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Tren Griffin
@trengriffin
, 9 tweets, 3 min read Read on Twitter
1/ Battle of the Banks- CAC vs COGS.

In this corner CAC:

Morgan Stanley: "banks have an advantage in that they don’t have the same customer acquisition costs as startups." bing.com/amp/s/fortune.…
2/ In this corner COGS:

"Zelle, the person-to-person money transfer service created by a coalition of banks cost the banks billions of dollars to launch.

Venmo, a similar app used by millions of millennials, cost in the single digit millions."
3/ The CAC advantage of banks is reduced as financial technology startups start to cross sell ("would you like a credit card or insurance with that?") and upsell ("we have a premium plan for that") as the startups move from unbundling services to rebundling services.
4/ 25iQuiz: Is the statement below accurate? If not, what is accurate? Support your answer with links (open Internet exam).

"Customer acquisition is expensive. For a large bank it could cost between $1,500 and $2,000 to acquire a retail banking customer" tearsheet.co/data/why-custo…
5/ When trying to estimate CAC for a new (or old) service it can be helpful to use comparables from ~similar businesses. For example, a few years ago Progressive and Geico spend $519 and $451 (Direct) in CAC. State Farm and Allstate $827 and $711 (Agents). google.com/amp/s/www.chic…
6/ Clue about the answer to tonight's 25iQuestion:

Invert Charlie Munger style!

Can unit economics of retail banking support $2,000 CAC given gross margin, ARPU and churn? Do the numbers reconcile to positive unit economics? What's the payback period? Does this dog hunt?
7/ Supplemental 25iQuestion: Why is Customer Acquisition Cost (CAC) like a Belly Button?

25iq.com/2016/12/09/why…
8/ What very tall person wrote this:

"Organic users typically have a higher NPV, a higher conversion rate, a lower churn, and more satisfied than customers acquired through marketing spend."

How much of Amazon's CAC is organic (often looks like COGS)?

abovethecrowd.com/2012/09/04/the…
9/ A business with high inorganic CAC is often dangerously far out over their skis since the cash impact of churn before payback happens can be brutal. That danger is a leading cause of "unbundling and then rebundling" which is about lowering CAC (trading three beans for a cow).
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More from @trengriffin see all

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Tren Griffin
@trengriffin
1/ One of the few magical aspects of business is an ability to sell something more to an existing customer. The cost of cross-sell or upsell doesn't drop to zero and ideally the additional product should complement the primary product in a way that is integrated to lower churn.
2/ 25iQuiz: What parts of the Apple financial results announced today represent a cross-sell or upsell related to an existing product? apple.com/newsroom/2019/…
3/ Cross-sell? "Apple said it had $5.52B in wearables revenue, its category for the Apple Watch, and AirPods and Beats headphones. That’s up from $3.7B a year ago. Apple’s services business—which includes sales of apps, games, movies, music, cloud storage, and Apple Pay."
Read 4 tweets
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Tren Griffin
@trengriffin
1/ I'm old enough not to remember when I became interested in outcomes created by feedback. I do remember talking about feedback with an investor named Michael Larson in the early 1990s. He convinced me to read "The Alchemy of Finance" in which Soros describes "reflexivity."
2/ In 1994 Soros admitted: “I did not discover reflexivity. Earlier observers recognized it, or at least aspects of it, often under a different name. Knight (1921) explored the difference between risk and uncertainty….” Also Keynesian Beauty contests. georgesoros.com/2014/01/13/fal…
3/ It is possible my interest in feedback arose when I was trying to understand how Jimi Hendrix used feedback in his music. I think about feedback whenever I think about outcomes in investing and business generally. It is a core part of work being done at The Santa Fe Institute.
Read 6 tweets
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Tren Griffin
@trengriffin
If there was one group of people I would like to reach more with my writing it would be small business. Among the business people most in need of help would be food truck owners, who are engaged in a thin margin business with almost no barrier to entry. crosscut.com/2019/07/order-…
There is ~zero probability a food truck owner will read one of my books, my 25IQ blog, follow me on Twitter or listen to my yearly podcast interview out today. Reaching people at scale with advice on how to select and run a business is an unsolved problem. thehungrydogblog.com/2015/09/the-ec…
If there was one point I could magically convey:

"Businesses generating high economic returns will attract competitors willing to take a lesser, albeit still attractive return, which will drive aggregate industry returns to opportunity cost of capital.”
25iq.com/2017/03/10/you…
Read 3 tweets

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Ryan Caldbeck
@ryan_caldbeck
1/ Over the last 9-12 months I’ve noticed a somewhat fascinating trend in my conversations with successful consumer tech investors:

Many are out on DTC only brands.
2/ What was a category these investors were extremely excited about just a few years ago, now is getting very little attention from some of the most high profile investors that would publicly be considered DTC experts.
3/ First let’s re-calibrate on why they were excited in the first place.

Then let’s talk about why the train came off the tracks.
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DO
@docolumide
African e-commerce startup Jumia files for IPO on NYSE – TechCrunch| Finally! This will be one juicy filing to read. I’m going do many multi-threads on this one. techcrunch.com/2019/03/12/afr…
This is what it REALLY means to be an African unicorn—not $1Billion valuation: “the FIRST African tech startup to list on a major global exchange.” And that is if you can really call Jumia an “African” startup.
Timing of the public launch of our pivot looking good as each day progresses #coattailriding 😜
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ᴅᴀᴠɪᴅ ᴘᴇʀᴇʟʟ ✌
@david_perell
I co-wrote an article with @mrsharma.

$0.40 of every VC dollar raised goes straight to user acquisition. As a result, companies that used to focus on industries are now focusing on audiences.

Enjoy!

perell.com/blog/customer-…
Digitally native brands are fighting for the same customers on the same platforms (such as Facebook and Google).

As they fight for limited advertising space, marketing costs are soaring. As companies grow, so do costs of acquiring each additional customer.
The DNVB space wreaks of high customer acquisition costs and smells like a bubble.

This quote from @chamath says it all...
Read 11 tweets
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Jae S Um
@jaesunum
1/ Happy Monday Twitter. ⚠️ #tweetstorm 🌪️ #alert ⚠️

My #LegalGeek #FOMO peaked when I missed @nwaisb talk on #AI #hype which is still ALL OVER MY TWITTER FEED. Plus now I have #ACCAM18 #FOMO so here's a bunch of 🤔re #AI, #MachineLearning, #EmergingTech #hype, and #marketing.
2/ As @ZachAbramowitz thinks there's no fun in agreeing: no, I don't think @nwaisb / @KiraSystems & others have benefited (on net) from the AI hype. I'd say hype hurts us all, bc it trades short term gainz to a few players for long-term pain shared by all.
3/ New entrants can feel the need to build #buzz for brand awareness + brand lift. I wouldn't exactly disagree this may help new offerings generate leads + fill their pipeline. Piggybacking on an existing trend with #hype is a shortcut to buzz, BUT with many pitfalls ⚠️
Read 16 tweets
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D’Arcy Coolican
@DCoolican
Customer acquisition costs are tricky.

Prioritize them too early and you limit how great a product you can build.

Prioritize them too late and limit how great a business you can build.
Obviously the best ones have all organic growth and never have to focus on it. You probably will. Few are that good / lucky.
When you focus on customer acquisition costs too early you risk finding a local maxima. You haven’t fully fleshed out what the product could be, but are optimizing for the low cost users you’ve found.
Read 6 tweets
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Douglas
@Douglas9162
A thread on Zero to One by @peterthiel - things I took/learned from the book (~100 things)
1-Every moment in business only happens once. The next Zuckerberg won’t make Facebook, nor the next Gates make Microsoft. If you are copying these guys, you aren’t learning from them.
2- Every time we create something NEW, we go from 0 to 1.
Read 105 tweets

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