Episode 39: Bonza collapses, Envato Founders Heroic Exit, HIMs, Newbook and Big Bucks in Restaurant Bookings
The guys discuss the huge exits at Envato and Newbook, the importance of picking your Golden Moment, the Bonza debacle, HIMs controversy and how college kids are cashing in on restaurant reservations.
Adir + the Pro-Palestinian protests
With all his spare time, Adir popped by the University of Melbourne protests and found most of the protesters weren’t actually students, and the chats were a li’l anti-semitic in nature - “I definitely felt like the protests at Melbourne University were much less pro-Palestinian, despite the words, and much more apologist for this idea of resistance at any price.”
Adam references the latest “All In“ podcast, where Sheryl Sandberg (who helped build two of the largest advertising and technology companies in the world, Google and Facebook) talks about her involvement in “Screams Before Silence” and her reaction to sexual violence on and after October 7th. Listen below 👇
Andrew Dudum is not him
US brand Hims, formally known as Hims & Hers Health, Inc., is an online sexual health and pharmaceutical company and their CEO, Andrew Dudum, caused some controversy that led to the share price dropping 10% in a couple of days and 30% in the last month.
Dudum (not to be confused with Tudum, the sound Netflix makes when you start watching) told protesters in the US to “keep going” because “it’s working”, while motivating the protesters to apply for a job at his company because CEOs are "eager to hire you, regardless of university discipline."
The controversy shone a spotlight on a pretty interesting business.
With a market cap of $2.4B and $872M in revenue (up from $527M the year before and $272M the year before that), with an incredible gross margin of 80%.
BUT, they’re not profitable, mostly because they spend 50% of their revenue on marketing (Adir: “And so that is the way to avoid profitability, basically.” For the record, Adir’s target for marketing spend at a D2C consumer is 20% of revenue.)
Adir (bearish on Hims, bullish on Eucalyptus) thinks “this is a badly run business based on the numbers”, but Adam (the contrarian view to Adir) says “if you look at the trend, this business could be making 100, 200 million bucks in the next couple of years if that trend continues.”
The collapse of Bonza Airlines
Bonza Airlines is no longer, lasting about 14 months before it was grounded and its planes repossessed. The airline was run by a former Virgin exec, Tim Jordan, and needed 10 airline craft to be viable, but only got to four, which spent much of their time docked at various airports.
Bonza was backed by a Miami-based private equity firm, 777 Partners. Founded by Josh Wanda, who was revealed to have been arrested back in 2004 for drug offences, 777 Partners used a cash float from a Bermuda-based reinsurance business to fund some random investments in struggling airlines and poorly performing European soccer teams, until the music inevitably stopped last week.
Bonza was knocked for its app, but Adir said the downfall wasn’t about the app - “This had nothing to do with Qantas and Virgin's market power. These guys just had a terrible business. The irony of the app situation is Rex doesn't even have an app. I check in on my phone on their HTML5 website and then take a photo of the boarding pass so I can scan it at the gate.”
“Companies are made up, it's all fiction, right?”
“Popular jewellery and bag companies Colette and The Daily Edited have fallen into voluntary administration, as their umbrella company Marquee Retail Group tries to salvage their business during cost of living pressures.”
This comes after major shareholder, former Myer boss, Bernie Brooks, pumped $3.6M into the business since the end of 2022.
Adam: “The reason directors put companies in administration is because they start getting held liable for insolvent trading. They don't want to be liable. So if you're a director and it's about to go bankrupt, I'm not going to get sued, but if I know it's insolvent, I can get sued personally.”
Adir: “We're just having this argument in Australia at the moment about wholesale investors and how much people should have to be worth in order to make investments in risky companies. And there's a huge focus on trying to protect people from their own ignorance and naivety is how I would describe it. Yet you have a customer who is the most ignorant and the most naive of a company's performance. Gives money because they think they're getting a product and he's totally unprotected by the system. It's actually terrible.”
Two Aussie exits: Envato and Newbook
Two Australian companies had major exits this week!
One of the OGs of Australian e-commerce, Envato, sold to US giant, Shutterstock for $375M. Unlike most tech businesses, Envato was fully bootstrapped, never raised a single cent, and has been profitable since day one. It's paid out more than $100M of dividends in the last two years alone.
A husband and wife, Cyan and Collis Ta'eed, creating generational wealth is our favourite type of success story.
The chat took a quick detour when Adam and Adir went down a Microsoft rabbithole and the near-impossibility of being a bootstrapped B2B SaaS company today. The story of Microsoft mentioned is below if you’re interested 👇
The other exit was Gold Coast-headquartered property booking software company, Newbook (formerly known as NewBook, apparently), which was owned by high-profile private equity firm, Potentia, and was sold for $250M to Storable, which is owned by another private equity firm, EQT.
Picking your golden window
… following on from those notable exits at Envato and Nowbook, Adir shares the art of picking your golden window: “Most businesses have a period where they are shining and there's a golden window. And this is what I say to founders when they ask if should they sell. I say, I’ll tell you the time to sell: it's when everybody believes there's nothing but blue sky ahead, including you.”
Cashing in on restaurant reservations
A story came out recently about two college students who made a combined $150K reselling restaurant reservations. Adir said they’re taking advantage of market inefficiencies - “this is what's good about capitalism. They're not doing anything illegal.”
Should restaurants deploy dynamic pricing? Should they charge for cancelled reservations? Are reservation resellings a problem that need to be solved?
Adir: “That is that's the smartest idea on this entire episode has come at the very end” (listen to find out what it is).
Five other stories worth following:
Elon Musk (who will eternally feature in this section) shared plans to summarise news with AI, also rolling out a new ‘Stories’ feature to provide users with real-time, accurate information. The summaries will rely solely on X posts and commentary, not the text of news articles themselves.
Disney is going all on its amusement parks, planning a $60B parks expansion over 10 years and building new lands tied to new IP. The House of Mouse brought in $9B in revenue from amusement park visits last year.
Boeing is attempting to escape some of its drama on Earth by leaving the planet. Boeing is planning to launch its Starliner capsule that will ferry two NASA astronauts to the International Space Station. The Starliner program has been delayed for seven years and cost $1.5B more than expected.
Did you know Adir is a hip-hop aficionado? Two of its biggest stars, Drake and Kendrick Lamar, have been going back and forth with a barrage of diss tracks that had fans scrambling to decode the lyrics before the next song was released. Lamar’s “euphoria” was the No. 1 song on Spotify yesterday, and Drake’s “Family Matters” came in at No. 5.
Warren Buffett hosted the annual Berkshire Hathaway meeting, recognising his late business partner Charlie Munger and telling the group “I not only hope you come next year. I hope I come next year.” The company announced a $189B pile of cash.