Hey — It’s Nico.

Today’s issue takes 6 minutes to read.

If you only have one, here’s what you need to know:

• EV startup Zevvy failed (more below).

• QI Tech, Beehiiv and RevenueCat raised new rounds of funding.

• Binance founder is sentenced to 4 months of prison.

• The founders of Supabase, Mailgun, and Teleport share lessons on startup failure.

• Startups’ organic traffic is going down due to the Algo update — what to do if yours is as well (read below).

Let’s get into it.

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Below you’ll read about Zevvy, an EV startup that struggled to raise additional funding as the VC landscape changed in the recent years.

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This Week In Startups

🔗 Resources

Lessons from Supabase, Mailgun, and other founders on startup failures.

How Perplexity AI builds product.

How major startups found their first community members.

Clay’s CEO shares their growth journey to millions of users.

Alex Lieberman on how Morning Brew went from $0 to $400K in 1 year.

📰 News

Binance founder sentenced to four months in prison.

Survey shows 71% of startup founders report worsening relations with investors.

General Catalyst to raise $6B to invest in technology start-ups.

Indian transportation startup Ola cuts 180 jobs to focus on profitability.  

A16z continues to invest $20M in Tech X Games startups.

💸 Fundraising

QI Tech raises fresh funding and becomes new LatAm fintech unicorn.

Beehiiv raises $33M Series B to expand its technical capabilities.

Subscription management platform RevenueCat raises $12M.

GitHub Copilot rival Augment launches out of stealth with $252M.

Fail(St)ory

EV Leasing

A few days ago, Zevvy, a startup that offered electric vehicle leasings, announced it was shutting down.

Zevvy was founded in 2021 with the goal of facilitating access to EV vehicles for the people who would benefit most from them: high-mileage drivers.

However, despite its noble mission, the company faced insurmountable financial hurdles due to the substantial capital required for such a venture and the rising interest rates.

Pay-Per-Mile

The idea behind Zevvy was pretty simple. EVs usually have lower operating costs compared to their gas-powered counterparts. This means that the more you use them, the more money you save. Yet, their higher upfront purchase costs often render them inaccessible to certain demographics that could benefit from them the most, like gig economy drivers.

Andrew Krulewitz, one of Zevvy's co-founders, envisioned a solution: a pay-per-mile EV lease. This innovative leasing model featured a cheap fixed monthly fee complemented by a variable per-mile charge. Essentially, drivers would only pay for the distance they traveled, aligning expenses with actual usage.

This approach resonated with drivers, offering them significant savings on operational costs, primarily fuel expenses. Even after covering the lease payments, they could potentially generate savings. Krulewitz estimates that their customers saved an average of $283 per month compared to gas-powered vehicles.

Additionally, Zevvy contributed to reducing carbon emissions. Most of Zevvy’s customers were high-mileage drivers (half were Uber or Lyft drivers), averaging about 2000 miles per month. Therefore, each EV lease avoided a lot of carbon emissions.

Reasons For Failure

So, customers love the pay-per-mile lease because they save money, help the environment, and get to drive a Tesla at the same time. Then, what went wrong with Zevvy?

• Increased interest rates: Zevvy was founded in 2021 when interest rates were low and access to capital was easy. This allowed them to get the necessary VC funding to start their venture and buy the first set of vehicles. However, over the course of three years, the economic landscape has shifted, with interest rates rising and VC funding becoming scarce across nearly every industry.

• Decreased price of EVs: This was good for consumers but bad for Zevvy, which bought most of its vehicles when prices were high. Consequently, Zevvy's lease pricing became less competitive compared to other options available in the market.

  

• Vehicles are hard: According to Krulewitz, “Any business that deals with the ownership or operation of vehicles is a royal pain.” This is because buying, maintaining, and insuring cars requires a lot of capital, specialized facilities, and know-how. 

• EV charging is still a problem: The biggest reason customers dropped their service was that they couldn’t find easy ways to charge their vehicles. Because most of their users were in a tight financial situation, installing private chargers in their homes was not usually an option. So, most had to rely on public chargers, which sometimes could be far away.

Go Deeper

• One of the cofounders has written an excellent postmortem article about Zevvy.

Trend Radar

Organic Traffic Goes Down

Many different startups have been experiencing a sharp decline in their organic traffic. 

Here is a chart of ClickUp’s organic traffic. They have lost 50% of their organic traffic in two months, going from 1.9M in early February to 900K as of now.

Another example is Process Street, which had 700K organic visitors in March but only has 450K at the moment.

So, what's going on?

The reason for this decline is that Google has finished rolling its March Core Update, which aims to tackle “spammy, low-quality content.” Essentially, Google is trying to penalize websites that are unhelpful, have poor user experience, and do not satisfy user intent.

They have announced that users should now expect to see 45% less low-quality or unoriginal content in the Google SERPs.

Should You Be Worried?

Google claims this update will only penalize “low-quality content.” But what constitutes “low-quality” for Google? Is it just spam content? AI-generated content, maybe?

To get a better idea, we can look at the Process Street website and see which pages have seen the biggest decline since the update. 

Here is one of them: an article teaching how to log in to Microsoft Teams.

You do not need to read much to realize that this content is extremely low quality. Not only are the articles bloated and much longer than necessary but there are also sections that are entirely nonsensical. 

Take, for instance, this paragraph in the middle of the instruction on how to access the Login Page:

This is the kind of “low-quality” content we are discussing here. It is most likely AI-generated and does not satisfy user intent at all. No one in the world is interested in hearing about your colleague's struggles with the Microsoft Teams login page.

No More AI content, Then?

AI content is definitely not the problem here.

I believe that AI and pSEO content can be done well. It’s not a game of producing as much content as possible for keywords to get traffic. It’s a game of identifying how you can use AI plus data to satisfy a series of user search intents in a quicker way than by writing editorial content.

When it comes to ranking high on the SERPs, the key is the same as it has always been: you need to satisfy the user's search intent. Google wants to rank content that meets the user's needs. Whether it was partially written by an AI does not matter as long as the user finds it useful.

Failory has many pages that have been made programmatically, and they have not suffered a decline in organic search since the update. Our list of Pitch Decks from FinTech Startups is one example.

This article, along with hundreds of others like it, was generated effortlessly in one sweep. Yet, they aren't labeled as "low-quality" by Google because they effectively deliver the information users are searching for.

This means that when you search for "FinTech Pitch Decks," you get a list of 50 complete pitch decks, along with relevant details like the startup's funding raised. No bloat. No lengthy introductions on the history of pitching. Definitely no stories about colleagues. Just the necessary stuff to satisfy user intent.

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That's all of this edition.

Cheers,

Nico