World-Builders: The Packy Portfolio

Tomorrow’s prodigious companies are building the future’s foundations today. They’re not only building products that provide access to more people, but platforms they can build from. Over time, these products have earned different names like platforms, ecosystems, or “horizontal SaaS”, but there’s one term that captures their essence best: World-Builders. 

By unlocking access and providing a foundation, world-builders create paradigm shifts. But they’re tough to find. It’s even tougher when they’re young. That’s why it’s critical to search for patterns in portfolios of world-builders. Doing so helps us become not only better investors, but also operators and builders. There’s no better place to start than the writer who introduced me to the term: Packy McCormick. 

Packy’s “World-Builder'' investment thesis is working too. In one year, Packy went from less than a thousand newsletter subscribers to over 60k subscribers and an $8M fund. His weekly writeups are widely read, and his proclivity for World-Builders certainly played a role. 

World-Builders consistently zoom out, identify an industry’s atomic unit, and use it to aggressively expand into an ecosystem. Doing so yields reinforcing strengths across them like building inter-product flywheels, enhancing commodities, and prioritizing velocity over absolutes. 

The companies in Packy’s portfolio are incredible examples of what these traits look like. I’ve picked 5 of my favorite companies below. His investment theses are linked and my summaries are right underneath - let’s dive in:

Scale AI

Scale AI is quickly becoming AI’s foundation. It began by focusing on the atomic unit of AI: data labelling. AI needs labelled data (ex. labelling a cat as a cat) to progressively learn how to successfully mimic human intelligence (no matter how narrow that may be right now). 

But basic data labelling is a commodity. That’s where Scale AI saw its opportunity. By enhancing data labelling in more complex use cases like Autonomous Vehicles, Scale AI built out a compounding moat from which its platform can arise. 

Enhancing commodities has proven to be lucrative too - take Stripe ($90B payments company) and Twilio ($70B communications company) as examples! But there’s a critical execution element to these World-Builders - they don’t rely on just one product. Instead, they use it as the foundational layer to build auxiliary products that feed into each other: creating inter-product flywheels.

Stripe reached its $90B valuation by building products like checkout, invoicing, tax, etc. on top of its foundational unit: payment processing. Scale is taking a similar tact: building products across the ML value chain (from annotating to managing to evaluating data) from its own foundational unit: data labelling. 

By improving over time, Scale AI is close to reaping its compounding benefits. It’s executing seamlessly by (1) identifying the atomic unit of AI (data labelling) (2) drastically improving what, on initial glance, seemed like a commodity business and (3) building inter-product flywheels to create an ecosystem: a world-builder. 

Scale AI’s Product Roadmap (Art from Packy). Data labelling/annotation has been the focus, but 2020 onwards is where the ecosystem emerges. 

This inter-product flywheel not only applies to technical products, but also human-centric ones. It’s foundational for building an ecosystem. There’s no better counter-example than the next company: On Deck. 

On Deck

On-Deck is a unique example of the inter-product flywheel thesis. It’s transforming online learning by not only introducing program-specific learning cohorts , but tightly linking these cohorts to feed each other and build a broader ecosystem. 

For example, two core programs in OnDeck are for founders and investors. To create flywheels, OnDeck founders give exclusive deal flow to OnDeck investors. OnDeck investors then invest in OnDeck founders. And OnDeck creators can write about both, continually accelerating the flywheel. 

These flywheels let OnDeck scale while maintaining optimally sized groups. They call this concept the "Cross community flywheel", allowing graduates to get a head start to hit escape velocity in whatever direction they choose. Here's what the community flywheel looks like:

OnDeck’s Community Flywheel - each box is a program containing multiple cohorts. ODA is OnDeck Angels, ODF is OnDeck Founders, ODW is OnDeck Writers etc. Their full list is here

OnDeck is a phenomenal case of the power of building ecosystems successfully. By breaking an ecosystem down into different atomic units (in this case, programs and cohorts) and reassembling them with tight links, they’re building a flywheel-driven ecosystem that only gains momentum as it grows. It’s a World-Builder.  

A critical piece of these ecosystems is that they lower the barrier to entry by enabling more people to create. Scale AI lowers the barrier to enter AI, On Deck lowers the barrier to create and succeed in cohort-based courses. That takes us to Packy’s next investment: Melio. 

Melio

B2B payments aren’t new. But when a market expands around products built for specific users (finance/account professionals here), new user profiles emerge. That creates over-served markets. In this case, payments offerings like Bill.com were too complex for a large portion of the market - SMBs were resorting to manual processes because the software was too complex. They needed a simpler, easier tool to manage payments. That’s where Melio came in. 

Melio built out the automation behind B2B payments, but abstracted away that complexity for less tech-enthused SMB owners. In doing so, they carved a niche for themselves in a classic disruption tactic: because incumbents tend to move up the value chain (larger, more complex customers), Melio went down the chain with smaller players (SMBs). With this laser focus on SMBs, Melio cracked open a massive niche and is growing quickly: in 2020, its Monthly Active Users (MAUs) grew 2200%! Enhancing the payments commodity enabled them to exhibit high velocity over absolutes - a key indicator of an early World-Builder.

Melio’s growth rate modeled over time (calculation and illustration from Packy’s article). Its rapid growth could see it quickly unseat the incumbent, Bill.com.  

Melio clearly unlocks more individuals with technology. Its simple UX and rapid traction prove it. But fundamentally, it allows more people to do more with less. It’s enhancing a commodity! That’s critical to world-building, and is exactly what Packy’s next company does in a different space: Healthcare.

NexHealth

NexHealth takes worldbuilding to a notoriously difficult space. Its ultimate goal is to be the platform for future healthtech companies to build from - a Plaid for Healthcare. 

But healthcare is hard. There are thousands of different software offerings for doctors across the U.S, making data access an almost insurmountable feat.

NexHealth is tackling this with a novel, three-step plan: (1) Gain source system access by offering practitioners a vertical SaaS offering, then (2) wrap the absorbed integrations into accessible APIs and (3) bundle their acquired customers to build a three-sided platform! 

Like the previous World-Builders, NexHealth enhances a commodity (data integration) and builds inter-product flywheels. Each time the SaaS solution is used with a new vertical, its API grows more valuable through broader integration offerings. When the API has more offerings, it attracts more developers and verticals - opening opportunities for the SaaS solution and accelerating a fortifying flywheel:

NexHealth’s customer flywheel: the SaaS solution attracts doctors, who bring patients. These new integrations expand the API, attracting developers, who then build tools that expand the doctor userbase too.

NexHealth is an extremely exciting piece of Packy’s portfolio, and a core example in how you can look for World Builders anywhere. But the biggest World Builder of all is one you’ve probably heard of. It’s rebuilding the internet: Ethereum. 

Ethereum

Ethereum is the World-Builder of World-Builders. So far, we’ve thought of world builders in terms of industries or segments, but how about the whole internet? That’s what Ethereum is all about.

Ethereum is the first programmable blockchain - it’s called the “world computer” because it is a universal platform on which hundreds of web3 applications are being built. Ethereum retains the security and decentralization of Bitcoin (ensuring a trustworthy ledger of transactions) but evolves it by enabling others to build on top of it. While Bitcoin is essentially an application, Ethereum is a platform: a World-Builder. 

By abstracting away complexity (enhancing a commodity: blockchain logistics) and enabling builders to build on top of it, Ethereum established itself as a World-Builder in web3. That’s also yielding an inter-product flywheel - because of its unique usability-flexibility balance, developers are building hundreds of applications on top of Ethereum, further fortifying its foundation. 

As web3 proliferates, Ethereum will be the settlement layer of the internet. Initial web3 applications in Decentralized Finance (DeFi), Non-Fungible Tokens (NFTs), and even decentralized social networks are already built on it. And as these applications continue to grow, so does Ethereum’s importance. It’s already a World-Builder and is continually expanding. 

Wrap-Up

Looking back helps us peer forward. By understanding the underlying patterns in Packy’s portfolio (inter-product flywheels, enhancing commodities, and prioritizing velocity over absolutes), we can make more informed bets on what tomorrow’s World-Builders could be.

At their core, World-Builders strengthen with every new offering built on top of them. They don’t compete with new offerings, they grow with them. Innovation begets innovation, and World-Builders unleash innovation to the masses. That’s why Packy likes them. That’s why they’re growing rapidly. And that’s why it’s worth finding the next ones - they could just be foundations for the future.