Cult-favorite salad company Sweetgreen publicly filed to IPO this week. Sweetgreen was founded in 2007, and raised $670M from VC and growth firms. There’s been a lot of talk about how the company is not yet profitable - Sweetgreen lost $141M last year on only $221M in revenue. Public investors typically expect these types of brick-and-mortar businesses to be making a profit!
However, it’s worth noting that Sweetgreen’s margins on a store level are comparable to other quick service restaurants (QSRs). With the exception of 2020, when Sweetgreen was hit hard by COVID (maybe because so many regular customers bought their salads as an office lunch?), the company’s restaurant-level margin tends to be ~15% - similar to that of Shake Shack and Wendy’s. And according to the S-1, Sweetgreen is aiming for an 18-20% margin moving forward.
What does this mean? We need to look at the other costs that aren’t incorporated in this margin, like HQ expenses, pre-opening costs, and depreciation & amortization. Without getting too deep into the accounting, the largest driver of expense for Sweetgreen is general & administrative. This bucket includes the costs of things like HQ-level employees, running the company’s support center, brand marketing, and acquisitions (Sweetgreen purchased robotics startup Spyce).
This analysis suggests that Sweetgreen’s model may not be inherently unprofitable - assuming the company can achieve greater efficiency on G&A spend at scale. Today, Sweetgreen has 140 locations, which is relatively small. As a point of comparison, Chipotle has ~2,800 locations and Shake Shack (another “upstart”) has nearly 350 locations. I’m interested to see how this progresses over time!
As a sidenote, I am somewhat of a biased observer here - I’m such a big Sweetgreen fan that I was once mistaken as a secret shopper from corporate by employees at Sweetgreen’s “test kitchen” in Culver City.
🚘 Tesla crosses $1T. Tesla stock surged on Monday after Hertz announced that it will order 100K+ cars to build out an electric fleet (half of which will be available to Uber drivers!). This drove the company’s market cap over $1 trillion for the first time, making it more valuable than Facebook. Most car companies trade at 1-2x LTM revenue - Tesla is at 24x. It’s also a favorite of retail investors, consistently ranking in top 5 most-held stocks on Robinhood. Coincidence? 🤔
🌲 Sequoia shakes it up. VC firm Sequoia Capital is abandoning the traditional fund structure in favor of a new model - a single fund that will both own public stocks and allocate capital to closed-end funds investing in startups. This will allow Sequoia to maintain ownership in companies post-IPO - Axios has an overview on what this means + why the firm is doing it.
💰 Earnings updates. It was a big week for tech earnings! A recap:
Facebook’s earnings were mixed - EPS beat expectations, but the ad business continues to be negatively impacted by the recent iOS changes. Mark Zuckerberg told analysts that the company will be “retooling” its apps to better serve young adults, including emphasizing TikTok competitor Reels.
Amazon had a tough Q3, with weak earnings and disappointing Q4 guidance. The company’s costs are soaring thanks to supply chain constraints and labor shortages - Amazon has to be prepared for high order volumes during the holiday season.
Apple similarly missed expectations due to supply chain constraints that limited sales of the company’s devices (and cost an estimated $6B). CEO Tim Cook told analysts that the chip shortages and manufacturing delays will only get worse in Q4 - but services revenue was a bright spot!
Robinhood plunged 10% on Wednesday after the company reported Q3 earnings. Net revenue fell 35% QoQ, largely due to a massive drop in crypto trading revenue (from $233M in Q2 to $51M in Q3). CFO Jason Warnick warned analysts that it will be “impossible” to predict this moving forward.
what i’m following 👀
Insights on early stage marketplaces from Annelies Gamble at Scribble.
Instagram is now allowing all users to put links in Stories.
Learnings from BVP on how enterprise software companies can unlock their “second act.”
An update on VC funding to Florida-based startups.
The biggest news of the week was undoubtedly Facebook’s rebrand to Meta, reflecting (1) a focus on building the metaverse, and (2) a de-emphasis on the namesake app. Mark Zuckerberg is putting his money where his mouth is - he told analysts that Meta will spend $10B this year on AR/VR hardware and software.
We rarely see established companies recognize potential forces of disruption and realign priorities accordingly - remember when Blockbuster refused to pay $50M for Netflix? But Zuckerberg has often been ahead of the curve, as evidenced by his prescient acquisitions of Instagram ($1B seemed crazy for 13 employees!) and WhatsApp (which gave FB a critical foothold internationally).
Facebook’s investment in the metaverse may take a while to pay off, but there was a near-term winner from this announcement…Twitter. The platform thrives when the “chronically online” are consuming the same content and want to share hot takes. Think about the flurry of tweets and memes during events like the presidential inauguration, a surprise Taylor Swift album drop, or Tiger King.
Facebook’s Connect event (where Zuckerberg announced the rebrand) was a perfect opportunity for Twitter to shine. A few of my favorite storylines: the BBQ sauce bookend, other brands proposing new names, and the BJ Novak logo (context here).
N26 - Strategy & Ops Data Associate (Remote)
Evernow - Biz Ops Analyst (Remote)
Method Financial - Developer Evangelist (Austin, Remote)
B Capital Group - Senior Associate / Principal (SF)
Notarize - Associate Product Manager (Boston)
BBG Ventures - Analyst (NYC)
Redesign Health - Ops Associate (NYC)
QED Investors - Principal (TBD)
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Ribbon - Data Analyst Intern (Remote)
Coinbase - PM Intern (SF)
Uber - Winter Product Designer Intern (SF)
Snap - MBA Strategy Intern (LA)
Duffl - Campus Growth Lead Intern (LA, Berkeley, Santa Barbara)
LTK - Creator Success Intern (Dallas)
Techstars - Accelerator Intern (Knoxville, TN)
Elektra Health - MBA Intern (NYC)
Galaxy Digital - Ventures Intern (NYC)
ZX Ventures - MBA Summer Investment Intern (NYC)
Lovepop - Product Research Intern (Boston)
puppy of the week 🐶
Meet Lu, a one-year-old English Cocker Spaniel who lives in Macedonia.
Despite the fact that this is only his second Halloween, Lu has already had some legendary costumes. Other than dressing up, he enjoys hanging out with his brother, Archie, and digging for stuff in the park.
Follow him on Instagram @lu.cocker!