Hi there,
In yesterday’s newsletter, we shared a great graphic from The Economist showing the value of fintech companies growing dramatically vs. legacy banks and payment companies.
So why don’t more big cos that see threats looming do something?
One cause is the hopelessly antiquated notion of “fast following,” as the world just moves too fast — or rather, gradually, then suddenly — to sit back and hope to catch up later.
And so in this new, more sudden world, there are 2 types of companies:
Two notable instigators over time have been Walmart and Roche. They initiate, take risks, and aim for true market leadership.
(Side note: see how we analyzed our business relationship data to predict Roche’s future M&A targets here.)
A recent example of instigation comes from Lululemon.
In June 2020, as gyms and fitness classes were on lockdown due to Covid, the apparel firm — which was worth nearly $40B at the time and is now at $45B — purchased in-home fitness equipment and app maker Mirror for $500M. Mirror falls into the same world as Peloton.
The deal made sense for 3 reasons:
Call option on the future — Lululemon spent 1.25% of its current market cap at the time on a call option on the future as in-home fitness takes off.
It would have been interesting to see a company like Nike, Adidas, Under Armour, Equinox, or Planet Fitness make a similar move to bet on the future. Of course, there are  Mirror competitors, which these other firms should probably be looking at now.
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