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Hi Bipul – that is a great point. I agree with you that Labster is not the best at the discovery stage. The reason is that Labster comes in much earlier as a teaching tool to get students excited about science who would otherwise never have had the opportunity to set food in a lab. So many students already drop off from STEM education because it has historically been not only very challenging, but has had very limited resources and has not managed to make the educational process a bit simpler, a bit more engaging, and a bit more fun. So this is where Labster adds the most value. I would argue that for the next step – the research and discovery of new scientific knowledge will probably continue to happen within a real lab. Just see how this simulation is 100x cooler than reading boring descriptions about cells and molecules: https://www.youtube.com/watch?v=oairUMkieak .

Thank you for the great post, Christy. Seems that Stitch Fix is doing an excellent job figuring out and predicting what styles people will be interested in wearing. You mention that they are currently growing their human capital of stylists as the user base grows – do you think that is necessary? Interestingly, one of their competitors Trunk Club is coming exactly with that value proposition of offering every user “their personal professional stylist”, relying on the premise that people do not trust a computer algorithm recommending them what to wear. As we talked in class today, it would be pretty difficult to figure out a perfect algorithm that is able to take so many variables and constraints into account.

What about Le Tote’s model of suggesting you clothes, shipping them to you, and letting you wear them – it’s a bit like Rent the Runway where you also have the option to buy and keep what you like. I prefer this model as a user – I can wear the cool items once or twice and then get new ones selected for me. Do you think letting people wear the shipped clothes increases or decreases the chance they keep them?

Thank you for the comment, Techie and apologies for responding so late. As you point out, STEM can change the technology it uses easily – it acts more like a software platform. Hence, it is possible to also change the business model slightly as technology changes and the competitive landscape as well as regulations change as well over time. They already have some market channels that have been working pretty well, so I assume that they will adapt their sales and marketing efforts as well as the competitive landscape changes as well. It is true that the biggest threat for them is to just be replaced by the software solutions that the actual battery producers create. For example, Tesla is both making batteries at the Gigafactory in Nevada, but it is also making its own optimized software solution that runs the batteries and will soon even integrate with the solar panels that SolarCity makes. So I agree that the threats are real and imminent – so STEM needs to closely watch its competitors and stay on top its proprietary software innovations.

Thank you for the comment, Chun – and apologies for the late response. I agree with you that Nike is well-positioned with the gamification of health data. If you look at Strava, you can see how much people care about comparing their results to their peers – this has helped Strava gain a lot of traction. So I am completely with you – the social aspect is completely necessary for Fitbit to remain the industry leader in health tracking. It crosses a fine like between data privacy and gamification, so I am not sure if people will be widely willing to share their health data with their peers. The more data the wearable gathers, the more that data becomes valuable and many businesses will also be interested in taking it. And there is always the risk of hacking the device as well.

Interesting point, Techie. I just did some research on the tax considerations of equity crowdfunding and here is what I found:

For the purchaser of an equity stake, tax implications are created when the equity is sold. The tax on your gains and the deductibility of your losses on the sale of equity in a company will depend on the seller’s tax bracket and the length of time for which you held the asset before it was sold. Capital gains are realized when equities are sold for a profit, whether that sale is to the issuing entity (liquidation) or to another individual (transfer). This profit is taxable to the stakeholder. Short-term capital gains are taxed the same way as regular income and are subject to different tax rates depending on the seller’s income bracket. Long-term capital gains are also subject to different tax rates depending on the seller’s income bracket, but the tax rates on this type of income are significantly lower than traditional income taxes.Capital losses are realized when an equity stake in a company is sold for less than its original purchase price or the company in question declares bankruptcy. The shareholder can write off short or long-term capital losses, depending on the life of the organization in question or the duration for which the shares were held. Short and long-term are measured by the same standards for losses as they are for gains.

So, in short, there is an implication only at the moment of sale or liquidation of the equity that you’ve bought. And the tax rate depends on the tax bracket of the seller. Hope this explanation helps!

Interesting point, Techie. I just did some research on the tax considerations of equity crowdfunding and here is what I found:

For the purchaser of an equity stake, tax implications are created when the equity is sold. The tax on your gains and the deductibility of your losses on the sale of equity in a company will depend on the seller’s tax bracket and the length of time for which you held the asset before it was sold. Capital gains are realized when equities are sold for a profit, whether that sale is to the issuing entity (liquidation) or to another individual (transfer). This profit is taxable to the stakeholder. Short-term capital gains are taxed the same way as regular income and are subject to different tax rates depending on the seller’s income bracket. Long-term capital gains are also subject to different tax rates depending on the seller’s income bracket, but the tax rates on this type of income are significantly lower than traditional income taxes.Capital losses are realized when an equity stake in a company is sold for less than its original purchase price or the company in question declares bankruptcy. The shareholder can write off short or long-term capital losses, depending on the life of the organization in question or the duration for which the shares were held. Short and long-term are measured by the same standards for losses as they are for gains.

So, in short, there is an implication only at the moment of sale or liquidation of the equity that you’ve bought. And the tax rate depends on the tax bracket of the seller.

Thank you for your comment, Brandon K! I agree that many crowdfunding campaigns have gone awry and have created a bad rep in the industry. I would think of it this way: non-equity funding is more or less just a payment to receive a product (so success is more or less expected and should be close to 100%); however, equity crowdfunding is an investment in the growth of a business (and based on statistics, only 1% of startups actually make it big and maybe another 3-4% have some kind of exit, be it large or small) – so the expected success rate is by definition different. So what individual investors need to understand is the underlying risk of their investment. That can be fixed with education / blogs / tutorials and with success and failure stories.

On the point of adding more controls and not letting people invest in shady businesses — there’s already some controls based on the amount of annual income (2% or so) and the amount that each startup can raise (max $1M). The debate here is that some believe that people should be free to put their money wherever they want. Yes, banks can exercise control and stop giving you credit (money you have not yet earned), but no one really controls where you put the money you have actually earned.

Great point, dturenshine. I agree that VCs add a lot of credibility by syndicating deals. What Indiegogo can possibly do it work together with institutional/strategic investors, angels, and traditional VCs to syndicate a deal – for example, 80% of the capital is from VC and the last 20% comes from the crowd. This way people can trust that the terms they sign up for are “market terms” and individual people don’t commit to deals, which have unfavorable terms. I do not not what each deal looks like, but the valuation for now seems to be vetted by Indiegogo. Maybe in the future there can be a mechanism, in which the valuation and deal terms are also crowd-sourced?

Great article, Yao. I just stumbled across it, noticing that you also wrote your post on equity crowdfunding (I wrote about Indiegogo entering the same space, https://d3.harvard.edu/platform-digit/submission/equity-investing-for-the-masses-is-indiegogo-killing-vcs/ ). You make great points on the challenges that equity crowdfunding is facing. Despite being located in a different geography (China vs USA), both JD and Indiegogo seem to be struggling with very similar problems such as vetting the businesses, educating the investors, and syndicating deals with registered VC investors. What I find interesting is that Indiegogo has chosen one registered investment partner for all its investments, while JD chooses a new VC each time. Why do you think that is? Would that give them more credibility and larger access to interesting investment opportunities? Wouldn’t it complicate the paperwork and regulatory compliance too much? Would be great to hear your thoughts!

Great article, Alex. I wrote about Fitbit in one of my previous posts and looked into how the company announced its transition to become a healthcare platform business. Do you think WHOOP has the potential of changing its business model from a hardware one to a platform one by integrating with other devices and wearables (adjusts the ambient light if you are in recovery mode for example), or with other businesses (insurance companies, hospitals, other healthcare providers)? If they transition to a platform, what needs to change?

Do you see WHOOP going beyond just professional athletes and more into lifestyle tracking – simply by reducing the price point with its newer/cheaper/maybe more limited versions? Would it make sense for them to compete head-to-head with the more popular fitness trackers like Garmin or Fitbit? Would be great to hear your thoughts.

Thank you for sharing this article, Adam. I met Freebird’s founder at an E-Club event last year and it was great to hear his story and how the company is growing post-HBS. As you point out, there might be some issues with the risk assessment model in adverse selection – people flying in the winter months between snowy cities when delays and cancellations are very likely to occur are also more likely to buy this insurance product.

If Freebird is now a stand-alone product and is only available via a different website than the one people use to book their tickets, how should they manage their Go-To-Market strategy? Would the business model work if they never integrate it with the airline ticket aggregator websites such as Kayak or Skyscanner? Do you think they should offer some revenue-sharing with the aggregators or the airlines directly so that they get featured? Would be great to hear your thoughts!

Great article, Gil. I also read CB Insights’s newsletter on a daily basis and find it a lot more entertaining than the regular dry VC industry reports. Their focus on data and visual maps of industry landscapes like the one you showed is actually extremely helpful and gives you a quick and easy overview of what is happening in a particular field.

CB Insights is a newcomer though – what do you think about their datasets on the website? Whenever I have tried using them, it just seems a bit more cumbersome to find information than, let’s say, using the industry norm, which is Pitchbook. While CB are great at aggregating industry data, it seems that they have not yet been able to gather the copious amounts of data on people (incl. linkedin profiles!), investors, and valuations, and investing rounds the way Pitchbook has. Do you think they can still survive without it or they need to match up to the quantity and quality of data that Pitchbook has?

Regarding data gathering, do you think they have been doing this all manually or they have developed intelligent algorithms to scrape information off the web?