Outliers #002

We’re back. Issue #002 of Outliers hot into your inbox.

This week we shift our focus right across the globe to Asia and the booming internet opportunity made visible through TikTok. Plus, how vacuum cleaners are Amazon’s greatest marketing tool.

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Dealmakers

The biggest global Seed to Series A deals from outside the US this week:
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1. Talon Cyber Security - US$100m - Tel Aviv, Israel
   Talon has built a secure web-browser for organisations. Granting employees access to internal apps and data from any device, security teams can completely monitor engagement with internal tools.
2. Hysata - US$29.3m - Wollongong, Australia
   Born out of the University of Woollongong, Hysata is developing capillary-fed electrolysis. For the non-physics Ph.D. in the audience, they generate green hydrogen. Paired with 95% efficiency, they claim its the lowest cost green hydrogen in the world.
   
3. Dezerv. - US$20.7m - Mumbai, India
   Having transacted almost US$80m to date, Dezerv. is an Indian wealth management platform. On top of advisory services, the company offers more direct, digitised access to investments like bonds and VC.
   
4. All G Foods - US$17.2m - Sydney, Australia
   Another example of Aussie innovation, All G has developed synthetic milk. Instead of a plant-based alternative, the company is engineering mammary cells to produce close to authentic milk.
   
5. Ben - US$16m - London, UK
   Offering a platform for HR departments to manage benefits, Ben also ties in an individual Mastercard for every employee.

A VC's Insight

TikTok is eating social

In the US, people are spending as much time on TikTok as they are on Facebook, Instagram, and Snapchat combined! TikTok is eating social...the multi-billion dollar incumbents are struggling to compete with China’s innovation.

TikTok is the first app outside Meta’s quartet (Facebook, Messenger, WhatsApp, Instagram) to reach 3b downloads. An even more impressive accomplishment when India’s 830m internet users are locked out of the service. It’s more than just a users game. TikTok is nailing it on growth, time spent on the app, and in-app spending.

With users spending an hour a day on TikTok, we are already seeing a decline in time spent on Facebook. Meanwhile, Instagram and Snapchat usage are growing marginally. This should be scary if you’re Facebook and co. The next batch of social media users are not only signing up to your platform less than TikTok, but read together with the above it is having such an impact that it’s actually reducing the overall time spent per month (non TikTok) for the entire cohort of US users.
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Naturally, eyeballs lead to dollar bills. Perhaps most worryingly, TikTok is monetising at an astounding rate. TikTok is already making more than Twitter and Snapchat combined.

In 6 years, they have eclipsed Facebook’s 11th year and YouTube 14th year revenue. When armed with a balance sheet rivalling Fortune500 companies, they’re primed to continue steamrolling.
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What’s next? Perhaps Google is in their sights. TikTok is increasingly occupying a greater share of content formats across the internet, which gives it a growing collection of high-insight videos on everything. High-quality videos may lead to TikTok becoming the native search option. Here’s a TikTok to prove it.
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TikTok as a search engine, instead of Google/Youtube is truly terrifying in its potential. If search works, you can find highly engaging answers in less than 15 seconds viewing time. This piece is a great insight into the changing face of search for young consumers.

So, what does this meme for our investment philosophy? Well, it may be worth understanding why TikTok could scale and monetise so quickly in the first place. Asia is home to more than half the world’s internet users. A more native, Chinese built solution more easily captures the hundreds of millions of internet users in the region. In the Macro lens section below we go deeper on this idea.

Macro lens
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More than half of all internet users are based in Asia. While the tech world may seem centred around the West, North America and Europe don’t even have half as many users. As the TikTok piece above makes clear, an Asian first social platform has been able to grow at unprecedented rates.

What do we take away from this? Just how big the Asian opportunity is. Chinese investment opportunities may be relatively inaccessible but India and South East Asia have over 1.2b internet users between them. Moreover, no region has more room to grow. America and Europe are at ~92% internet penetration each. India is still at 43% while Indonesia and Pakistan, the 4th and 5th biggest countries in the world are at 53% and 19% respectively.
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Retweet

In the last week, Amazon announced their US$1.7b acquisition of iRobot; the creators of the Roomba vacuum. Co-founded by Aussie roboticist Rodney Brooks, it's another example of the US turning to foreign innovation.

Is Amazon really that interested in a vacuum cleaner? Are they more interested in the floor plan of tens of millions of homes in America? Yes. The most cynical observers will claim that Amazon will now know whether household’s have a dog or a cat and target them based on this intel. More trusting commentators note that Amazon is just building out their connected home offering, already having Ring (home cameras) and Blink (home security) on their books.
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Your authors this week

Lachlan Duffy - A founder-focused investor, Lachlan puts traction to the side. If you have a big vision, Lachlan is waiting for your deck.  

Alex Barrat - New to the VC world, Alex spent his early career at VC-funded scale up Stake. As one of the first ten hires, he left the team of 130 almost 5 years later. All pitches welcome. Submit your deck here.

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