+ how to compete with industry incumbent
Hey hey 👋,
Welcome back and happy Sunday! Two quick housekeeping notes before I get started. First, check out this Notion board if you want to check out some of the previous features. Second, make sure to sign up here if you would like to chat with some other members of the Consumer Startups community.
At the end of last year, I wrote about Jemi, a creator economy startup that aims to become Shopify for content creators. This week’s star, Beacons, also has the same aspiration of dominating the creator space. The main difference is that they are starting with a link-in-bio homepage builder, a nexus that connects fans to different platforms that a creator offers.
One surprising element about Beacons is its team - it was co-founded by 3 Stanford Machine Learning PhDs. None of them were really creators before Beacons. It seems odd at the first glance, but the team’s deep tech DNA will become quite useful down the line. I will dive into that part in a bit.
Sooo... what are these PhDs 🤓 doing building a creator platform? Let’s tell the story from the lens of Neal (CEO of Beacons).
🌱 Genesis of Beacons
Options Trading and Career Pivot
Growing up in Ohio, Neal wasn’t the hustler like many founders I have featured before. He was more or less a regular kid. He studied Math and Economics at Duke, but he didn’t really know what he wanted to do. Well... like most college kids graduating from an elite university, he defaulted to pursuing a career in finance, specifically options trading in Chicago.
It was there he found the first spark for startups - not from the trading job he was doing but from reading Paul Graham’s essays while sitting at the trading desk. He was interested in startups, but he didn’t feel like he had the technical chops to go down this startup path.
A fortunate event happened a year and a half into the job. Neal got fired.
“It was tough getting fired at the time, but it really gave me a chance to think about what I wanted to do in life.” - Neal
He made a surprising decision - going back to undergrad to study computer science 🤯. He went back to college and did a second undergraduate at Georgia Tech. He then continued his academic journey at Stanford pursuing a PhD in computer science with a focus on Machine Learning, where he did research on things like how to combine satellite imagery and machine learning to predict poverty.
Getting into Y Combinator
Neal met his Beacons co-founders, Jesse and David, at Stanford. They started working on a side project during their last year of PhD program in 2018 - a face-recognition camera that could lock and unlock doors automatically. They hacked together a prototype using a Raspberry Pi and a camera. It started as a fun project, and somehow, it got them a ticket to Y Combinator. Though they didn’t have much commercial success with the product, it certainly helped that they had three Stanford ML PhDs on the team.
Prior to the start date of their YC cohort, they made the decision to pivot away from that initial face-recognition camera idea. As a result, they spent the first month of YC exploring different ideas, and finally, they found another idea that could leverage their ML experience.
“During the second month, we started building a product using natural language processing to look at Instagram comments to price influencers for brands to work with. We built a prototype and started getting pilot customers.” - Neal
Despite seeing some early traction, the team quickly realized that they weren't that excited to build products for the brand side of the market. After arriving at this realization, they switched to the other side - building for creators.
The third pivot
The idea was to create a Cameo competitor that focused on content creators rather than actors or other celebrities. They pitched this ‘Cameo for content creators’ idea at the YC demo day - on that day, they had one active user and $20 in revenue.
The hardest part of entrepreneurship is knowing when to keep going and when to give up. It’s never easy to just abandon what you have worked so hard on for months. Neal and his team decided to persist and keep prowling.
After a few more months of searching for product-market fit, they were still at where they were when they first graduated from YC. This challenging time forced them to reflect more on the model. After some reflections, they realized two important insights:
Cameo works because it drives incremental demand for their suppliers, aka D-list celebrities, such as retired athletes and celebrities that have the capacity to sell their time.
Content creators on the other hand have a very captive audience. They don’t really have the time or the need for incremental demand. They are mostly just looking for better tools to capture more value from these audiences.
( 📣 Note - if you are interested in learning more about Cameo, my friend Ali and I wrote about their story a few weeks back. Make sure to check it out here.)
These insights led them to pivot once again to adopt a platform approach than an aggregator approach. Around the same time, the three co-founders noticed a widespread phenomenon among all the Instagram creators they were following - they all have a Linktree link in their bio, a simple website with a bunch of links. Upon further research and thinking, they realized this link-in-bio home page is a great wedge to get into the creator space because they can first capture creators and then upsell with more tools that creators might need to build their businesses.
They didn’t really know what additional tools they would build but they had the intuition that this was their best chance to get into the creator space.
Now, it’s time to beat Linktree.
🌲 Growing Beacons
Acquiring the first 100 users
The first step was to get some creators onboard to start iterating on the product. One weakness they identified with Linktree was the lack of customization. The hypothesis was that content creators would be willing to try Beacons if they could offer more design customization options.
The approach they took was to identify creators that were using Linktree on Instagram and also had an email listed publicly. Before approaching those creators, the team would build a Beacons website that had the same links as their Linktree website but looked nicer in terms of design.
“We would reach out to those creators over email and include a screenshot of the Beacons website we built for them. We would then ask if they wanted to sign up. It turned out to be a very effective strategy, and we were able to manually acquire our first 100 creators this way.” - Neal
First 100K customers
Their traction began to pick up exponentially when they launched in public in September of 2020. There were two factors that really contributed to this rapid growth. First, the Beacons logo shows up at the bottom of the link-in-bio page. It is similar to the Superhuman’s “sent via Superhuman” sign, which builds FOMO and creates social proof for the platform. The second contributing factor is the nature of the content creator industry. Most creators follow each other and smaller creators look up to creators with a larger following. Even today, this viral word-of-mouth growth still contributes to over 75% of their growth.
Current competitive landscape
This ‘link-in-bio’ space has started to heat up since the start of this year - both in terms of the roster of companies competing and the amount of VC money pouring into the space. Linktree recently raised $45M Series B to create more tools for its website builder. As one of the early movers, it still has a significant head start compared to Beacons. According to Techcrunch, it had over 12M users in March, holding over 88% of the market.
Beacons also raised a seed round earlier this year, bagging $6M from a16z. Since the public launch last September, it has amassed over 700K users, slowly chipping away at Linktree’s market share.
🚀 Future of Beacons
Phase #1 - Winning the link-in-bio space
According to Neal, there are three parts to the creative economy. On the top layer, creators create content and aggregate audience in different content platforms, from YouTube to Instagram. On the bottom layer, creators make money on a bunch of monetization platforms, like Patreon and merch stores. Due to the growing fragmentation of both the top layer and the bottom layer, there needs to be a tool like Beacons in the middle layer to connect their audiences with different monetization platforms.
“Our strategy is to start by winning this link-in-bio space because this link is going to be a growing point of leverage. Whoever owns the space sees where all the traffic flows in this ecosystem. That traffic is a good proxy for what value creators are getting out of the downstream platforms. Then we can use that data to build out our own product roadmap, where we can decide where we want to integrate downstream, either vertically integrate, or we can build third-party integrations with those downstream platforms. We can decide where we want to compete and where we want to complement.” - Neal
Phase #2 - Using AI to help creators monetize better
The second part is where this super technical team is going to shine. Once they own the data farther down through the funnel, they can leverage machine learning to take advantage of the data. For example, they can start helping creators to identify their superfans.
“The more advanced version of identifying super fans is predicting expected LTV for every member of your audience. I think that would be extremely cool if we could get there someday. Also, the transaction data can serve as labels for training machine learning models that can prescriptively tell creators how they should be building their businesses - like you're similar to these other creators on these dimensions, here's how they're monetizing and what they're having success with.” - Neal
Thank you Neal for speaking with me and sharing your journey! Big shout out to my friend Josh for making the intro!
That’s it for today 👋,