Before anyone talks about a bubble and how easy this service is to replicate, consider that by putting $12M in, Magic was selected to win the space. Now to win over Magic you need to replicate the concept AND get matching resources.
Even spaces that are easy to get into and replicate still have winners, household names to rule over all others (Dropbox, Github to name a couple of services that, ignoring scale, can be replicated pretty easily).
At the seed stage, investors mark those winners in advance. At later round stage, investors back the de-facto winners (A16Z style). At some point the investment creates a momentum of its own, preventing viable competition and drawing in even more money (all the way to an IPO or acquisition).
The competition eventually dies and if the business case/segment has merit, the winner and their investors will stand to make all the money.
So Magic has just been marked as the winner in their segment (whatever you can call it). Whether or not this service is easy to replicate is irrelevant.
Yes they have money. Can they execute using it? Who the hell knows? Can they execute better than some kids whose uncle gave them £20,000? Maybe, or maybe they'll piss it up against the wall on some stylish offices and seats.
They can pivot, refine, experiment and endure temporary setbacks in a way that would kill those kids with their uncle's money. Their margin of error is incredible compared to someone bootstrapping. Obviously this has a flip side as well - they might be too lenient and careless. But money is a major factor, always.
That said, I'm not saying they have won - they've just been marked by Sequoia to do that. That's a hefty thing.
We don't like to admit it because its painful, but the cool kids with the VC money, get the hype, the coverage, the big names C-level executives and the follow investment that are needed to win big. Many fail, but this is how you build a first rate startup.
The on-demand service market is going to be a lot bigger than anything a $12m stake will buy you. There will be competitors. The competition might be better funded, better positioned, have better domain expertise, have access to markets Magic find difficult to enter, and so on. Magic is, essentially, just proving the market exists at this stage. Their first mover advantage is useful, but it's not enough to win the majority share of a market.
For example, if Magic grow to £x00m in a year, what would stop Uber adding a similar service to their app? They have the capital, the customer base, the delivery network, and no overhead from using third parties to do the delivery. $12m and a year wouldn't magically beat that.
The overwhelming majority of those "winners" fail. These funds aren't anointing the king, but rather are just trying to make a bet, and it's a bet they usually lose. As you said, their funding gives the entrant a leg up (usually if there's a significant capital cost), but in this case such funding provides astonishingly little advantage of scale.
This isn't an example of a bubble. It's an example of a really comically silly investment.
"winners" failing is not much of an indication - obviously there is a staggering number of investment entities and often they are competing with other "winners" (look at the payment market, with Stripe, Balanced, Braintree etc, they all raised serious money) and someone usually comes out on top.
Whether or not Magic is a smart investment - I can't really tell, but I suspect that if I were to choose between Magic and Twitter back when they were just ideas, I would bet on the former.
Yeah I have to agree it's actually really hard to fail when backed by one of the bigger VC's, if you're on the road to failure they can just bully one of their former portfolio unicorns to acquire you with post IPO Opm dollars. See Twitter's recent bail out of Foursquare care of Fred Wilson. There are no losers in this game.
Even without doing the OPM arrangement, it's very sobering to see companies that fail on tech, product and people level hoovering up gobs of money due to their investor momentum. At some point, an IPO is the only way out (well, that's the best kind of OPM, isn't it).
Funny enough I just wrote one of my first blog posts in years, minutes before this article was written, about Magic. [0] My theory is that by positioning themselves as an aggregator, or a "platform for platforms," they retain the cashflow advantages of service based marketplaces, without the need to build supply because they piggyback on existing supply.
Some say this is unsustainable because of low barrier to entry, but I would say actually they are in a perfect position. With investment like this, direct partnerships with service providers are possible. Partnerships are a barrier to entry.
I liken it to Segment.io who managed to move up the analytics stack and being the integration point for a product. This lowers the switching costs to using other analytic services and gives Segment all the leverage to create the highest value products in the future and offer one button migration. Additionally they have efficient platform economics with their emerging app-store. If I was an analytics provider I'd be really worried about Segment. Now Magic has something that could be similar, defaulting them to owning all the relationships with the consumer in the very hot on-demand industry.
I haven't used magic, but their demos imply that they keep data on you.
Example:
"Send a cake to my girlfriend"
"That'll be $45.43 in 90 minutes".
"ok, do it"
Who's the girlfriend? Where does she live? It's evident they've asked these questions the first time she's come up and then recorded them for later use. Since the service relies to much on personalization, the longer you use it the higher the switching cost will be.
Think they might have over simplified it in the demo. There is no way for them to know if the girlfriend has become an ex or if the person is still living at the same location. They would have to confirm it every time.
> There is no way for them to know if the girlfriend has
> become an ex or if the person is still living at the
> same location. They would have to confirm it every time.
"That'll be $45.43 in 90 minutes to Kate at 123 Bubble St".
Yeah, it's so much harder to just type that the first time:
"send X to my girlfriend at 123 bubble st"
So I stand corrected. This is obviously a massive, defensible industry. Nevermind the fact that there are a dozen of these things in Europe, and none are notable businesses.
Don't forget that they have a stored credit card with payment information as well (via Stripe). That's another barrier to entry - especially considering the effort in building up enough trust to hand over payment details.
Actually the barriers to entry aren't that low. You need to have at least 6 figures to deal with the "float" problem (7 or 8 figures if you're successful), you have to hire people to deal with the orders, etc. Then you have the whole fraud aspect, which if not carefully managed could quickly bankrupt the business regardless of its bankroll. If I were a Russian credit card thief, I'd be hammering away at Magic right now. "Find me a Rolex submariner with 2 tone gold and mother of pearl face".
You need to have at least 6 figures to deal with the "float" problem (7 or 8 figures if you're successful)
What's your modeling look like here? They capture payment on day 0, are sent an ACH from Stripe on day 2, and physically have it in the bank on day 3~5. The worst possible credit terms they'll have with vendors is "We put it on our Amex on day 0, are invoiced by Amex on day 15, and pay the invoice on day 22." That lasts until they can tell without-loss-of-generality 1800Flowers "We did 100k with you last month. Give us 30 day net on a rolling monthly basis. [+]" My back-of-envelope math suggests they have ~15 days of float at present and will have ~40 days once they have direct relationships with suppliers.
They're almost certainly generating tremendous positive cash flow, limited only by their ability to generate transactions.
[+] That will not be the only ask in that conversation, believe me. I'd take pertinent note that 1800Flowers has fat, fat margins and is willing to pay affiliates 25% commissions, then ask them for their top-tier affiliate offer. Who benefits from that discount? Magic, because they're selecting for price-insensitive customers. If 1800Flowers doesn't want to play ball, you just update your CS docs to say "Our preferred flower vendor is $EMPLOYS_SANE_BD_TEAM."
> "We put it on our Amex on day 0, are invoiced by Amex on day 15, and pay the invoice on day 22."
Despite what people think, Amex is not unlimited [1]...in fact it has a limit, they just don't tell you what it is. Although he edited the comment, a very ignorant person posted below that they could just charge a few million dollars to their Amex, and pay it off at the end of the month. No, they couldn't. When you hit the Amex limit you don't know about, your card gets declined. That's why they don't say "unlimited," they say "no pre-set spending limit".
So that may have been good for maybe $20K or so (depending on the credit of the person whose card it was) but that doesn't get them anywhere near the finish line if they really had 17K requests in the first 2 days.
I agree with you that they could work out discounts/affiliate agreements with some large merchants, but given that this is a long-tail business, that won't be the norm.
A few Internet buddies of mine did affiliate marketing, which has roughly similar cashflow issues. If you need to charge $100k in a day, and you can demonstrate capability to pay $100k in a day, Amex will happily accommodate your business.
The main question is whether you can scrape together $100k~200k for your first 48 hours. I don't know what to say about that other than "It's clearly doable." (Anecdata: My personal credit limits total about $100k and have since BCC was my main source of income. That's the "No phone calls required" number for what a young professional with a fairly modest income and good credit habits can have just lying around. Do I have difficulty thinking that a team in Silicon Valley can float $X00k for N days? Not in the least.)
>A few Internet buddies of mine did affiliate marketing, which has similar cashflow dynamics to this. If you need to charge $100k in a day, and you can demonstrate capability to pay $100k in a day, Amex will happily accommodate your business.
Possibly, but I don't think that consists of calling Amex and telling the phone rep to log into your Stripe account to check out your mind blowing pending balance. Anyway all I was saying is that this was a weekend project of a YC company that had already (presumably) burnt through a good portion of their cash on their initial idea. You are right though, if you're a YC company, there are people you can call to deal with cash flow issues.
I would suggest that anyone who wants to run a business approach this and other issues with a mindset of "This is a problem which I can trivially solve." rather than "This is a problem which would be trivially solved for me if I were member of a special elect, but given that I'm not, boo hoo."
Chase bank didn't give me a $25k credit line because they're uber impressed with my HN karma. That's basically their get-you-in-the-door offer if you have good credit.
Amex has floors of people who do underwriting and convincing them to let you give them money is by far not the hardest sale required of a startup founder. (An early tactic to try: "Would you accept written confirmation from our accountant that we added $100k in accounts receivable in the last 24 hours and will probably add $100k in AR in the next 24 hours if we can get a credit limit increase from you? I can have him fax it to you on letterhead. This is time-sensitive and while I'd greatly prefer to work with Amex you are not the only bank with a fax machine.")
Stripe is full of friendly and accessible people, and should you be cursed with $100k of transactions on launch day (oh noes!), you have options including "Use the HN search function to find the CEO's email address and ask him for help, which he'll happily give you, because it makes his company very happy when non-fraudulent operations rack up $100k of transactions in a day. If he had a magic wand that could conjure up businesses like that he'd do virtually nothing other than wave it."
I was merely making a statement of fact - that if you are in YC, and you have a cash flow problem and receivables, odds are very good that someone will wire you some money or cough up a credit card that actually is good for millions of dollars. That isn't necessarily the case for everyone everywhere. Many businesses die because they don't have access to the capital to fulfill orders.
You're assuming $20k limit why? For my part I have several cards that individually have limits in the $50k range. Not so much because my income is all that huge, but because I have quite long, good credit history. I don't think that's all that unusual in places with SV level software developer salaries.
I'm not saying there are no cash flow issues here, but it would not take a very unusual team to be able to scrape together $500k-$1m in credit on cards alone.
It's something everyone can do, but it's also not something that's necessarily going to be all that difficult.
A large part of your blog post seems to be premised on the difference between incoming cash and outgoing cash. That only works as long as the people you're paying will accept net-30 (or have it imposed on them) -- Amazon was a great example of this but their suppliers also got wise to it.
In the current scenario, all those instacarts, eat24s, etc are also looking to get paid first, so this advantage should evaporate (leaving only those which are systemic -- ie banks, processors, etc).
If you receive money on a credit card and pay expenses on a credit card, you're virtually guaranteed to have positive cash flow. It's one of those services you're buying when you pay CC processing fees.
Example: Suppose I am in a "Buy things for $50, sell them for $60" like Magic is. Day 0 is the transaction day. I buy the good/service for $50 on my Amex and capture a $60 transaction from the end-user using Stripe. Stripe sends me 97% of $60 on day 2. It arrives in my bank account on day 5. My next Amex statement is, probabilistically, issued on day 15, and includes the $50 I spent to service my customer. On day 22, I instruct my bank to transfer Amex $50. (We'll ignore the relevant detail that I'm generating cash rewards from Amex up the wazoo once I hit scale.)
In addition to $8.20 or so of revenue I've also had ~17 days of use of someone else's $58.20.
OK, so in the 17 days I have the $58.20, let's say I can make a completely optimistic 5% APR return risk free on my float. I've now made a whopping 13.5c extra on top of my $8.20 I made providing the service. Excuse me if I'm not getting excited over squeezing out an extra 1.6% profit.
That's not the main thing that float does for you. Massive positive cash flow as a result of operational dynamics means that you if you happen to have explosive growth you can fund it out of your cash flow rather than having to go begging on Sand Hill to pay for your rocket fuel, like many tech companies.
Might as well give two examples of how it looks like with different business models:
+ SaaS is often cash-flow negative if you're doing month-to-month billing, since cost of customer acquisition (marketing spend + sales commission) is routinely 4~8 months of billings. If you increase MRR by $100k in a month you're doing great, unless you don't have $500k in the bank account, in which case you just bankrupted yourself.
+ E-commerce: If you're in a model where you actually hold inventory, it is very possible to need to pre-purchase a large amount of inventory in advance, occasionally on non-favorable credit terms (like e.g. cash before delivery), prior to being able to sell it. Many of the great e-commerce businesses are built on various hacks which flip this cash flow cycle around. Amazon, for example, was famous for (ab-)using traditionally prevailing payment terms in book publishing which are hilariously in the favor of retailers ("We'll just give you free inventory and only ask you for money if you sell it." "OK. Tell you what, how about we sell it, only then even take delivery, and then pay you." "My, you tech people sure don't understand how this game works. OK, sounds great.") -- that's one of the reasons they picked books as their first base of operations.
It's not the profit that you're trying to capture, it's the flexibility gained from having working capital. In that 17 day window, you can complete another sale without any additional outside money or pay for an unexpected expense. Having working capital is huge for quick turnaround businesses;
People are incorrectly thinking of this round as meaning that Magic is worth $40M. That's not how fundraising at this stage works.
The thought process is more along the lines of:
- is this a VC fundable concept?
- are the founders impressive enough that Sequoia thinks they can pull it off?
- how much money does the company need to build what they need to build?
- how much does Sequoia need to own in order for them to get 10-100x return if the company succeeds?
Think of the $40M valuation as simply a back-calculated parameter based on how much Sequia needs to own with respect to how much capital the company needs and how big the opportunity could be.
The thought process is not: how much is Magic objectively worth now based on their EBITDA?
I'm a little bit curious if anyone knows or someone from the company is willing to answer: Magic charges the customer, then pays for the items. Since this was a weekend project and they use Stripe (which pays in no less than 2 business days, and in most cases 7 days)...where did they get the money for such a large "float" at the beginning? They have to have the money to pay out in advance, well before receiving it back.
Also, maybe Stripe should issue temporary cards instantly for just this sort of business. You charge a customer, then can get a one-time-use virtual card number to be able to order the items that you just charged the customer for, up to the amount you have in "escrow" with Stripe. People could do "roll your own" affiliate programs anywhere, with anything, without the cooperation of any other business.
> where did they get the money for such a large "float" at the beginning
i don't understand what the mystery here is. it could have come from anywhere. credit cards, savings, cofounder investment, mom and dad, etc.
in major US cities regular professional people easily have six figures of cash in their bank account and the whole point of money is that it's fungible.
also, after doing some reading, this isn't the ceo's first startup. maybe they just had the cash.
They had 17K messages in the first 48 hours (I realize those aren't orders, but still). Let's call it 5K orders. Maybe $50 average order. $250,000, or $125,000 per day in required float - to wait 7 days for Stripe they'd need at least $1M. That's from the beginning - it may have grown by now. So we aren't talking about credit cards or mom and dad type investment, unless you have a stratospheric credit limit or mom and dad are very wealthy.
Frankly, for a single professional person with a history of SV level salaries, covering several days worth of that on credit cards is not necessarily a problem.
Maybe I'm misunderstanding what you mean by "regular" or "professional", but the idea that normal professionals have six figures in their bank account is absurdly far from reality.
not every one, but plenty do. of course they're not going to tell you about it.
let me ask you something - how do you think people are buying houses in these insane real estate markets? do you think they're royalty, or aristocracy? no, they're professional people spending their hard earned money.
a good 30 year old lawyer easily makes 200k a year. the smart ones spend very little of that. the really smart ones invest the rest, and have been for years.
if imagining a major city like LA or SF or NY where lawyers and bankers and entrepreneurs have six figures to their name is tough for you, i really don't know what to tell you, dude.
even in tech, i personally know sysadmins and programmers who make ~100k but save most of their money and have done so for over a decade, who easily have 100k saved up. most of them are either trying to buy property, or pull the escape hatch with a huge cushion.
quite frankly if you're a professional (a REAL, ACTUAL, professional, with a respectable salary) in your 30s and you don't have at least one account with six figures in it or a house to show for it instead, you kinda sorta fucked up somewhere along the way. where in the hell did ~$1M of cumulative gross income go?
if you are a working professional who is gainfully employed, it's not hard to save 10k a year for a decade. it just isn't. you're not thinking critically about this.
quite frankly if you're a professional (a REAL, ACTUAL,
professional, with a respectable salary) in your 30s and
you don't have at least one account with six figures in it
or a house to show for it instead, you kinda sorta fucked
up somewhere along the way.
This is naive in a way where you probably can't be convinced otherwise. Is your worldview so limited that your only conclusion to draw from this scenario is that the person "kinda sorta fucked up"?
Median home price in SF is $1m and the down payment on a mortgage is 20%, so do the math and there are easily lots of people building up or who have built up a significant nest egg of savings.
Not necessarily. They can negotiate custom payment schedules with the service provider. I imagine this investment will go a long way toward helping them form those partnerships.
With all the bubble talk and speculation recently (of which I have no real opinion either way) - to me, this is the biggest evidence I've seen of a bubble. The day after Magic posted on HN, someone posted how to make an identical service with only a couple hours (tops) of configuration. Per user, this valuation seems insane. You could launch an identical service for free, essentially instantly, and for tremendously less than $12 million you could get the same number of users and same brand recognition. I have no idea how this can be justified.
I also think Magic is going to be hard to be sustainable due to fraud. Get Magic to buy you thousands of dollars worth of something and then do a chargeback on the card (or use a stolen credit card). There's nothing they can really do about that other than try to detect fraud before it happens.
Your misconception here is to think that valuation means how much the company is worth today. Or to read it as an intrinsic signal of the difficulty of creating what the company has created so far.
It's neither.
Early stage investors make calculated bets on teams that they think can succeed in the long run. Valuation is a technicality, and depends on how well founders can pitch their idea, and how desired they are by other competing VCs. Ultimately, what really matters, is the potential of the team, and the size of the space they're exploring.
In this case, Sequoia is not investing in a simple messaging app that can be "replicated in a couple of hours" (regardless if that's true or not). They're giving money to a team they believe can do something great with it. And one that spent 3 months being personally trained by Paulg plus some of the best minds in the startup ecosystem, to seize opportunities and create something big.
From a purely statistical perspective, 80% of investments will fail. It's very likely that Magic will fail, too. But the 20% that succeed will pay for all the other ones.
For anyone interested, I strongly recommend "The Launch Pad: Inside Y Combinator" [1], by Randall Stross. It shows in incredible detail the ins and outs of YC, and explains why angels and VCs do things that seem, at face value, crazy for outsiders. It will give you a totally different perspective on deals like this.
Not even that! Literally the valuation is a figment, especially without knowing the associated terms. $12m at $40m post-money with a 3x participating preferred? Literally all we know is the team has access to $12m in the bank to spend, not on their own salary, but on building a company called Magic. After the $12m is spent they should have a company that is worth $40m.
It's a bet that for every $1 the team spends they can create about $3 in value. Which at 5x revenue is to say, they can spend $12m and at the end of the day be cash flow neutral and have about $8m in ARR.
Throw in a liquidation preference on that $12m and what you actually have are golden handcuffs and high expectations but the work for this team all lays ahead of them not behind them.
Getting to the proof of concept like they did is easy. Going from there to having many millions of recurring users is not. They can easily be as big as Amazon's retail arm is, but they need to grow fast. After this $12m is spent on marketing and tech, you will have a much harder time competing with them with your two hours of configure editing. They have identified a good business model and are actively building a moat around it while we sit here debating.
I don't disagree, but where do you see the moat? $12m could be spent on developing hard-to-copy technology eventually, but I don't know if that explains the current valuation. Also, I believe Amazon has strong economies of scale, but I'm not sure if Magic does or not.
For their solution to be attractive, they need to learn your preferences. The more customers they get to place more orders, the less attractive it will be for those customers to sign up with another service and have to go through all the motions of teaching those services about them again.
I often pay by Paypal - using an account that's never funded, but paying straight from my debit card - simply because I don't want the hassle of re-entering my card details, for example. It takes very little added convenience before there's a switching cost. And the perceived switching cost may be far greater than the actual switching cost.
By analogy, I could build an ecommerce site but not compete with Amazon, I could build a search engine but not compete with Google, or a hardware company but not compete with Apple/Dell/Lenovo. These companies have the brand recognition and market share as well as economies of scale. Will economies of scale come into play for Magic? I can see it. The trchnology you can have afree two hours of confus editing is not going to be ask good as the trchnology you get ad we spending a few million on it. They are more or less first to market, and that is no predictor of long term success, but it does allow them to grab customers before others jump in.
Maybe it's not a bubble in the sense of "the entire industry is doomed", but it's just par the course for wall street poker face mentality of upselling the fuck out of your investments and then offloading the spoiled hot potatos to the next sucker.
There's plenty of room to build useful and valuable businesses, products, and services with new technologies. The hype bubble I see is just classic sales flare amongst VC investors. Make a solid business and there shouldn't be a problem.
If you think you can launch an identical service "for free, essentially instantly", and know that such a service can get $12 million of funding that quickly, why don't you?
I guess you give part of the answer yourself:
> I also think Magic is going to be hard to be sustainable due to fraud.
In other words, you can't launch an identical service for free, essentially instantly, without being prepared to put in a huge amount of gruntwork afterwards to solve hard problems - like fraud.
There are lots of early stage startups these days that, on the surface, are easily replicated. The fact is though that they were the ones to do it first/successfully. This isn't to say that someone else can't come and eat their lunch, but as an investor, if you think the market in general has potential, you obviously have to bet on the best horse before the opportunity gets snapped up. Fraud is always going to be an issue with companies that deal with transactions but money can help alleviate to put the systems in place to deal with it.
i guess it is like with Groupon - the value is in the spinning of the wheel of the business. The faster the wheel - the more money gets invested which are directed toward spinning the wheel even faster.
Bubble prediction is easy. I have predicted it already some time ago :) The value is in predicting of the burst of the bubble. And so far there is no such in sight... When this sentiment consume majority - i guess that would be the time :)
You demonstrate a breathtaking lack of understanding of the topic. Yes, the front-end tech is easy. The hard part is the scheduling tech and the task management. And you seriously underestimate what it takes to get noticed and the value of such. Many/Most Magics result in a face-to-face meeting which cuts down dramatically on fraud. And card transaction is susceptible to being charged back.
Let's be real here: Magic likely did not develop much, if any, scheduling tech and task management technology in-house. I would be comfortable betting they are using off the shelf software for this and applying some smart decisions about how to use it. Before launching I would also bet less than a month of full-time work went into planning scheduling tech and task management. It's a cool achievement, I like their service and wish them luck, but valuing this amount of effort (and a great deal of luck) at $40 million seems pretty ridiculous.
I agree getting noticed and getting users is hard, but did Magic really generate millions of dollars worth of brand recognition in only a few weeks?
> In the first 48 hours of the service going live, Magic co-founder Mike Chen said the service had already seen 17,000 text messages.
If this is the metric being offered as evidence of virality, and was likely given to investors, it's misleading. It implies at face value that 17k unique people tried out Magic, but transactions take many SMS messages, as evidenced by the example conversations given. This is why vanity metrics are a bad thing.
As with Meerkat, I am very skeptical of the short-term-virality-indicates-long-term-success logical fallacy that seems to permeate Silicon Valley nowadays.
I can't wait until every hackathon has endless amounts of poorly-thought-out "Magic for X" clones, as was the case with Yo.
I would assume that the partners at Sequouia are smart and diligent enough to follow-up or ask for clarification if presented with a potentially misleading metric like that.
Yah, that 48 number doesn't mean much, which is why I was asking if they have released any user or rev numbers. I know some startups did at Demo day, but I guess they didn't or someone would have tweeted or wrote about it.
Would be helpful to pin down the factors that led to Sequoia to invest $12 and take only a little more than 20% of the company.
Is Magic still taking people's money without actually doing anything?
"Or, in my case, Insomnia Cookies. After I paid $50 to jump 178 spots in line, I got a VIP number and texted again. By now I was hungry, so I ordered a dozen chocolate chip cookies. Five minutes and $26 later, they were supposedly on their way—but they never arrived, and I never heard why. I never got my money back, either."
Is there a huge market for this? I'm probably right in their demo. UMC professional millennial with a time suck job. I ubered to work today and I'll uber home. I ordered dinner on postmates.
But how is magic going to save me time. Seems like I'll spend more time typing the stuff out than doing it myself.
I imagine the first time, where you have to give them your credit card number and address and whatever other info, won't be any faster than doing it yourself.
But once you've done that, you can just activate the voice commands on your phone and say, "Text Magic: order a massive burrito delivered to my house." One more quick command to confirm, and boom, massive burrito at your house with ten seconds of effort on your part.
Does anyone have any idea of their numbers? Even just estimates of users and revenue. I ask because $12 mill Series A is definitely on the high side, and I'd love to know what numbers helped them get that valuation. (I know there are other factors like the team, market size, momentum, etc).
Magic + DoorDash seems like a great pairing. DoorDash wants to get away from just food pickup, Magic needs better delivery options. (When I tried Magic, they priced out delivery via a cab.)
I'll invest $100 in Magic Messenger at a $100 million valuation if you can get TechCrunch to write it up. I won't even ask for a liquidation preference!
Even spaces that are easy to get into and replicate still have winners, household names to rule over all others (Dropbox, Github to name a couple of services that, ignoring scale, can be replicated pretty easily). At the seed stage, investors mark those winners in advance. At later round stage, investors back the de-facto winners (A16Z style). At some point the investment creates a momentum of its own, preventing viable competition and drawing in even more money (all the way to an IPO or acquisition).
The competition eventually dies and if the business case/segment has merit, the winner and their investors will stand to make all the money.
So Magic has just been marked as the winner in their segment (whatever you can call it). Whether or not this service is easy to replicate is irrelevant.