US Delivery System (2): Railway & Steamship

Industrialization: Railway & Steamship

Postal system has its political importance, which is why it’s included in the constitution. As the US expanded, how information / news / mails were transmitted were directly influencing the limit of a united society.

The Railway mail service began as early as November 1832. In 1835, railroads accounted for only one percent of mail transportation and connected only two major cities – Washington and Baltimore.

On July 7, 1838, Congress declared all railroads to be post roads and enabled the railways to make contracts as long as sending mail by rail cost no more than 25 percent above transporting it by stagecoach.

But it’s the industrialization that enabled the US to include / connect California and other lands that are far away from the initial states.

In 1848, US acquired California at the end of the Mexican War. Under the  Treaty of Guadalupe Hidalgo, Mexico also recognized the U.S. annexation of Texas, and agreed to sell California and the rest of its territory north of the Rio Grande for $15 million plus the assumption of certain damages claims.

In November 1848, Postmaster General Cave Johnson dispatched a special agent to California to establish Post Offices. By Christmas, steamships were carrying mail from New York to California via the Isthmus of Panama. This was before the construction of the canal. When the ships reached Panama, the mail was taken off and transported in canoes or on pack animals – and later by railroad – about 50 miles to the Pacific coast. Another steamship collected the mail on the Pacific side and headed north.

Map showing mail routes that steamships traveled along the Atlantic Coast, from New York south to Charleston, Savannah, Havana, New Orleans, and on to Panama. On the Pacific side, the mail route followed the coast from Panama north to Oregon, with stops in Mexico and California.
The first U.S. Mail traveled to California by steamship, via the Isthmus of Panama, in 1848 | Source: USPS

Congress authorized funding for the overland routes not because they brought any financial profit to the Post Office Department or the federal government, but because they helped build and bind together a nation.

Also briefly mentioned in 一朝风雨一代王:Sears, Walmart, Amazon, the expansion of the US rail transportation contributed to the growth of USPS (Post Office Department at the time).

Map railroads 1870
Source: gorhistory.com
Map railroads 1890
Source: gorhistory.com 

In 1862, mail was sorted en route, as a train moved between two points, using converted baggage cars.

On August 28, 1864, the first U.S. Railway Post Office (RPO) route was established officially.

By the early 1900s, railroads were critical to postal operations. Like Union Station in Washington, D.C., located adjacent to the City Post Office Building, the Post Office Department ordered that all new main post offices in large cities be built as near as possible to the principal railroad station.

Jumia And Africa E-commerce (3): JumiaPay

JumiaPay is a very natural business choice as we see the success of Alipay, spun out of Alibaba.

This is also the reason MasterCard expanded collaboration and invested €50 million last year.

In Jumia’s 19Q2 press release:

… expanded the scope of JumiaPay beyond our physical goods marketplace. As of December 31, 2018, JumiaPay was only available within our physical goods marketplace. It is now also available within our on-demand services, Jumia Food, and hotel booking portals, Jumia Travel, in selected countries.

…we continued to expand the range of financial and digital services available from third parties, powered by JumiaPay, offering our consumers an increasing range of relevant every day services.

In Nigeria for instance, consumers can now access micro-loans offered
by a local fintech startup, alongside event tickets offered by a local event ticketing provider.

In Egypt, in the second quarter of 2019, we started distributing services from a local deals provider allowing consumers to purchase their vouchers on the Jumia platform, using JumiaPay.

Not surprisingly, 2019 has been a good year for JumiaPay, with quarterly TPV ( Total Payment Volume) growing constantly and annual TPV of ~€124 million.

TPV as a percentage of Jumia’s GMV,  grew from 8.6% in 19Q1 to 15.1% in 19Q4. (update: GMV before adjustment)

Meanwhile, the value per transaction on JumiaPay is lower than its value per order on Jumia, which makes sense as JumiaPay is more user in every day purchases.

In 19Q4, €19 per transaction is roughly half of the Jumia order value (€36).

JumiaPay provides a hyper-growth opportunity.

In the Q4 press release, it says “the ramp-up of JumiaPay on-platform is attributable to our continuous education efforts of consumers, the expanding range of digital services offered as part of our JumiaPay app as well as a number of newly introduced marketing initiatives. These include Mastercard Tuesdays discounts, cash-backs funded by card issuing banks or the possibility to pay for purchases in 12-month installments at no interest, offered by partner banks. “

「News of the Week」Court Rules: Privately Operated Internet Platforms Free To Censor Content They Don’t Like.

WSJ – Tech Platforms Aren’t Bound by First Amendment, Appeals Court Rules

Despite YouTube’s ubiquity and its role as a public-facing platform, it remains a private forum, not a public forum subject to judicial scrutiny under the First Amendment

– Circuit Judge M. Margaret McKeown

Dots to connect: internet platforms’ products that operate like government, possible platforms with political views,  regulation vs. indirect influence on tech firms, etc.

Jumia And Africa E-commerce (2): GMV And Consumers’ Online Spending

Below is the chart for Jumia’s performance in terms of GMV.

    • A spike in 2018Q4 just before IPO is controversial..
    • Although with the “artificial” growth in 18Q4, the trend looks good
    • The more worrying part is the slowdown in GMV growth – especially when Jumia is still has a long way to go

Jumia’s full year 2019 GMV is €1.1 billion, up 33% compared to 2018.

Comparatively, Pinduoduo’s GMV in the twelve-month period ended December 31, 2018 was RMB471.6 billion (US$268.6 billion), an increase of 234% from RMB141.2 billion in the twelve-month period ended December 31, 2017.


Combined with Jumia’s annual active customer base, we can see the GMV per AAC declining over time.

In its Q4 press release, Jumia says “we have reduced promotional intensity and consumer incentives on lower consumer lifetime value business. While most product categories experienced GMV growth in the 20 to 50% range, phones and consumer electronics contracted by approximately 20% on a year-over-year basis. This aspect of the business mix rebalancing will likely continue to negatively impact GMV development over the next two quarters.”

Source: Jumia 2019Q4 Presentation

“…we have increased our focus on everyday product categories such as Fast Moving Consumer Goods (“FMCG”), fashion, beauty and personal care as well as digital services which provide affordable entry points into the Jumia ecosystem…”


We could also see that Pinduoduo’s GMV per active buyer is a little bit insane..

approx. annual GMV per active buyer = $268.6 billion /  418.5 million = $641.8

Jumia is at ~€180 in 2019, using annual GMV divided by ending AAC.


To compare it with consumers’ e-commerce purchase across the globe..

    • World avg. $499
    • US $1,389
    • China $1,021
    • South Africa $109
    • Egypt $96
    • Ghana $59
    • Nigeria $44
    • Kenya $42
    • Morocco $41

Jumia And Africa E-commerce (1)

Pan-African e-commerce company Jumia listed on the New York Stock Exchange on April 2019, becoming the first startup from Africa to list on a major global exchange.

Jumia was offering 13,500,000 ADR shares with an IPO range of $13 to $16 per share and priced at $14.5 per share.

Mastercard Europe SA has agreed to purchase €50.0 million of shares in a concurrent private placement at the same price.

As of December 31, 2018, Mobile Telephone Networks Holdings (Pty) Ltd (“MTN”), Rocket Internet SE (“Rocket”) and Millicom International Cellular SA (“Millicom”) own respectively 31.28%, 21.74% and 10.15% of the Company.

Other shareholders are AEH New Africa eCommerce I GmbH (8.86%), AXA Africa Holding SAS (6.06%), Atlas Countries Support S.A. (6.06%), Chelsea Wharf Holdings S.à r.l. (5.51%), CDC Group (4.04%), Rocket Investment Funds (3.48%) and Goldman Sachs (2.83%).


Africa has one of the most digitally connected populations on the planet, with 400 million internet users.

Jumia said it has 4.0 million and 6.1 million annual active customers at the end of 2018 & 2019.

Comparatively, say China has three times the number of internet users (1.2bn), Jumia would have 12 million or 18.3 million respectively.

Pinduoduo, a relatively new e-commerce platform in China, said its Active buyers in the twelve-month period ended December 31, 2018 were 418.5 million, an increase of 71% from 244.8 million in the twelve-month period ended December 31, 2017.

We are talking about totally different stages of e-commerce. Low penetration means more education and infrastructure are needed while potential upside is large.

Prepare For A Future Where FinTech Firms Dominate: Buy & Be FinTech

In the future where Fintech firms dominate, established companies are reacting with three main strategies:

  1. Cut costs for legacy business lines – like what we said in a previous post Banking Headcount Cut
  2. Consolidate with other legacy companies to gain more market share and thus more say/power, further cutting expenses and trying to get more economy of scale – like what we said in the last post From TD Ameritrade To E-Trade: A Wave Of Consolidation
  3. Acquire Fintech startups or replicate what they are doing – like the title of this post Buy & Be FinTech

Visa x Plaid

In Jan 2020, Visa said it will acquire Plaid $5.3 billion. The deal includes a $4.9B cash consideration and $400M of Visa stock as retention equity and deferred equity consideration.

Plaid is a Fintech firm that enables a lot of other Fintech apps & digital transaction based businesses, providing underlying APIs. It counts Venmo, Robinhood, Coinbase, Acorns, etc. as customers.

Source: Visa Presentation

Previously in Dec 2018, Plaid raised $250 million Series C at a valuation of $2.65 billion, led by Mary Meeker with capital from Kleiner Perkins’ growth fund. The growth.

In its mid-2016 financing tho, Plaid was only valued at $200 million.

The growth of valuation is supported by the growing business, the network effect and the sticky/recurring nature.

Through the Plaid acquisition, Visa secured a very strong spot in the future of Fintech and can expand/build upon the Plaid’s platform.

In Visa’s presentation, there is a list of Fintechs with rapidly growing users, on the top of which is Credit Karma with 100 million users.

Intuit x Credit Karma

On Feb 24, Intuit (Nasdaq: INTU) announced that it has agreed to acquire Credit Karma for $7.1 billion in cash and stock. (50/50).

Credit Karma lets people check their credit scores, shop for credit cards and loans, file taxes and more. It had close to nearly $1 billion revenue in 2019, growing at 20%.

In 2018, Credit Karma was valued at $4 billion when Silver Lake purchase $500 million in the secondary market.

The company started out originally in 2007 providing free credit scores, later extending that to full credit reports. Credit Karma’s launch of a financial planning tool in 2013 drew a direct comparison to Intuit’s Mint. And since then, Credit Karma has launched other products that directly rival Intuit, for example a free tool to help people file their taxes. These not only represented direct competition, but a disruptive threat, since Credit Karma’s products skewed younger and were built on a “free” premise (offering the products at no charge and instead making money off showing users and selling relevant, related products). The fact that Credit Karma partners with so many other financial services providers also means it’s sitting on a huge data trove that it leverages to build and personalize products, representing a data science angle for Intuit here, too. [TechCrunch]


Meanwhile, besides the notable acquisitions of Fintechs, companies are building similar services by themselves.

In Jan 2020, Goldman Sachs launched a long-awaited app of its online bank Marcus for customers . The bank launched Marcus in 2016.

And BofA’s AI-powered assistant Erica has pulled in more than 10 million users. Zelle peer-to-peer (P2P) payments increased 76 percent year-over-year in the fourth quarter of 2019.

While JP Morgan has closed its experimental mobile banking app Finn last year, its own branded mobile app is ranked one of the best. The idea was for Finn to reach locations—St. Louis among them—where it didn’t have branches.

By mimicking the experiences/apps offered by startups, established players are essentially becoming Fintechs themselves, thus evolving internally and embracing the future more positively.

a16z: 100 Marketplaces

Andreessen Horowitz introduced the Marketplace 100, a ranking of the largest and fastest-growing consumer-facing marketplace startups and private companies.

The top 4 companies (Airbnb, Doordash, Instacart, and Postmates) account for 76 percent of the list’s total observed GMV

Fast-growing marketplace startups grow quickly in the early years—often >3-5x year-over-year

Read more a16z’s thoughts on marketplaces.

Non-stopping Cybersecurity Acquisitions: 3 Deals Over One Billion In 2020 So Far

Following up on a previous post of M&As in the cybersecurity space – interests and activities are still strong.

RSA for $2.1bn

Another private equity firm Symphony Technology Group (STG) just announced the acquisition of RSA from Dell for $2.075 billion in cash. STG partnered with Ontario Teachers’ Pension Plan Board and AlpInvest Partners in the deal.

Dell acquired RSA when it bought EMC in 2015. RSA has over 12,500 customers according to the statement.

Forescout for $1.9bn

Earlier this month, Forescout was to be acquired by Apax and its partner Crosspoint Capital for $33 per share in an all-cash transaction valued at $1.9 billion.

The purchase price represents a premium of approximately 30% over Forescout’s closing share price of $25.45 on October 18, 2019, the last full trading day prior to the release of the 13-D filings by Corvex Management L.P. and Jericho Capital Asset Management L.P. on October 21, 2019, which disclosed they had formed a partnership to approach Forescout and accumulated a combined 14.5% ownership in the company.

Forescout recorded fourth quarter revenue of $91.3 million, compared to $84.7 million in the fourth quarter of 2018 (+8% growth); full year revenue of $336.8 million, compared to $297.7 million in the full year 2019 (+13% growth).

Armis Security for $1.1bn

In January, Israeli IoT security firm Armis Security announced that it agreed to be acquired by NY-based Insight Partners at a valuation of $1.1 billion.

Insight will pay cash for the cybersecurity company, with participation from CapitalG for $100 million and rollover from some existing stockholders.

 

「What’s News In China」

On Feb 14, Oaktree Capital Management, a Los Angeles-based distressed debt manager, became the first foreign company to set up a wholly owned unit in China under a trade accord with the U.S. The Beijing-based subsidiary has a registered capital of $4.55 million. // Caixin


On Feb 17, OYO reported a $951 million revenue globally for the financial year ending March 31, 2019, growing 350% yoy. In 16 month, OYO China has grown into an annual revenue of $307 million (~1/3 of total revenue). While facing more pressure, OYO China now has expanded into 3 brands and signed up 19,000 hotels. // TechCrunch | FT


Coronavirus has pushed many industries in China to go digital. In the past few weeks, there are booms in enterprise remote working apps 远程办公 (DingTalk surpasses WeChat to rank first in the App Store in China on Feb 5), online house tours 云看房 (of the top 100 residential real estate developers, 92 have launched the online selling services), online grocery shopping 生鲜电商 (Miss Fresh GMV grew by 321% yoy during the Chinese New Year), etc.


Tesla (NASDAQ: TSLA) is in advanced stages of talks to use batteries from Contemporary Amperex 宁德时代 (SHE: 300750) that contain no cobalt – one of the most expensive metals in electric vehicle (EV) batteries – in cars made at its Gigafactory 3 in China. Tesla started to deliver cars from that factory in December 2019. // reuters

「News of the Week」Zuckerberg Ready For Facebook To Pay More Tax In Europe

Reuters – Zuckerberg ready for Facebook to pay more tax as welcomes rules review

Venturebeat – Zuckerberg ‘accepts’ that Facebook may have to pay more tax in Europe

Reuters – Treat us like something between a telco and a newspaper, says Facebook’s Zuckerberg

Dots to connect: global tax reform for tech companies, tech companies go beyond countries/regions, potential indirect trade war in digital world, tech ultimately benefits as it can balance between nations, the leading companies may make it hard for others to expand globally and follow suit, social medias as media & telecom companies, UK’s digital taxes, etc.