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Lazy Capital

@lazycapital01/16/2021

$AFRM Investment Thesis

Summary

Affirm is a consumer loan company which offers instant loans inside of E-Commerce Point-of-Sale systems. Affirm came out of the Startup Studio HVF.
The company is riding major industry trends with it's "sell shovels" strategy, and by integrating at the POS layer it can benefit from the popularity of all major online retailers.
Competition does exist, but Affirm has first mover advantage and a unique product offering. Their biggest risk is social media platforms launching their own fully integrated payment systems with play later functionality.

Opportunity

Selling shovels: Affirm has partnered with Shopify and BigCommerce to offer retailers easy payment options on their websites. By integrating at the POS, Affirm can ride the trend of E-Commerce and online retail without having to compete in that crowded space.
Alternative Credit: Affirm offers an alternative to Credit Cards. Instead of buying an entire thing with credit, Affirm lets customers make smaller monthly payments on the item with cash. Customers can use these services without any impact on their credit score.
Trends: Forrester reports that just 26% of retailers offer installment plan options at checkout. There's lots of headroom to grow here. JetBlue recently partnered with Goldman Sachs to offer pay later financing on airline tickets recently.
First Mover Advantage: While competition does exist, and other online retailers/social media platforms/credit card companies might launch their own competing product, Affirm is ahead of the pack with first mover advantage.

Risks

Competition does exist, both from direct startup competitors and future moves from social media giants and online retailers themselves.
Afterpay Ltd offers layaway for online retailers and plays in the same "pay later payments" space. It saw a 219% YoY growth between 2019 and 2020. Between that time, 20,000 people downloaded their mobile app per day in the US (for an undisclosed period of time).
QuadPlay is a company acquired by Zip Co, an Austrialian FinTech company. They offer a mobile app customers can use to purchase anything from any retailer in 4 payments. QuadPay acts like a virtual credit card, and requires a credit check before being able to use it.
Klarna is a direct competitor to Affirm. Their payment option can be integrated with online retailer's POS systems. Klarna offers customers the option to pay for something after 30 days, but can send the item back (for free) if they can't pay in 30 days. Klarna also offers a 36 month installment plan, but this requires a credit check and is essentially a Credit Card.
Credit Card companies like Chase Bank or American Express. They've recognized the threat and are now allowing customers to convert purchases into installment loans after they make the purchase (provided it's over a certain amount). This isn't convenient, but a company like Apple could make it work nicely with their credit card and wallet app.
PayPal is expanding into the Buy Now Pay Later and POS Lending market. They also have a large merchant network in the E-Commerce space.
Social Media platforms like Instagram or Pinterest who have experimented with in-app E-Commerce. They could offer in-house pay later products or other Financial Products. These companies also have direct access to influencers who can influence consumers to use pay later services.
Regulation - As with all FinTech companies, regulation is a risk with Affirm. Perceived predatory lending practices (making it so easy for someone to take out a loan with limited credit checks) could bring about new regulation.
Peloton: Represents 30% of all revenue. Huge dependency on a single customer, so diversification will be key in the future.

Lazy Capital

@lazycapital12/29/2020

What's going on with $OPEN ?

Anyone have thoughts on what's going on with $OPEN the past few days? Stock down ~25% from it's high a few days ago. Looking at $RDFN and $Z P/E ratios, it seems like Opendoor is pretty undervalued considering it's a clear leader in the iBuying space.

Lazy Capital

@lazycapital12/03/2020

Alteryx ($AYX ) Investment Thesis

Summary

Alteryx is an attractive investment because of it's ability to democratize the ability to make data-driven decisions inside companies.
Recent public statements from Alteryx leadership and job postings suggest the company is looking to transition from building on-prem software to providing a cloud SaaS offering.
The company has started a free upskill program for customers designed to educate users how to work with data, and they acquired a startup building tools which let users create models without any code.
The potential shift to cloud SaaS and investments in no-code tools make the company an even more attractive investment as it could well become the defacto standard way information workers interact with corporate data.**

Background**

Alteryx was founded in 1997 and built the first online "data engine" which could deliver demographic based mapping. Their product was used by customers to do demographic segmentation analysis of geographies.
Since then, the company has built out a series of products which help customers analyze datasets and identify patterns in their company. Most of their tooling has been used by "data workers", business analysts and non-AI/ML experts.
The company's software runs on Windows servers with web clients, and is mostly on-prem today. Some of their products are cloud-first.

Opportunity

Cloud SaaS: Recent job postings and statements by the company's leadership suggest they've decided to build a cloud based product offering, or are going to attempt to pivot their existing on-prem product to a cloud offering similar to Microsoft Office 365. Like MongoDB did with Atlas, if successful, I suspect this will have a positive impact on the business.

Democratization of AI/ML:

The company's recent acquisition of Feature Labs signals they're interested in helping their customers build more advanced models without them becoming data science experts. Feature Labs was a MIT spawned startup which built software that allowed AI to create models for algorithms with little to no code required.

Secondly, the company also recently announced a free upskill training program for their customers. Their goal is to up-skill all workers into "data workers", train existing "data workers" to become data analysts, and turn data analysts into full blown data scientists.

No-Code: By evolving it's current products which require little coding knowledge to use, Alteryx is positioned to create a no-code data analytics platform anyone inside a company can use to generate insights. Instead of waiting for an analyst to build you a Tableau report, newly trained "data workers" can build one themselves.

Risks

CSPs might offer their own native solutions to Alteryx's Analytic Process Automation platform. Much of the data companies generate already lands there, and they already have the advanced tooling (things like SageMaker and Big Query) to build upon. Additionally, key influencers like Data Scientists already work in the CSPs consoles day in and day out, so adopting Alteryx might be perceived to come with switching costs.
Time to market is another concern I have. Pivoting from an on-prem deployment and sales model to a cloud SaaS model will be a difficult task, and two problems in one. If they're able to get a cloud offering running in short order, upgrading customers to it and training a field on how to sell it will be critical to the company's long term success.
Competition from younger companies who already have cloud SaaS offerings is another concern. If Tableau were to invest in building easy to use ETL and model creation tools, they'd be well positioned to compete.

Lazy Capital

@lazycapital12/02/2020

Affirm Investment Thesis

Summary

Affirm is a consumer loan company which offers instant loans inside of E-Commerce Point-of-Sale systems. Affirm came out of the Startup Studio HVF.
The company is riding major industry trends with it's "sell shovels" strategy, and by integrating at the POS layer it can benefit from the popularity of all major online retailers.
Competition does exist, but Affirm has first mover advantage and a unique product offering. Their biggest risk is social media platforms launching their own fully integrated payment systems with play later functionality.

Opportunity

Selling shovels: Affirm has partnered with Shopify and BigCommerce to offer retailers easy payment options on their websites. By integrating at the POS, Affirm can ride the trend of E-Commerce and online retail without having to compete in that crowded space.
Alternative Credit: Affirm offers an alternative to Credit Cards. Instead of buying an entire thing with credit, Affirm lets customers make smaller monthly payments on the item with cash. Customers can use these services without any impact on their credit score.
Trends: Forrester reports that just 26% of retailers offer installment plan options at checkout. There's lots of headroom to grow here. JetBlue recently partnered with Goldman Sachs to offer pay later financing on airline tickets recently.
First Mover Advantage: While competition does exist, and other online retailers/social media platforms/credit card companies might launch their own competing product, Affirm is ahead of the pack with first mover advantage.

Risks

Competition does exist, both from direct startup competitors and future moves from social media giants and online retailers themselves.

Afterpay Ltd offers layaway for online retailers and plays in the same "pay later payments" space. It saw a 219% YoY growth between 2019 and 2020. Between that time, 20,000 people downloaded their mobile app per day in the US (for an undisclosed period of time).

QuadPlay is a company acquired by Zip Co, an Austrialian FinTech company. They offer a mobile app customers can use to purchase anything from any retailer in 4 payments. QuadPay acts like a virtual credit card, and requires a credit check before being able to use it.

Klarna is a direct competitor to Affirm. Their payment option can be integrated with online retailer's POS systems. Klarna offers customers the option to pay for something after 30 days, but can send the item back (for free) if they can't pay in 30 days. Klarna also offers a 36 month installment plan, but this requires a credit check and is essentially a Credit Card.

Credit Card companies like Chase Bank or American Express. They've recognized the threat and are now allowing customers to convert purchases into installment loans after they make the purchase (provided it's over a certain amount). This isn't convenient, but a company like Apple could make it work nicely with their credit card and wallet app.

PayPal is expanding into the Buy Now Pay Later and POS Lending market. They also have a large merchant network in the E-Commerce space.

Social Media platforms like Instagram or Pinterest who have experimented with in-app E-Commerce. They could offer in-house pay later products or other financial products. These companies also have direct access to influencers who can influence consumers to use pay later services.

Competitive matrix from: https://fintechbusinessweekly.substack.com/p/buy-now-pay-later-vs-pos-lending

Regulation - As with all FinTech companies, regulation is a risk with Affirm. Perceived predatory lending practices (making it so easy for someone to take out a loan with limited credit checks) could bring about new regulation.
Peloton: Represents 30% of all revenue. Huge dependency on a single customer, so diversification will be key in the future.

fintechbusinessweekly.substack.com

Buy Now, Pay Later vs POS Lending, a Crash Course

Everything You Need to Know About This Exploding Category

Lazy Capital

@lazycapital12/02/2020

Metromile ($INAQ) Investment Thesis

Summary

Earlier this month Metromile announced they were going to go publish through a SPAC, $INAQ. The company provides Pay-as-You-Go Car Insurance for drivers who install a GPS unit into their car. Data gets uploaded to Metromile servers, and monthly rates are set dynamically based on distance driven and driving habits (as well as other factors).
The company is well positioned to ride the secular trends of Urbanization and buying habits among millennial and gen z Americans.
The biggest risk to the company is the Car Insurance industry re-orients vertically where OEMs offer insurance with the purchase or lease of one of their cars. In this case, Metromile is still well positioned to license it's technology and continue to build a Data Moat across it's customer base.

Opportunity

Trends: Millennials and Gen Z have less wealth than their parents, so we're seeing the popularity of Buy Now Pay Later payment plans spring up across industries. Car insurance is no exception. Additionally, as Urbanization increases, driving habits will change, making Pay-as-You-Go plans financial commonsense.
Headroom for new business creation

The company has yet to expand into corporate fleet insurance, something I suspect their technology will be widely applicable to in the future. Most corporate fleet vehicles already have GPS trackers installed in them, so the market is likely crowded.

Metromile could license it's technology to OEMs or large car dealers like AutoNation to enable them to sell insurance at the time of vehicle lease or purchase.

Partners: Metromile has developed relationships with several car manufacturers to include push their services when the vehicle is being purchased. In the future, the company may be able to license it's technology or services to companies like ZipCar, increasing their data moat.
Data: Metromile's Data Moat gets bigger the more people use the service. This data can be used to improve service quality and sold to interested parties like governments, car manufacturers, or Healthcare companies. Flywheel
Automation: The company's claim process is assisted by AI, providing a quick and easy claim processing experience to customers. Continued investment in this area will allow the company to reduce operational costs, making them more attractive to . They can surge agents when needed similar to SelectQuote.
Performance: The company claims to have best in class growth and customer retention metrics in their industry.

Risks

Regulation is always a risk, but increasingly so when it comes to the auto industry. Congestion Taxes and Climate Change legislation may dramatically alter driving habits once implemented.
Transit: US investment in Public Transit or High-speed Rail may curtail longterm growth. Though these projects are notoriously time and capital intensive in this country.
Car ownership is decreasing along as Urbanization increases.
First-Party Insurance: The biggest risk to Metromile is the entire insurance industry re-orienting around vertical integration.

A streamlined process is easy to imagine: Lease a car using a Sub-Prime Auto Loans after a test drive at AutoNation, then get Car Insurance through the OAM or a company like Credit Acceptance Corporation.

OEMs like Tesla could offer their own Pay-as-You-Go Car Insurance. Tesla in particular already has the exact same data Metromile is collecting, and actually probably more considering they know detailed car payment information on their customers.

Counterpoints:

Independent, cross brand insurers will still exist despite likely vertical integration. Some OEMs may not want to focus on building out this kind of business, others will be too slow to do so if it becomes an "obvious" revenue stream.

An insurer who offers insurance across vehicle brands will have more data and increased customer loyalty than insurance provided by OEMs.

For the next 40+ years, the vast majority of vehicles on the road will be Petroleum based used cars made by traditional manufacturers. Drivers will be experiencing the same secular trend of urbanization, and they will need to be insured.

OEMs might not want to be in the insurance business, or Antitrust regulation might prevent them from entering.

Competition from traditional insurance companies like Geiko, Farmers Insurance, and Progressive (Insurance) already exists and will likely increase. I believe the company's First Mover Advantage matters, and has made it's customer acquisition muscle is stronger than it's competitors.