – Demand for core gaming business products remains strong.  Historically, Nvidia has been known for providing high-quality GPUs for gaming. Nvidia was well-known in the PC gaming space in the mid-t0-late 1990s, and even won the contract to provide graphics hardware for the original Microsoft Xbox. Nvidia has maintained its leadership in the space, and stands as the go-to GPU component for gamers. Despite competition from AMD, ASUS, and Intel, Nvidia has remained a leader. In addition there are two trends that add to the growth of Nvidia’s gaming business:

ESports continues to rise in popularity. Newzoo expects the ESports market to reach $1.5B by 2020, up from $696M in 2017. Not only are more users participating in ESports, but more advertisers are flocking to the industry as well.

Gaming is becoming more social. This is driving engagement and bringing more people on to various platform, including PC platforms where Nvidia’s products are often used. While this can partially explain the rise in ESports, the trend impacts users that opt out of participating in eSports in favor of playing with their friends. Most platforms are spending more time creating online communities where users can interact with each other. Separately, with more kids using tablets and mobile phones at an early age, the exposure and transition to gaming is greater than ever before. As parents continue to let devices act as virtual babysitters, the number of children that get into gaming grows.

Catalyst #2 – Companies are adopting artificial intelligence in order to remain competitive. Nvidia’s datacenter business (20% of revenue today, to 36% by 2023) has seen triple digit growth for the past six quarters. A big part of this growth is due to the expanding use of artificial intelligence by companies, specifically deep learning. Even more positive for Nvidia, we are only in the early innings of the game. Just as all companies evolved to be internet companies in the late 1990s and early 2000s, and mobile companies in the late 2000s, they will soon evolve to be AI companies. On Nvidia’s last earnings call, CEO Jensen Huang shared:

“…Artificial intelligence and its emergence and applications to solving problems that we historically thought were unsolvable. Solving the unsolvable problems is a real realization. I mean, this is happening across just about every industry we know, whether it’s Internet service providers, healthcare, manufacturing, transportation, logistics, you name it.” – Jensen Huang

We expect Nvivia’s datacenter segment to continue to see high growth as companies rely more on artificial intelligence. By 2023, we expect Nvidia’s datacenter business to account for over one-third of its revenues and be growing at 30% annually.

Catalyst #3 – The market for autonomous vehicles will be bigger than most people think. Nvidia’s opportunity in the automotive space (6% of revenue today, to 14% by 2023) is bigger than many anticipate. As stated in our Auto Outlook 2040, we expect 90% of vehicles on the road in 2040 to have level 4 or 5 automation, which would require a platform such as Nvidia’s DRIVE PX. Nvidia’s products are used in two different instances as it relates to autonomous vehicles. First, Nvidia’s DGX system is used to train neural networks at data centers. Second, Nvidia’s DRIVE PX platform provides cars with the necessary on-board computing strength for autonomous capabilities. Currently, Nvidia has partnered with Toyota, Mercedez-Benz, Audi, Volvo, and Tesla, among other. We see the ramp of autonomous vehicles beginning in late 2020 as autonomous taxis enter the field, and further expanding in 2021 as autonomous consumer vehicles enter the market. By 2023, we expect Nvidia’s automotive segment growth to accelerate from 16% in 2017 to 100% y/y in 2023. 2023 is only the beginning of autonomous vehicles, and Nvidia’s automotive segment will continue to accelerate past the 5-year window. Based on our auto outlook, we feel 2028 is the year where there will be an influx of demand for level 4 and level 5 autonomous vehicles. We expected Nvidia’s automotive segment growth will continue to accelerate until that time.

Catalyst #4 – Nvidia has planted seeds in other industries with bright futures. OEM & IP is 8% of revenue today, to 3% by 2023.

Virtual Reality. Nvidia’s GPUs are a core component for virtual reality solutions. Today, high-quality VR solutions require a headset tethered to a desktop or laptop computer, which are often running off of an Nvidia GPU. While we believe that VR content will move to standalone devices in the future, those devices will still require enough processing power to delivery high-quality experiences. Nvidia’s solution, the Tegra mobile processor line, is currently a leading option for manufacturers. Nvidia is well-positioned to benefit from the growth of virtual reality gaming, as its products are used in three (mobile, PC-based, standalone) of the four VR solutions, missing out on only console-based VR; for now.

Augmented Reality. We’ve written many times before about the future of augmented reality and the impact that it will have on how we interact with the world in the future. Similar to VR, AR requires sufficient computing capacity on any device. As the market for AR develops, Nvidia will benefit as either a manufacturer of specific solutions for customers, or tangentially through expanding cloud use for deep learning algorithms used by AR applications.

Cryptocurrencies. Lastly, Nvidia is poised the benefit from the continued growth of cryptocurrencies. Cryptocurrencies require individuals to dedicate computing power to the the blockchain, those that do are referred to as miners. Miners often turn to GPUs for the necessary processing power to complete blocks on the blockchain. Here is an explanation of how mining works, and why it is necessary.

If you read that article, your reaction might match James Franco’s above. Putting it another way, miners rely on GPUs to provide a cryptocurrency network with the necessary processing power to function. As a particular cryptocurrency is mined (with GPUs), customers will ask for specific ASICs to be built by companies such as Nvidia (positively impacting OEM and IP). As these custom ASIC components are deployed, the specific coin’s mining market becomes monopolized, and forces smaller miners to move a different currency in order to remain profitable. The smaller miners will turn back to GPU-based solutions (positively impacting Gaming) before the cycle repeats itself. Because of this ebb-and-flow and the volatile nature of cryptocurrencies, modeling the impact of cryptocurrency mining is difficult. While highly speculative and volatile, we feel that cryptocurrencies will be a part of the future. We are modeling OEM and IP business to grow by the low single digits in the future.

Bottom Line. Artificial intelligence, autonomous vehicles, virtual reality, and augmented reality are technologies that will have a profound impact on our lives. As these technologies take hold, companies supporting the development of the underlying components are sure to benefit. Betting on Nvidia is betting on frontier technologies, and Nvidia has planted seeds in numerous areas that we are optimistic about. Despite competition from Intel and AMD, Nvidia will continue to be the dominant component supplier in various spaces.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Tesla’s 100-Day Countdown Pushes Team to Do the Impossible

While many question the feasibility of Elon Musk’s bold claims, this fall he put his money where his mouth is, embarking on an ambitious energy project in South Australia. We are betting that the project is on track, and will be completed the first week of January within the aggressive 100-day window. Get ready to score one for Musk pushing his team to the do the seemingly impossible. More importantly, hitting the 100-day goal is a positive for the future of Tesla, given that companies who achieve the impossible change the world.

Several months after storms left critical power infrastructure damaged leading to frequent rolling blackouts, a twitter conversation led Musk to claim Tesla can build the world’s largest grid-scale battery in 100 days (powered by wind farm), or it would be free. Shortly afterwards, Tesla was selected out of 90 bids from other companies. The papers were signed on Friday, September 29th, beginning the 100-day countdown that will end on January 7th, 2018. If it’s not finished on time, Tesla stands to lose about $50 million.

What they’re doing.

Today, we believe the project is largely complete and is expected to be operational by December 1st. Tesla was granted approval to start working on the project before signing the grid connection agreement (Sep 29), making a true countdown difficult to estimate. In our minds the clock starts when ground is broken, however, we are confident the time constraint will still be met as a Dec 1 completion implies a start date as early as mid-August.

The battery, which is actually a system of connected Powerpacks, will be plugged into a wind farm near Jamestown and operated by French renewable energy company Neoen. With a capacity of 100MW (next largest is 30MW), or enough to bring power to 30,000 homes, the system is the largest in the world by a factor of 3 and will bring stability back to the region that is powered by 48% renewable energy. As we detailed in a note on Tesla’s mission here, grid-scale battery storage is one solution to the key problem with renewables – there is a disconnect between when power is generated and when it needs to be deployed. Most grids use dirty and expensive “peaker plants” to meet peak demand each day, but batteries can be charged during times of low demand and deployed as needed.

Why it matters… reality distortion field 2.0.

This project is important for two reasons, but it must be completed on time. First, it would prove that Musk can actually meet the deliberately aggressive deadlines that he sets, something that has investors and the public concerned after missing Model 3 production goals. Companies that change the world set and meet aggressive goals. Think back to how Steve Jobs’ “reality distortion field” propelled Apple to perfect the smart phone and launch mobile as we know it today. Musk drives his teams with similar goals that seem distorted from reality. One Tesla employee recently mentioned to us that she’s ok with Musks’ targets, stating “anyone can set a goal that’s achievable, leaders set goals that are hard to reach”. Second, it would be a massive validation for Tesla’s Energy segment that is often seen as a distraction from their core business. If Tesla can prove battery installations to be both functional and profitable it may serve as a catalyst for similar projects in the future, including a potential rebuild of Puerto Rico’s power infrastructure which remains a possibility. With the project tracking ahead of the deadline, we expect this to be a win for Tesla Energy and a step toward the public buying into Tesla’s mission of transitioning the globe to sustainable energy.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Posted in Tesla  •