Fast deal memo by Coughdrop Capital on its Series A investment

What it looks like behind the scenes to invest in one of the fastest growing startups in the world

This deal memo by Coughdrop Capital on its Fast investment will be the first in an ongoing series where we publish behind-the-scenes investor memos into high profile companies.

Online checkout platform Fast has had a remarkable trajectory marked by incredible investor demand for Fast stock:

  • March 2019: Domm Holland and Allison Barr Allen found Fast.

  • March 2020: Fast raises a $20M Series A led by Stripe and including a number of smaller firms like Coughdrop Capital.

  • September 2020: Fast publicly launches its core one-click checkout product Fast Checkout.

  • January 2021: Fast raises a $102M Series B led by Stripe at a valuation reportedly at or near $1 billion.

What’s fascinating about Coughdrop Capital’s memo is how the team reasons about the potential upside of the opportunity and signals their enthusiasm to their LPs in the context of a fast-moving deal where allocations are scarce. So far, the investment has turned out pretty well.

Check out the original deal memo behind Coughdrop Capital’s Series A investment in Fast. Note that this memo has been published with the permission of Coughdrop Capital and some sensitive information has been redacted.

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To: Coughdrop Capital LPs
From: Stu Smith, Austin Petersmith
Date: March [X], 2020
Re: We’ve made our seventh investment: Fast

You know Amazon’s “Buy Now with 1 Click” button? Fast is building that, but for any website in the world.  Currently you have a 1:1 relationship with every online service and retailer -- you need a unique account for each one, which requires you to input and update the same information (name, address, payment info, etc.).  With Fast, your personal information is stored on Fast and with a single click, you can create an account and purchase items. 

Domm’s vision is to be a trusted, neutral third party: “We are very cautious of consumers being lulled into using other authentication or payment products very clearly using the data to feed conflicting and primary business models, not in the consumers’ interest; such as advertising, or to lock consumers into a particular platform/ecosystem.  Once we launch Fast Checkout, we will offer the fastest and easiest payments, whilst being completely independent and free of any conflicting business model.”

We are in good company -- Coughdrop is investing alongside Stripe, who is leading this round, as well as previous investors Index Ventures, Susa Ventures, Kleiner Perkins, and an impressive group of angel investors.

Founders

Fast was founded by entrepreneur Domm Holland (CEO), who founded and led an on-demand tow company in Australia, and Allison Barr Allen (COO), who helped scale Uber as Head of Global Product Operations on the Money Team.  You can see Domm tell the founding story of Fast here.  Domm named the company Fast not only because it describes the user experience -- he also expects the whole team to move incredibly fast in everything they do.  Speed is the default state of the business when it comes to product development, hiring, fundraising, and building new partnerships.  We’ve seen this in action and it’s really impressive.  Early-stage businesses who move quickly and efficiently are the most likely to succeed.  As we used to say at Teespring: “days are weeks and weeks are months.”

Part of our interest in this company is the founders’ bursting enthusiasm. They have built a huge following on Twitter by talking about the things they’re building, and it has led to a huge competitive advantage. Fast has recently poached senior engineers from Uber, Google, and other top tech companies.

Product

Fast Checkout is platform-agnostic and allows any ecommerce service to offer an Amazon-level one-click checkout experience.  For these businesses, Fast Checkout eliminates friction at the point of sale which increases their conversion rate, sales, and buyer satisfaction.  It is one of the most magical experiences on the internet and will set a standard for eCommerce -- you’ll want to use it frequently, ideally every time you have to pay online. Fast’s first product Fast Login, which enables any website to offer one-click account creation, is still growing each month and enabling tens of thousands of people around the world to quickly, easily and safely login without passwords.  As an example, on a single integrated e-commerce website, Fast Login now processes over 4,000 logins a month, enabling nearly $800,000 in purchases, and powers over 70% of all site logins. 

Business Model

When ecommerce businesses offer Fast Checkout for processing payments, they will be charged a transaction fee.  Fast profits from the difference of the amount charged to the merchant, less the interchange and network fees incurred to process the transaction.  

The opportunity is very large -- Fast is working to capture a share of the $3.5 trillion ecommerce market, in addition to other sectors they can easily service like media, SaaS, and others.  The initial TAM represents hundreds of billions annually. 

According to Domm, the company “also has long-term ambitions of solving additional friction points for consumers when interacting with businesses, especially in the repetitive sharing of siloed data.  As an example, you currently have to manually update your address with your bank, phone company, and everywhere else whenever you move.  Fast will eventually enable you to push that update to all your trusted contacts, in just 1-click.  For this service, we would charge the businesses who you expressly approve, a fee for that access, or for the data pushes.”

Our take

We don’t know if Fast is going to work. But if everything goes right, the company will be a core piece of payment infrastructure across the internet. Stripe (which has gone from zero to a $35 billion company in 10 years) has a mission of growing the GDP of the internet, which is why they bet on companies like Fast. We agree with their logic.

We know they are recruiting top talent, we know they already have a very impressive product, and we know they have the x factor we’re always looking for. So, we made this investment because we believe Fast has a great shot at becoming a huge, impactful company.

Key Risks

  • Competition will be fierce. Fast is up against incumbents like Paypal, platforms like Amazon and Shopify, and bigtech initiatives like Apple Pay and Google Pay.

  • Fast is a network effect business. The more merchants and customers they bring on, the more value they provide to the next batch of merchants and customers. So, they are going to need to solve a big chicken-and-egg problem.

Asks from Fast

Fast is focused on onboarding an initial concentration of merchants specifically in the fast fashion and beauty verticals.  They would love to talk to more merchants in these categories, so please let us know if you have any referrals to companies who would consider integrating Fast Checkout. 

At this stage, they are mostly interested in bringing on some well known brands as their early banner merchants. If you know anyone in a senior role at a brand that does a high volume of ecommerce, that could be a very helpful intro to make.


Check out Coughdrop Capital to learn more about their early-stage venture fund.

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