Suppliers vs Aggregators

In the light of Epic Games raising over a billion dollars, I recently joked on twitter how gaming studios and venture funds are raising unicorns these days. It is somewhat true given this, this and this.

That news sparked a debate about what it means for a company that has been around for over two decades to raise a mega round. I don’t have strong views on the specifics of this deal. My views don’t matter anyways. I found this reaction to the news particularly interesting.

Obviously, Discord and Epic are two completely different kinds of companies but the comparison Blake draws is relevant. Conceptually speaking, it goes back to Aggregation Theory that Ben Thompson has been writing about for years. If you don’t read him, here’s how I feel about his writing.

It is widely known in tech these days that the product that bring together suppliers tend to become much much more valuable than individual suppliers. We see this happen across sectors.

WSJ recently reported how VCs have poured $3.5 billion in food and grocery delivery businesses this year so far, much more than all of last year. That led to a similar debate as the one above regarding Epic.

It is true that we still have not seen a profitable, self-sustainable food or grocery delivery business, at least in the United States. Instacart and UberEats seem like strong contenders. If I had to choose a side on the supplier versus aggregators debate, I tend to agree with Blake. These are extremely cash hungry businesses. It is yet to be seen if these will ever be standalone businesses. But, it feels inevitable that delivery networks are a big part of the future.

Here are some more thoughts on the battle going on in the food business.