00:00welcome to the a 16z podcast I'm Michael
00:02Copeland and we're here today with
00:04general partner Jeff Jordan Jeff welcome
00:07yeah thank you Michael good to be here
00:08we're also joined today by Sam Kirsten
00:10Zang who's part of our investing team
00:12thanks honking thanks Michael so Jeff
00:15you have written a fair bit and talked
00:17about what you define or call people
00:20marketplaces tell us what those are and
00:23then let's get into kind of the
00:24marketplaces that you're seeing out
00:25there I mean it's almost a eBay meets
00:28services so PA you win it when I worked
00:31there was in power economically
00:32empowering literally hundreds of
00:34thousands or even a million people to
00:36earn part or all of their living selling
00:39in it with the advent of mobile phones
00:41it's now possible for those same armies
00:44of people to earn a living doing
00:45services and you know that's what I
00:48refer to as a people marketplace they're
00:49they're their service marketplaces build
00:52up around independent contractors so
00:54give us an example of some of those
00:56marketplaces operating out there in the
00:58world today you know the lift is a great
01:00example of a marketplace homejoy
01:02instacart any place that that you know
01:06people are performing a service that it
01:10can be done can be rented essentially
01:12with labor so in this case it's my car
01:15in home Joy's case cleaning service from
01:18home cleaning why or what enables these
01:21kind of marketplaces you know today as
01:24opposed to five years ago or even three
01:26years you know the mobile phones the
01:28smartphone in your pocket which is a
01:30little computer is essentially the
01:32enabler here before if everything would
01:34have had to been done you know in an
01:36analogue way or just you know you know
01:38scheduling would be hard would
01:41geographic location is hard logistics
01:44are hard the mobile phone in the
01:46processing power and the GPS
01:47capabilities is a real enabler to
01:49empower a distributed workforce to be
01:52really smart and really efficient I mean
01:54I get that in the case of lyft right so
01:56it's transportation it's people in and
01:58you know automobiles moving around how
02:00does that work in the case and how does
02:02it sort of get more sort of nuanced in
02:04the case of whether it's home cleaning
02:06as an example or you know there's these
02:08services that will deliver food from a
02:10restaurant and and I want to get to
02:11groceries because that's you know
02:12our latest investment is it a car yeah
02:14so let's talk delivery from restaurants
02:16there's two that are growing very
02:18strongly doordash and caviar and so they
02:22they get an order in so a consumer can
02:25order in them a number of fashions but
02:27they have to one get the order to the
02:29restaurant which often involves some
02:31form of mobile technology a lot of them
02:32have tablets sitting there to have the
02:34restaurant receive the order then they
02:36have to efficiently get drivers to that
02:39restaurant ideally as the order is being
02:42completed and efficiently get to the
02:44house as fast as they can so they're
02:46tracking the drivers through GPS they're
02:48doing algorithms to say which driver is
02:50optimal to do this order and then by the
02:53way once they drop off that order what's
02:55the optimal next order so the efficiency
02:58and profitability these marketplaces are
02:59typically around capacity utilization
03:01how many deliveries can they fit into
03:04say an hour and the mobile phone and the
03:07computational power and the GPS enables
03:09them to do to pack more efficiency into
03:13the hour which creates better economics
03:16for consumers and better economics for
03:17the company interesting so in some ways
03:19in Sam I want you to chime in here you
03:21could be caviar or - no - and
03:26essentially you're operating like FedEx
03:28but without the jet plans it sounds like
03:30yeah planes in the car I mean the level
03:32of logistics behind Restaurant delivery
03:35behind you know the ubers and lyft's it
03:37is astonishing how these these are these
03:40are large-scale logistical systems and
03:42one of the advantages Sam that I think
03:45we talked about earlier was that we've
03:47all bring these supercomputers to the
03:50party it's not like you know FedEx or
03:52UPS I had to sort of install this
03:54infrastructure of technology yeah
03:55absolutely I think there's sort of this
03:57red herring and that we think of it the
03:59service are enabled because we have
04:00smartphones but the the the interesting
04:02part is that each of these drivers on
04:04door - for instance where they bought a
04:06smartphone for themselves play games or
04:08do other things and now suddenly this
04:09becomes this tool that allows them to
04:11tap in to this network and it allows
04:13them you know that it's bring your own
04:14device and that creates this marketplace
04:17well you mentioned instacart we've
04:19mentioned it you know now several times
04:20Jeff let's let's jump into that that's
04:22one of the most recent investments here
04:26how is it a people marketplace and
04:29describe for us how it works no it is
04:32interesting grocery is one of the last
04:34category standing for the analog yell
04:37brick-and-mortar business grocery has
04:39been almost completely untapped by the
04:41digital revolution in commerce and I
04:43want to dig into that why do you think
04:45that is you know historically the
04:48approach people were taking was to build
04:50a parallel supply chain for the grocery
04:54so take Webvan back in the day they
04:56would build their own warehouse with
04:58their own materials handling technology
05:00they would feel they would buy the goods
05:02to go into that warehouse and then
05:04they'd fill their trucks on a delivery
05:06route and send it out it's incredibly
05:08capital intensive I believe Webvan you
05:12know 1.2 billion dollars of investor
05:15capital disappeared with the with the
05:17disappearance of Webvan and right so it
05:19gives you a sense for the asset
05:20intensity fast-forward to today now
05:23you've got this mobile army of
05:25underemployed people you know because if
05:27there was a full employment this might
05:28not be quite as interesting but right
05:30the whole employment relationship
05:32between the US worker and employers has
05:35change and there are a lot of people
05:36looking for decent paying jobs you've
05:39got a bunch of potential people who want
05:43to earn money all with mobile phones and
05:45so instead of building the parallel
05:47supply chains they're figuring it's a
05:49cart staring out how to leverage the
05:51existing supply chain the
05:52brick-and-mortar store so freaking
05:54Warner has a lot of disadvantages but
05:55wanted van a couple advantages it has
05:57they have strong local brands I mean my
05:59local supermarket is being kinis and and
06:02they have a distributed inventory of the
06:05goods that are of interest to the people
06:07in that area so instacart gets into the
06:09grocery business without like web then
06:11and even like Amazon fresh and I want to
06:13get to this without building warehouses
06:16stocking them you know some other
06:18grocery store does all that it's it's
06:20but it's it's basically a virtual
06:21approach the the instacart capex instead
06:24of building distribution centers buying
06:28trucks you know inventory them they
06:30literally are buying servers I mean
06:32that's our that's our capex because the
06:34the employees or bring their own mini
06:37computers there's smartphones they
06:39bring their own cars and the
06:41supermarkets are where the where the
06:43warehouses are if quote-unquote as well
06:45as the as well as the inventory it's a
06:48virtual approach relative to a very
06:50expensive centralized physical approach
06:52and why then do the bricks and mortar
06:55supermarket chains and or supermarkets
06:58individual ones why do they want to play
06:59along with instacart um you know one is
07:02they really lack the the technology
07:05technology capabilities to build
07:07something this sophisticated and this
07:09efficient themselves so you know we had
07:11the same thing at Open Table why doesn't
07:13it why doesn't a restaurant build their
07:14own reservation system well we you know
07:16we had a man century of development into
07:18our reservation system it was pretty
07:20good so one is a lot of the grocer's are
07:23you know lack lack disability but the
07:25big thing is they want incremental
07:27orders so if you're the you know in in
07:30Portola Valley there's two grocery
07:31stores it's being Keeney's and it's
07:33Roberts and so if neither is delivering
07:37and one offers efficient delivery at
07:39this point they're gonna take share and
07:41the instacart tracking the survey work
07:44they've done is the the grocery store
07:48who is providing affordable delivery in
07:51a very timely way instead of cart you
07:53can get to groceries as quickly as
07:55within an hour take share and so the
07:58grocery store on the same physical capex
08:01is getting more business and and and as
08:03there's all to get more business is more
08:04profitable Sam so we've tried this
08:08before with web then back in the day and
08:09I think web then finally shut down in
08:122001 but what's changed in those years
08:16to make this you know from maybe a
08:17behavioral aspect something that could
08:20work today I mean we've always gone to
08:23the grocery store we've always need food
08:24for dinner but yeah but why now well I
08:27think the first thing is just the the
08:28size of the of the Internet has grown
08:30tremendously and so there are more
08:32people who can who know how to and can
08:34log on to a website and just the
08:36expectations of what can be ordered
08:38online have changed people expect now
08:40that they can order anything else and
08:41why not groceries right there you have
08:43you know you can order tooth basically
08:45deliver next week from Amazon but but
08:47why can't you have the groceries in your
08:49home today and I think so there's this
08:51awareness that has completely changed
08:55and I think so today less than 1% of the
08:58US market have their groceries delivered
08:59online and we think why not quite can't
09:01that be a hundred percent right Jeff you
09:04know youyou obviously looked hard at
09:06this and other models and one of the
09:09other models is what Amazon is doing
09:11with Amazon fresh and it's that sort of
09:13like let's build our own I mean they
09:15have warehouses right but parallel
09:16supply chain yeah what what so in the
09:19instacart model and and I guess more
09:21broadly you know this sort of virtual
09:23model what efficiencies does it bring
09:25specifically that you say soso I'm
09:28violating one of my hard and fast rules
09:30in the sense of card investment which is
09:32don't compete with Amazon so but this is
09:34this is a kind of a hopefully a not core
09:39Amazon business at this point um so the
09:41from the consumers businesses and
09:45consumers differences the business
09:46difference is its capital efficient I
09:48mean Amazon will have to spend billions
09:49of dollars to roll out fresh that means
09:52it will be rolled out slowly you know
09:54just can't deal you know drop
09:56distribution centers and full of
09:57inventory with lots of trucks
09:59immediately into a market Amazon can be
10:01fast you so one is it's a lot cheaper
10:04second is the virtual model will be a
10:07lot will provide better service you know
10:09it will be able to get you groceries as
10:11an hour Amazon right now has a
10:13subscription to fresh and often need you
10:15need to schedule grocery deliveries a
10:17day in advance into a broad delivery
10:19window right third is operational
10:21efficiency you know in a centralized
10:24model that food that's being going to be
10:26delivered at five o'clock is possibly
10:28being picked at 10:00 in the morning
10:30stuff on a truck that is that in order
10:32to make the service efficient needs to
10:33make 10 stops along the way I say if
10:36you're number 10 you know they're there
10:37instacart the person picks it from the
10:40store and drives it to your house just
10:41like you would so there are a set of
10:43different different benefits both for
10:45the consumer and from the business
10:47perspective that we think creates an
10:48interesting opportunity for instacart I
10:50think also for a forensic card you can
10:52have groceries delivered from the
10:53rainbow co-op in the mission you can
10:54have groceries delivered from Whole
10:56Foods and so there's really you can shop
10:57from from merchants and brands you care
10:59about rather than sort of Amazon's
11:00generic brand which is also really
11:02exciting for customers like my favorite
11:03local supermarket now
11:05instacart Berkeley Bowl that they have a
11:08complete unique selection of food I
11:10actually I swing I'm I love to cook but
11:12I swing by Berkeley Bowl when I'm in the
11:15East Bay just because I loved their
11:16selection so these people marketplaces
11:19you know we've got groceries we got
11:20transportation we've got delivery how
11:22how far does this model extend you think
11:25Jeff well we're hopeful it extends quite
11:27well I mean right now the the companies
11:30focused on groceries one of the
11:31interesting things we've we've talked
11:33about in people marketplace internally
11:35is you know everyone wants a horizontal
11:38platform you know horizontal platforms
11:40you know just generically are more
11:41valuable they're just incredibly hard to
11:43start so early in people marketplaces
11:45you had the horizontals of TaskRabbit or
11:48surelly where you could ask people to do
11:50anything and my paradox of choice and
11:52the lack of optimization against
11:54specific virgle verticals no one knew
11:57what to do with it so they really didn't
11:58do much of anything with it but the ones
12:00that seem to be getting the traction you
12:02know lifting cars you know homejoy in
12:06instacart and in grocery delivery door -
12:09and caviar and food deliveries are
12:11picking a vertical and optimizing for it
12:14now you know so you know possibly down
12:16the road there's a possibility to extend
12:18and to do verticals but I tell you
12:20there's a lot of groceries bought in the
12:21US and so not a bad-sized marketed
12:25attack she's actually the single largest
12:26category of retail in according to the
12:29Department of Commerce in in the United
12:31States and it has not been at all
12:33disrupted by digital at this point
12:35interesting well my refrigerator awaits
12:38online grocery delivery I'll tell you
12:41that and Jeff I want to thank you for
12:43your time and Sam you as well it's a
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