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Letterhead wants to be the Shopify of email newsletters

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You’re probably investing in an email newsletter these days, whether you’re an international brand, a nonprofit, or a local news publisher.

Maybe email is even your focus now, because you got burned by Facebook, Google or other closed platforms during the past decade. The problem is that the tools you have available are probably too generic, or are built specifically for marketers. What if you want to make money from the newsletter content itself?

Letterhead is slicing through the vast market of existing email SaaS products, betting that a cross-section of revenue and collaboration needs are not being met properly for newsletter creators of all types. Instead, it puts all ad sales, paid subscriptions and newsletter content management into a single, streamlined product.

Its viewpoint on the future of newsletters — and its customer base so far — are intriguingly different from your typical SaaS startup in Silicon Valley. And there’s a reason for that. Letterhead is actually a product spinout of a community publisher in Miami called Whereby.us that began life in 2014 by launching a local media site, The New Tropic. The publication became a rare success in online local news, once it focused on the email newsletter format.

“Initially, our goal was to create a local media product that would help people learn about the city, get more involved and serve a new generation of local news users,” cofounder and CEO Chris Sopher tells me by video chat. “Our ideas had included opening a bar, events, and all kinds of other stuff. We quickly pared that back to the things that were working, and email was at the top of the list.”

Advertising inventory in these emails was in high demand, so the company built out a self-service payment system for advertisers, that allowed its newsletter writers to easily publish the correct ads in the correct place.

With this business model and technology as a foundation, it launched or acquired newsletters in Seattle, Portland, Orlando and Pittsburgh. Through this process, it has continued to improve the tool itself.

It also discovered the broader demand.

“People would reach out to us and say ‘I love this newsletter, what tools do you use?’ because it was such a pain to produce emails with all of the different tools out there,” Sopher explains.

(Those tools, in this author’s experience, generally include a combination of Mailchimp, Constant Contact or Sailthru, together with your main web publishing CMS like WordPress, your separate subscription software like Piano and however you are managing ads.)

“We’d tell people that we used our own internal tools and they’d say ‘oh, can we use those, too? And we’d say ‘no, that’s not what we’re doing.’ Eventually, we said no enough that we looked at each other and said, ‘we should figure out how to get to yes on this.’ And that’s where Letterhead came from.”

Today, Whereby.us is one of the few success stories from a catastrophic decade in local news. Sopher says that its five city newsletters are comfortably profitable via ads overall — having recovered from a pandemic dip earlier this year — and are continuing to grow.

But the new focus is on Letterhead’s tools, including the ad system, a new paid subscription feature that lets you do things like add paywalled subsections of emails, easy-to-use text editing and template formatting, and soon, analytics.

“Sponsorships and ads were [needs] we heard about most, so that’s where we started,” cofounder and COO Rebekah Monson said by email. “The bigger vision is to create a set of tools and services that feed into each other in one easy place, and help all of those revenue streams grow, eventually branching out from email. We’re seeing demand for that not just from traditional media publishers, but also from marketers, nonprofits, universities, professional associations — all these folks who have engaged communities and want to deepen those relationships and bring in revenue through that engagement.”

On the spectrum of email newsletter products, Letterhead’s focus on revenues and team collaboration places it adjacent to Substack’s focus on the individual writer, and to other products like Lede designed specifically around subscription news organizations.

Letterhead is explicitly a hosted software solution that you pay for your organization to use, not an open-source project like Ghost. Like how Shopify provides a suite of white-label ecommerce features for anyone who wants to run an online business, it wants to be the engine humming away under the hood of your newsletter.

On the much broader spectrum of all email solutions in the SaaS world, Letterhead is betting that its understanding of the market and its product design can beat out the brutally competitive world of SaaS email products.

Since soft-launching earlier this year, Sopher says it has already been signing up a broad range of customers. Examples he cited include startups (Shoot My Travel), nonprofits (Vida y Salud and Refresh) and political groups (OD Action) as customers, as well as local news publishers, of course (VTDigger, Choose954, and Santa Cruz Local). Letterhead is also a partner in WordPress’ News Pack program, which is a collection of plugins for publishers on that CMS.

“We’re always going to have an affinity to media publishing… but there is a broader need than just that industry,” he explains. “And we’re also seeing this moment where a lot of other organizations are participating in [publishing]. You name a topic, there will be professional reporters out there doing great work. But it’s also pretty likely that there is a brand, an agency, a nonprofit, or some other organization creating interesting and useful content, and building a community around it — that would not raise its hand and say that it is part of the news industry.”

Sopher also notes that the product is designed to be modular, so that companies can just use parts of it and integrate its features with other email service providers and most any tech stack.

“What we’re seeing is that smaller customers are coming on for the simplicity of having it all in one place without sacrificing monetization,” he adds, “but larger customers are choosing us as one part of their stack as they build a multifaceted business or grow out of tools geared more to individual or independent creators.”

With the revenue options in place, Sopher says analytics and additional ESP options are coming next.

Over the course of its history, Whereby.us has raised $5 million from across tech and media. Backers include the Knight Foundation, Jason Calacanis’ LAUNCH fund, Band of Angels, McClatchy, hundreds of smaller investors via Republic and SeedInvest, and most recently a round led by Brick Capital.

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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Snowflake latest enterprise company to feel Wall Street’s wrath after good quarter

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Snowflake reported earnings this week, and the results look strong with revenue more than doubling year-over-year.

However, while the company’s fourth quarter revenue rose 117% to $190.5 million, it apparently wasn’t good enough for investors, who have sent the company’s stock tumbling since it reported Wednesday after the bell.

It was similar to the reaction that Salesforce received from Wall Street last week after it announced a positive earnings report. Snowflake’s stock closed down around 4% today, a recovery compared to its midday lows when it was off nearly 12%.

Why the declines? Wall Street’s reaction to earnings can lean more on what a company will do next more than its most recent results. But Snowflake’s guidance for its current quarter appeared strong as well, with a predicted $195 million to $200 million in revenue, numbers in line with analysts’ expectations.

Sounds good, right? Apparently being in line with analyst expectations isn’t good enough for investors for certain companies. You see, it didn’t exceed the stated expectations, so the results must be bad. I am not sure how meeting expectations is as good as a miss, but there you are.

It’s worth noting of course that tech stocks have taken a beating so far in 2021. And as my colleague Alex Wilhelm reported this morning, that trend only got worse this week. Consider that the tech-heavy Nasdaq is down 11.4% from its 52-week high, so perhaps investors are flogging everyone and Snowflake is merely caught up in the punishment.

Snowflake CEO Frank Slootman pointed out in the earnings call this week that Snowflake is well positioned, something proven by the fact that his company has removed the data limitations of on-prem infrastructure. The beauty of the cloud is limitless resources, and that forces the company to help customers manage consumption instead of usage, an evolution that works in Snowflake’s favor.

“The big change in paradigm is that historically in on-premise data centers, people have to manage capacity. And now they don’t manage capacity anymore, but they need to manage consumption. And that’s a new thing for — not for everybody but for most people — and people that are in the public cloud. I have gotten used to the notion of consumption obviously because it applies equally to the infrastructure clouds,” Slootman said in the earnings call.

Snowflake has to manage expectations, something that translated into a dozen customers paying $5 million or more per month to Snowflake. That’s a nice chunk of change by any measure. It’s also clear that while there is a clear tilt toward the cloud, the amount of data that has been moved there is still a small percentage of overall enterprise workloads, meaning there is lots of growth opportunity for Snowflake.

What’s more, Snowflake executives pointed out that there is a significant ramp up time for customers as they shift data into the Snowflake data lake, but before they push the consumption button. That means that as long as customers continue to move data onto Snowflake’s platform, they will pay more over time, even if it will take time for new clients to get started.

So why is Snowflake’s quarterly percentage growth not expanding? Well, as a company gets to the size of Snowflake, it gets harder to maintain those gaudy percentage growth numbers as the law of large numbers begins to kick in.

I’m not here to tell Wall Street investors how to do their job, anymore than I would expect them to tell me how to do mine. But when you look at the company’s overall financial picture, the amount of untapped cloud potential and the nature of Snowflake’s approach to billing, it’s hard not to be positive about this company’s outlook, regardless of the reaction of investors in the short term.

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A first look at Coursera’s S-1 filing

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After TechCrunch broke the news yesterday that Coursera was planning to file its S-1 today, the edtech company officially dropped the document Friday evening.

Coursera was last valued at $2.4 billion by the private markets, when it most recently raised a Series F round in October 2020 that was worth $130 million.

Coursera’s S-1 filing offers a glimpse into the finances of how an edtech company, accelerated by the pandemic, performed over the past year. It paints a picture of growth, albeit one that came at steep expense.

Revenue

In 2020, Coursera saw $293.5 million in revenue. That’s a roughly 59% increase from the year prior when the company recorded $184.4 million in top line. During that same period, Coursera posted a net loss of nearly $67 million, up 46% from the previous year’s $46.7 million net deficit.

Notably the company had roughly the same noncash, share-based compensation expenses in both years. Even if we allow the company to judge its profitability on an adjusted EBITDA basis, Coursera’s losses still rose from 2019 to 2020, expanding from $26.9 million to $39.8 million.

To understand the difference between net losses and adjusted losses it’s worth unpacking the EBITDA acronym. Standing for “earnings before interest, taxes, depreciation and amortization,” EBITDA strips out some nonoperating costs to give investors a possible better picture of the continuing health of a business, without getting caught up in accounting nuance. Adjusted EBITDA takes the concept one step further, also removing the noncash cost of share-based compensation, and in an even more cheeky move, in this case also deducts “payroll tax expense related to stock-based activities” as well.

For our purposes, even when we grade Coursera’s profitability on a very polite curve it still winds up generating stiff losses. Indeed, the company’s adjusted EBITDA as a percentage of revenue — a way of determining profitability in contrast to revenue — barely improved from a 2019 result of -15% to -14% in 2020.

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The owner of Anki’s assets plans to relaunch Cozmo and Vector this year

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Good robots don’t die — they just have their assets sold off to the highest bidder. Digital Dream Labs was there to sweep up IP in the wake of Anki’s premature implosion, back in 2019. The Pittsburgh-based edtech company had initially planned to relaunch Vector and Cozmo at some point in 2020, launching a Kickstarter campaign in March of last year.

The company eventually raised $1.8 million on the crowdfunding site, and today announced plans to deliver on the overdue relaunch, courtesy of a new distributor.

“There is a tremendous demand for these robots,” CEO Jacob Hanchar said in a release. “This partnership will complement the work our teams are already doing to relaunch these products and will ensure that Cozmo and Vector are on shelves for the holidays.”

I don’t doubt that a lot of folks are looking to get their hands on the robots. Cozmo, in particular, was well-received, and sold reasonably well — but ultimately (and in spite of a lot of funding), the company couldn’t avoid the fate that’s befallen many a robotics startup.

It will be fascinating to see how these machines look when they’re reintroduced. Anki invested tremendous resources into bringing them to life, including the hiring of ex-Pixar and DreamWorks staff to make the robots more lifelike. A lot of thought went into giving the robots a distinct personality, whereas, for instance, Vector’s new owners are making the robot open-source. Cozmo, meanwhile, will have programmable functionality through the company’s app.

It could certainly be an interesting play for the STEM market that companies like Sphero are approaching. It has become a fairly crowded space, but at least Anki’s new owners are building on top of a solid foundation, with the fascinating and emotionally complex toy robots their predecessors created.

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