Ride Two Elephants at the Same Time
From time to time, someone will share a Forbes article with me and, surprisingly, it will be a good read.
Today, I got to read two such Forbes articles.
The first story was the cover story on Andreessen Horowitz.
You may not follow the venture capital scene nor is it entirely compelling enough for me to want to go into detail here.
But of all the ensembles that have gathered momentum and grandiosity this century in Silicon Valley, the standout team in the press and in dollars returned from their investments is Andreessen Horowitz.
The firm produces one of the best podcasts on tech (a16z) and, moving forward, will be categorized as a registered investment advisor (RIA) as it once again marches to the beat of its own financial drum:
“To build their VC firm, Andreessen and Horowitz modeled their brand strategy not on the industry’s elite but on Larry Ellison’s Oracle and its aggressive marketing during the enterprise software wars. They embraced the media, hosted star-studded events and badmouthed traditional venture capital to anyone who would listen. And while they started with small seed checks to companies like Okta (now valued at $9 billion) and Slack ($7 billion), they ignored traditional wisdom and gobbled up shares of companies like Twitter and Facebook when those companies were already valued in the billions. For one investor in their funds, Princeton University’s chief investment officer Andrew Golden, it became a running joke how long it would take for other firms to complain about Andreessen Horowitz. ‘In the early days, it was within two minutes,’ he says.”
The second story I read was that of Ollie’s Bargain Outlet ($OLLI).
Perhaps this company is not a household name to many.
In fairness, I just learned about them today.
But the retail store has over 300 locations in the United States.
And while it operates in fewer markets than Walmart ($WMT), collaborates with less posh partners than Target ($TGT), disrupts local businesses at a lower rate than Dollar General ($DG), and veers away from large digital ad spend of upstart e-retailers, its stock is up almost 300% in fewer than 4 years:
“An average Ollie’s does about $130 in sales per square foot, lower than Target (roughly $300), Walmart ($430) and even dollar-store levels ($200). These numbers support the idea that Ollie’s is, indeed, less expensive. Yet Ollie’s is more profitable. Its operating margin exceeds 13%, beating out Walmart (4.1%), Target (6%) and Dollar General (8.6%). Those retailers want to keep the same items in stock, accepting slimmer margins as a tradeoff for consistency. Ollie’s, on the other hand, embraces inconsistency — and the higher margins that accompany it. It passes on lower-margin goods because its customers know better than to expect the same Colgate toothpaste every time or that Ollie’s will bend to seasonality as much as a Walmart.”
Andresseen Horowitz and Ollie’s are clearly different.
Both make money, for sure, but operate and scale in varying degrees.
The media and its audience (me) may like the glitz and the glamour that tech serves up each day.
But the Heartland of retail in the United States sometimes finds a way to escape the allure of two-day shipping.
