Three Shorts: Fast’s 1b valuation, McPlant’s power move, and Apple’s disruptive M1 chip

Hello! Welcome to Three Shorts, a recurring series where I unpack the strategy behind the news in as few bullet points as possible.

Enjoy!

Fast’s rumored $1b valuation — a hail mary 🙏

What happened?

• Last week, it was leaked that Fast, an online checkout company, is looking to raise $50–$200 million at a $1 billion valuation.
• Seven months ago, Stripe invested $20m at a valuation of $180m.
• Fast's goal is to compete with instant-pay products like Apple Pay, Google Pay, Amazon Pay, PayPal, and Shopify's Shop Pay with a solution that is platform agnostic, universal, and, uh, fast.
• It’s unclear what sort of transaction volume Fast is processing, but when asked what websites use Fast, their CEO tweeted a list that suggests adoption of Fast is likely limited to smaller brands.

Why? What’s the strategy?

• Why raise so much money at such a high valuation so early in the life of the company? My guess is Fast’s founders believe they need to, in order to overcome the massive chicken-and-egg problem their business is facing.
• Fast only saves consumers time if they’re already signed up. And consumers will only sign up if Fast is on a lot of merchant’s websites.  This is a problem for Fast now, but if they can somehow reach escape velocity, the network effect becomes a huge advantage.
• Perhaps Fast is discussing raising an enormous sum of money in order to brute force a massive campaign designed to kick-start the network effect. 
• Some investors (Softbank?) might entertain a $1b valuation despite extremely limited traction, because if it works, they think it’ll be worth much more. And if it doesn’t work, it’s ok, because this is a high-risk asset class anyway.

Will it work?

• If history is any guide, chicken-and-egg problems like these usually aren’t solved by brute force. Just look at Quibi and Magic Leap — they both spent tons of money developing a core platform and trying to attract creators and consumers, but failed.
• But then again, sometimes it does work! PayPal attracted 100k users in their first month by offering $20 for you to sign up, and another $20 if you referred a friend. In total they spent $60–$70 million on the campaign. Who knows where they’d be if they hadn’t.
• Another interesting example is TikTok — they spent nearly $1b on advertising in 2018 to acquire users to accelerate their network effect.
• So, will it work in Fast’s case? I don’t think so. Adding a new checkout method to your ecommerce website is a much higher stakes decision than signing up for PayPal. Their value proposition is dependent on scale, and I don’t think a huge advertising campaign or sales push would change that.
• Fast needs a better wedge, a product with more “single player” value for website owners.