A Former Gang Member’s $10 Million Startup and Why Silicon Valley Is Miserable

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DAYLIGHT  

Thank you to Jennifer Fox for sharing photos from SIB Fixed Cost Reduction’s offices in Charleston, SC. SIB has offices in New York and Florida as well. Her company specializes in reducing monthly expenses. If you want to have your office featured in the Morning Report, send photos that capture an important element of what makes your business work to mattg@oxfordcenter.com.

STARTUPS

A former gang member has created a packaging startup that employs former inmates: “In 2015, [Darrell] Jobe, now 39, founded his own business, Vericool, to make sustainable, environmentally friendly packaging that can replace Styrofoam and other expanded polystyrene foam packaging for shipments that need to stay cool. The Livermore, California, company (which has raised $10 million from investors that include the venture capital arm of Europe’s packaging giant BillerudKorsnas) expects $10 million in revenue this year, up from $2 million last year.

“It now has a backlog of committed orders of just over $40 million to customers that include JustFoodForDogs, a homemade dog meal startup, and Raw Living Spirulina, a distributor of the blue-green algae, plus some larger pharmaceutical companies that he declines to discuss. But the company has been scrambling to crank up its manufacturing capacity to meet demand. ‘It’s been overwhelming,’ Jobe says. ‘No one needs to be sold that petroleum products need to be replaced.’”

After Facebook pulled out of a joint initiative, payments startup Marqeta was in crisis. And yet, founder Jason Gardner took a 40 percent pay cut and—laying off no one—turned the company into a $2 billion unicorn in four years: “It pursued a niche in the payments-processing business that had seen little innovation in over a decade: card issuing and processing, which involves deciding whether a debit card transaction should be approved. …

“With Marqeta’s API, companies that wanted to issue debit cards could authorize transactions themselves and set the criteria for accepting them. And companies no longer needed to separately solicit relationships with a card network (like Visa), a bank, a transaction processor and a plastic card manufacturer. … It helps to have healthy clients. Square went from a $4 billion market value in 2016 to $32 billion today, becoming Marqeta’s largest customer and processing more than $5 billion in volume through Marqeta last year.”

RETAIL

McDonald’s is buying an Israeli startup in a bid to improve in-store ordering and digital marketing: “As part of the deal announced Monday, McDonald’s will pay more than $300 million for closely held Dynamic Yield, people familiar with the matter said. The deal is the fast-food giant’s first acquisition in years and its biggest in two decades.

“McDonald’s will use Dynamic Yield’s technology at its drive-through windows, where digital displays will change in real-time based on factors such as weather and what the customer is ordering. During heat waves, for instance, a drive-through display could promote a McDonald’s ice-cream cone. … Dynamic Yield helps retailers provide personalized digital promotions to consumers using streams of customer data. Its customers include IKEA, Forever 21 and Fendi, according to the company’s website.”

Money-losing home-furnishing retailer Wayfair is opening a brick-and-mortar store: “Wayfair has generally resisted the call of physical retailing, in fact touting its store-less profile on its website. Yet as far back as two years ago, company executives talked publicly about eventually needing stores to showcase products. They said they didn’t necessarily see stores as profit centers unto themselves but as part of a broader marketing effort to reach consumers.”

CVS and Walmart are rethinking how much real estate to grant greeting cards in their stores. Kevin Hourican, president of CVS Pharmacy, “said the retailer, which has some 9,600 locations, is shifting more space to health care products after determining that greeting cards are not selling well, using an internal analytics tool. ‘More and more people are using text and email and e-cards, and fewer people are buying cards …”

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CRIME

A man stole $122 million dollars in “payments” by sending fake bills to Facebook and Google: “[Evaldas] Rimasauskas’s grift was pretty bold. He merely sent Google and Facebook invoices for items they hadn’t purchased and that he hadn’t provided, which the companies paid anyway. The invoices were accompanied by ‘forged invoices, contracts, and letters that falsely appeared to have been executed and signed by executives and agents of the victim companies …’ He also spoofed emails that appeared to come from corporate execs.”

FARMING

With milk prices down, Kendra Thewis says, time is running out for small dairy farmers: “She and dairy farmer Tom Crosby of Shell Lake endorse a proposal from the National Farmers Organization, based in Ames, Iowa, that would establish a two-tier milk pricing system aimed at boosting revenue for small and midsize farms. Under the plan, which would require federal government approval, farmers would get an extra $4 for every hundred pounds (roughly 12 gallons) of milk they produce a month, up to 1 million pounds. Anything over that amount would fetch a lower price.

“Backers of the plan say it is well-suited for farms milking under 300 cows, which is the majority of Wisconsin dairy farms. They say it could help keep those farms afloat during downturns such as the current one, which has lasted more than four years and claimed thousands of small and midsize dairy operations. They say the plan wouldn’t increase costs for consumers, and that it would help level the playing field between large and small farms through a redistribution of money collected in the federal milk marketing system.”

MEDIA

Google is launching the Local Experiments Project to fund dozens of local news websites around the country: “The tech giant says it will have no editorial control over the sites, which will be built by partners it selects with local news expertise. Big tech companies like Google and Facebook are often blamed for the demise of the local news business model. Now, both are trying to fix the broken local news ecosystem for the sake of their audiences, which they say crave more local news. … ‘We will be spending many millions of dollars on this overall,’ says Richard Gingras, Google’s VP of news.”

REGULATION

California is considering a bill that would ban paper receipts: “Modeled after a new state law requiring that plastic straws be given in restaurants only upon request, the bill would require businesses to provide electronic receipts by default unless a customer asks for a paper one. Assemblyman Phil Ting (D-San Francisco) said his bill is an easy way to reduce paper waste in the state while addressing consumers’ frustrations with excessively long receipts. Customers have taken to social media for years to complain and poke fun at the size of their receipts, particularly at CVS drugstore, posting pictures of the coupon-packed printouts measuring taller than a refrigerator.”

SILICON VALLEY

The techies in Silicon Valley seem to be obsessed with making themselves miserable: “They sit in painful, silent meditations for weeks on end. They starve for days—on purpose. Cold morning showers are a bragging right. Notoriety is a badge of honor. So the most helpful clues to understanding Silicon Valley today may come from its favorite ancient philosophy: Stoicism. …

“Startups big and small believe their mission is to make the transactions of life frictionless and pleasing. But the executives building those things are convinced that a pleasing, on-demand life will make them soft. So they attempt to bring the pain. ‘We’re kept in constant comfort,’ said Kevin Rose, the founder of Digg, in an interview on Daily Stoic, a popular blog for the tech-Stoic community. Mr. Rose said he tries to incorporate practices in his life that ‘mimic’ our ancestors’ environments and their daily challenges: ‘This can be simple things like walking in the rain without a jacket or wearing my sandals in the December snow when I take the dog out in the mornings.’”

And that’s what’s ahead.

Please send comments and suggestions to mattg@oxfordcenter.com and lfeldman@oxfordcenter.com.

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