Toto, We're Not on TikTok Anymore...

This is The Startup Breakdown, the newsletter where we breakDOWN startUPs (just had to make sure you appreciated the word play). By joining this growing community of dozens of interested people, you're getting firsthand access to my observations and opinions on the current state of startups and venture. If you'd like to receive these newsletters directly in your email once a week, go ahead and subscribe to never miss an email!

Happy Monday, folks.

The AI wars continue, though I’m not talking about Terminator. Yet.

Just a few weeks removed from calling ChatGPT a pretty mid technology, Google has announced its own generative AI tool, Bard. The only problem is that it doesn’t seem to work lol.

While demoing the shiny toy which is set to be released publicly over the next few weeks, the company wanted to show that its product is actually recent. For context, one of the biggest critiques of ChatGTP is that its most recent data is from 2021, so the company asked Bard about the new James Webb Space Telescope and its accomplishments.

Its response would have failed a poly test, claiming that the tele “took the very first pictures of a planet outside of our own solar system.” To be clear, this isn’t accurate, and the very public fumble caused Alphabet’s stock to tumble more than $100 billion…

This highlights a major weakness in these technologies. As they are based on text patterns rather than databases of information, they’re prone to bullshit you and sound really, really confident as they do while spitting out answers that sound natural rather than are factually correct.

Despite the lackluster debut, neither Microsoft nor Alphabet is likely to cut down on spending now that the generative arms (but not hands lol) war has begun.

It’s also not a battle contained to one country as China is getting in on the fun, too. The country’s version of Google, Baidu, has announced its own product called Ernie. Not to be outdone, tech behemoth Alibaba has been rumored to be exploring an Ernie competitor.

Big money is big confident on the tech. And in the broader geopolitical rivalry between the US and China, neither wants to let the other gain a leg up on such a widely observable show of technological progress.

Now if only one could explain this weekend’s UFO craze…

I promised to gloat if one of my 2023 predictions came true, so here goes. My prediction that more countries, likely the UK, would experiment with central bank digital currencies (CBDCs) was adequate. Golf clap.

Thank you, internet, for preserving my words, particularly the embarrassing typo on the line before when I claimed that “a few major companies” had been experimenting with CBDCs. I promise I meant countries, guys. Guys?

Anywho, our oh-so-beloved sibling across the pond has begun a public consultation process on the merits of introducing the digital pound by the end of the decade. The country’s economic leaders have expressed that the country’s low cash usage indicates that such a transition would be a fairly frictionless one, and it has begun to work with private banks to determine ways to introduce consumer wallets to store the Royal Robux.

To be clear, CBDCs are not cryptocurrencies. Like the physical pound, they’re backed by the sovereign, meaning that the King pinky promises that it’s worth what it is. Bam. Value.

Prime Minister Rishi Sunak (also wrote about his affinity for financial and blockchain innovation) has been adamant that there is no name yet for the currency. While “digital pound” would suffice, I find it bloody boring. Many are clamoring for Britcoin, though I think we should really consider Liz Bucks.

If we’re feeling really spicy, we can commemorate a slightly shorter period in British history and go with Lizz Bucks 🤷‍♂️ 

If the US were to introduce a digital dollar, what would you want to call it? Winner gets a shoutout next week.

A quick update on one of Her Majesty’s former colonies (wait isn’t that like everyone?), India has actually successfully onboarded 50K citizens as part of its own digital rupee pilot last year. The government has stated that it does not plan to further expand yet, instead choosing to observe this existing user base which has already recorded nearly 800K transactions.

Cash remains king in India where more than 50% of transactions are still physical exchanges. One would imagine that the transition to digital would have a much more dramatic effect than in England where just 15% of transactions are in the King’s papers.

In some more international (and former colony 😅) venture numbers, we have data from the land down under. For 2022, Australian startups raised $5.1B across 712 deals, a 30% decline in value from the $7.3B raised on 731 deals the year before.

It seems that while the bagmen were still willing to write checks, their wrists got tired, and they left a couple of 0s off the numbers from the highs of 2021. Most of the money that was brought in was in fintech.

Though this isn’t ideal, it’s actually a smaller drop from the global average of 35%. Congrats?

Moving a bit to the north, Japanese investor SoftBank might want to just forget last year even happened. The company lost $5.8 BILLION on startup investments in Q4 of last year alone, the unfortunate result of being the world’s biggest startup investor in 2021 right before the entire world economy decided to play hopscotch on the highway.

This ~lack of success~ has inspired the company to be a bit more defensive with how it spends its Misty Mountains of treasure going forwards. It’s reducing its investments by 98% YoY to a measly $300M.

Yeah, think I’ll keep my NFT apeing that low as well…

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Ask just about any preteen girl what she wants to be when she grows up, and 99% of them are going to say a TikTok dancer like Charli D’Amelio.

The young star completely changed the world of social media as we know it, in many ways serving as a catalyst for the ascension of TikTok as the most popular social media platform and thus its into into the conversations of Congress.

Charli, herself, has been vaulted from dance video creator to full-fledged celebrity. She and her sister Dixie mingle amongst movie stars, release their own music, and even star in their own show on Hulu. She has roughly 150 million followers… on TikTok alone.

That’s more than the two most-followed movie stars, Will Smith and The Rock, combined. As many proclaim that this traditional movie star is dead, top creators like the D’Amelios hold the the weight once reserved for Tom Cruise and Madonna.

The cultural influence of people like “The First Family of TikTok” (their parents have gained substantial followings as well) is irrefutable considering the hold that they have on the interests of society today. More importantly, they have a chokehold on the attention of the hundreds of millions of youth of tomorrow, and this demand isn’t going to simply disappear.

The role of influencers is no longer just about promoting established brands to their followings. In today’s social economy, creators are brands in their own right. And there’s no brand as big as that of the D’Amelios.

The family has been wise to capitalize on this fame, first securing talent representation with revered management agency United Talent Agency (UTA), the group repping established stars like Harrison Ford, Mariah Carrey, and Wes Anderson. Their expertise has helped the family secure partnerships with everyone from Dunkin’ to Hollister.

They’ve also decided to test whether they have the VC stripes of a Tiger (Global Management) by launching the D’Amelio Family Fund through 444 Capital with the goal of helping to “fund emerging tech companies with strong end user brands“. These startup investments allow the family to double down on their role in ushering in the next era of entertainment and cementing their influence within it.

Many celebs and athletes have waded into the investing waters, but the D’Amelios are going even further, establishing their own retail brand, the brilliantly named D’Amelio Brands.

The first product to hit the production line will be a pair of women’s shoes, an entry point which makes sense given the popularity of sneakers and the family’s ties to the fashion world. They also have plentiful case studies with the success of past celebrity shoe deals like Justin Bieber and Post Malone with Crocs and Gigi Hadid with Reebok.

The shoe is almost through the design process with plans to hit shelves later this spring. I can already envision the lines out the (virtual) door. The company is going the DTC route like Vivaia and Allbirds.

Investors seem to like the Renegade, too. D’Amelio has raised a $6M seed round from the likes of Richard Rosenblatt, cofounder of the company and co-chairman of Autograph and CEO and cofounder of Whip Media. Participation also included CEOs from Lions Gate and Fanatics as well as a check from UTA.

It’s challenging to determine the exact size of the market given categorizing the company as a true fashion label or a celebrity brand. As a whole, though, the creator economy is massive, already worth more than $100B, and it’s doubling every two years, so it’s safe to assume that the sky is still the limit for what the company could become.

The decision to found the company rather than enter a one-off collab between big brand and celebrity as has been done many, many times now signals that there is a commitment to scaling D’Amelio Brands to full-scale brand, meaning it likely has a much higher floor than these sorts of collabs.

These collabs have been extremely successful, too. The partnership between Justin Bieber and Crocs bumped the company’s revenue by 64% YoY for the quarter when they were released and promptly sold out. With a following as large as the D’Amelios’ (actually larger than Bieber’s…), the potential for the shoes and all subsequent product launches will be massive, particularly as the core demographic of the brand’s customers grows older and begins to have its own disposable income.

Sticking to The Biebs, the closest comparison is likely Justin’s Drew House, a retail streetwear and lifestyle brand. After being founded in 2019, the company is reportedly doing mid-high 8-digit figures in sales. The brand has become a hot name in the streetwear scene and on reseller sites, and its emphasis on the clothing transcending the artist has allowed the company to appeal to demographics even outside of Bieber’s fanbase.

A few other celebrities have attempted to monetize through retail launches, most of them in the beauty space. These experiments have largely been through partnerships with companies like Ulta or Sephora. Though a few have been successful, many others have fizzled out.

D’Amelio Brands stands out because frankly, few celebrities have as devoted of followings as Charli’s. This alone gives the brand an edge, but differentiating through fashion rather than makeup allows it to address an undertapped market.

Most retail companies are unable to go the DTC route because of the challenge of exposure. This company won’t be one of them, and this will allow the company to better manage production and distribution channel expenses.

Behind the team’s very public image is a team of experienced professionals in the fashion and retail space. Manning the CEO role is Marc D’Amelio, but rather than simply holding the position in name, he actually has two decades of experience in running clothing brands.

In addition to the mentioned investors, the board also consists of numerous other experts capable of capitalizing on the goldmine that is the family’s IP.

The sky is the limit when it comes to the potential of D’Amelio Brands. You can either dismiss it and miss out, or you can watch as the company continues to pioneer the futures of both the retail and creator economies as we know them.

TLDR: D’Amelio Brands is the lifestyle retail brand of the social media-turned A-list celebrity D’Amelio family. The company plans to launch its first product, a women’s footwear line, this spring before exploring other products to capitalize on the family’s massive influence. With backing from the biggest names in retail, the company has the potential to reshape the future of retail and its intersection with the rapidly growing creator economy.

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Really looking forward to getting to know you and ensuring I’m providing you with content you’ll get value from.

Cheers to another day,

Trey