A Second Chance for Atlanta? The Next Wave of Unicorns, and Building a Business on ‘Retail Arbitrage’

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Good Monday Morning,

DAYLIGHT  

Are you paying attention, Atlanta? With opposition mounting, Amazon is reconsidering its selection of NYC for half of its HQ2: “Unlike in Virginia, where elected leaders quickly passed an incentive package for a separate headquarters campus, and Tennessee, which has embraced plans for a smaller facility, final approval from New York state is not expected until 2020. ‘The question is whether it’s worth it if the politicians in New York don’t want the project, especially with how people in Virginia and Nashville have been so welcoming,’ said one person familiar with the company’s thinking.”

STARTUPS

Compared to Uber and Airbnb, the next wave of unicorns is looking somewhat pedestrian: “Many of the up-and-coming startups that may become the next unicorns have names like Benchling and Blend. And they largely focus on software for specific industries like farms, banks and life sciences companies…Other potential unicorns, such as Checkr and Earnin, are building businesses off the last generation of unicorns by offering services to them. CB Insights also pinpointed three start-ups that are popular with millennial women—Glossier, Zola and Faire—as unicorn candidates.”

Frank Denbow, an entrepreneur turned full-time startup advocate with Microsoft, says there are some dreams you just have to let go: “One dream I had was to be a Y-Combinator (aka YC) founder. I can already read the Hacker News comments: ‘It’s just an accelerator, why does their validation mean anything to you? Just build stuff.’ You have to understand where I’ve been and how far I’ve had to come.

“When you’re the only black male in the room for most experiences in your educational career, when you’re doubted for whether you have the skill or just won the diversity lottery, you look for something, ANYTHING to tell you that you’re worth it, and I thought I would get that from YC at the time.

“I should have realized in that moment that I already had found that which fulfills me. It was working with a startup community, helping people who are just getting started on their journey as entrepreneurs. I was so blinded by this dream of being a YC founder. Of having this hero’s story to tell…I prioritized the perception of me, over me.”

MARKETING

Germany has decided that Facebook’s business model is illegal: The European nation found that the social network’s advertising model, which relies on tracking, was exploiting users and has outlawed the policy: “‘This is significant,’ says Lina Khan, an antitrust expert affiliated with Columbia Law School and the think tank Open Markets. She notes that authorities haven’t done a good job of articulating why privacy is an antitrust issue.”  

“The most remarkable part of the ruling is the way it makes clear that privacy and competition are inextricably intertwined. ‘On the one hand there is a service provided to users free of charge. On the other hand, the attractiveness and value of the advertising spaces increase with the amount and detail of user data.’”

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RETAIL

At For Keeps, a small bookstore in Atlanta, half the books are not for sale: “That copy of Jet magazine from 1964, the one with Alan Alda and Diana Sands on the cover, illustrating an article about interracial romances in the theater? Not for sale. The book of Swahili names for your baby, or that copy of The African Communist? Nope. But you are welcome to spend all day here reading, if you like. That’s the point.

“‘The reason I’m not selling them is because I want people to have as many interactions with them as they can,’ said Rosa Duffy, 28, a visual artist with deep Atlanta roots who opened the bookstore in November. There is plenty to buy, of course. Her shelves hold used black-lit classics from authors like Toni Morrison, Maya Angelou and Ralph Ellison. If they’re well worn, that’s all the better.”

Growing numbers of people are quitting their jobs and making a living on Amazon through “retail arbitrage”: “The Herberts were on the hunt for all of the Contigo water bottles the [Target] had in stock, and kept the camera rolling for their 6,400 YouTube subscribers. Within minutes, an employee pulled out 32 two-packs—sold on clearance for $5 each—from a back storage room. For two people who recently left their jobs in finance, the blue-and-black plastic bottles might as well have been made of gold. The Herberts would resell the two-packs on Amazon for $19.95. Subtracting some taxes and fees, they’d clear $6.16 in profit. All told, the Herbert’s 10-minute Target run earned them $198.

“For some, this is just a lucrative side hustle—perhaps to climb out of debt or save up for a Disney World vacation. For others, [retail arbitrage] has become their primary way of earning a living…In December, according to Google Trends, searches for retail arbitrage spiked on YouTube, where aficionados post videos of their shopping and reselling sprees. (One reseller, who has more than 52,000 YouTube subscribers, filmed his 22-hour buying binge through 17 Walmarts. He filled his trunk with 182 Monopoly games and flipped most of them in one night for $2,500.) In the early 2000s, resellers started flipping products on eBay. But [Chris] Green’s guide focused on the engine behind many of these small businesses: Fulfillment By Amazon, or FBA.”

SOCIAL MEDIA

When Jeff Bezos, who owns the Washington Post, wrote a blog post on Medium accusing the National Enquirer of threatening to publish embarrassing photos of him, it prompted a lot of questions. For example: what’s Medium? “The opportunity to publish for a non-branded platform has made Medium, which was founded by Ev Williams in 2012, an appealing destination for a number of marquee media figures and chief executives.

“Katie Couric has used Medium to promote interviews and philanthropic partnerships. Joanna Coles, the former chief content officer of Hearst Magazines, used the platform to write about her experience as a working mother…Medium can be appealing because it’s unfiltered and posts can be however long the writer wants them to be. For Mr. Bezos, that was about 2,100 words.”

“Fake news” can be as big a problem for businesses as it is for political candidates: “In August 2017, for instance, someone on the anonymous online message board 4Chan said he wanted to inflict pain on a “liberal place” and cooked up a campaign against Starbucks, posting bogus tweets that advertised ‘Dreamer Day,’ when the coffee chain would supposedly give out free drinks to undocumented immigrants. The Seattle-based company had to move quickly to counter seemingly legitimate social media advertisements that carried the hashtag “#borderfreecoffee” and were adorned with the company’s logo, signature font and graphics.

“Other recent lies held that Coca-Cola was recalling Dasani bottled water because it had been infested by ‘clear parasites,’ that an Xbox console killed a teenager, that Costco was ending its membership program and that British pub chain JD Wetherspoon had banned staff from wearing Remembrance Day poppies because of the ‘multiculturalism’ of its clientele and employees.”

SELLING THE BUSINESS

States are offering greater incentives for business owners to sell their businesses to employees: “In our economy, there is a ‘silver tsunami’ of aging baby boomers that includes entrepreneurs, small business people and family farmers who built tens of thousands of companies and agricultural businesses over the past half-century. These owners have most of their wealth tied up in their businesses, and many will need to sell them to support a comfortable retirement…But what if government policy provided even stronger incentives for these business owners to sell their businesses to their employees and managers instead?…

“Iowa provides a successful state-level example of such a policy. A few years ago, former Governor Terry Branstad worked with Democrats and Republicans to pass legislation that reduced the state’s corporate income taxes for retiring business owners when they sold to the employees and managers through an employee share ownership plan. The Iowa effort mirrored an existing tax incentive at the federal level. Iowa also offered modest funds for feasibility studies to help the business owner and the employees work out the details. Versions of this policy are now under consideration with support from both Democrats and Republicans in New Jersey and several other states.”

THE ECONOMY

The last government shutdown cost $11 billion, and it looks as if we might be headed for another: “After looking promising for days, the delicate negotiations collapsed over Democrats’ insistence on limiting the number of unauthorized immigrants who can be detained by the US. Immigration and Customs Enforcement agency. The breakdown in talks made it unlikely that lawmakers will be able to finalize an agreement on Monday, as they’d hope to do so it could pass the House and Senate before Friday night’s deadline.”

FASHION

With climate change looming, the Milk Gallery has created a clothing line called Unfortunately, Ready to Wear that features items like a water-resistant/fireproof jacket, a hood that can double as a mosquito net and solar-powered headphones that give storm warnings: “The designs are about survival, not aesthetics. ‘If it comes down to the world burning down, who gives a shit about a pair of jeans that looks cool?’ [designer Luka] Sabbat said in a video about the project. ‘It’s about functionality.’”

FEEDBACK

Not surprisingly, we got some negative reactions to Friday’s item explaining what’s in the Green New Deal. From Joe Goodwin: “Stupid and ill-informed about the costs of such nonsense. Socialism at its best! Such actions would ruin the country and the capitalist economy that built the US.”

From Dominick Cassone: “Let me start by saying that I believe that this whole man-made climate change consensus is a hoax. It is nothing more than the government trying to spend more money. A consensus of scientists does not make it fact! We should never be wasteful and we should always strive to find new and better energy sources, that are economically feasible. This Green New Deal is beyond the pale.”

Want to continue the conversation? Is there something we missed? We want to hear your voice. Send questions and comments for today’s stories to Loren and/or Matt at lfeldman@oxfordcenter.com and/or mattg@oxfordcenter.com.

FOOD

Haagen-Dazs just announced a new line of boozy ice cream. The flavors include Irish Cream Brownie, Rum Tres Leches and Bourbon Vanilla Bean Truffle. You would have t0 eat several tubs really quick to get drunk as they contain less than 0.5 percent of alcohol.

SPOTLIGHT

As you may have heard, the practice of open-book management has developed something of a cult-like following (its practitioners include Oxford companies like Turnerboone and Advantage|ForbesBooks). But if it’s so smart, why don’t more companies do it? That was the topic of discussion on a recent Mind Your Business, which airs live on SiriusXM 132 Thursdays at 1:00 p.m. ET. If you happened to miss it, here’s the podcast.

And that’s what’s ahead.

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

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