Been thinking about “Always-on Location” on mobile a lot lately, or “ambient location” apps which always grab our GPS coordinates. I wonder if this the moment they start to kick in?
From time to time on Twitter, I’ll unknowingly dip my toes into contested waters. There are some debates which run deep, like strong ocean currents. Occasionally, I muster up the courage to write about my personal preference for iOS over Android (as well as Apple’s ecosystem advantage vis a vis others), or to write about how native mobile apps will provide the consumer touchpoint that matter, while the web as we know it will wane in relevance. This week, I may have stumbled onto another one: The debate around whether mobile consumers, at large, are ready and willing to allow some applications the right to persistently grab their location.
Disclaimer:This post *is not* about apps that capture your location while the app is active, such as Foursquare, or Google Maps. Rather, it is about apps which require GPS access most of the time, even at times when the app is not open or active.
A few days ago, I tweeted: “Maybe it’s me, but a whole lot of people assume the majority of smartphone users will be OK with an app that persistently grabs location.” Turns out I was wrong, and the situation is a bit more nuanced. I don’t have stats for the following, but play along. At least on iOS, when users onboard onto the platform itself, most seem to allow Apple to grab location from time to time, such as when Siri is activated, or when taking a photo, as well as more periodically so that Apple can provide both generalized and signification location change APIs to developers. At the app layer, it seems consumers are growing more comfortable with allowing applications to access the GPS sensor, including those apps which ask to persistently.
“Persistent Location” (or “Ambient Location”) presents a complicated case. Again, I don’t know how to prove this, so I rely on intuition, which tells me those who work in startups, technology, and mobile are aware of the battery costs associated with “always-on” GPS apps, and it may be that the early-adopters are the ones to test out such apps but are also more cognizant of the costs. On the other hand, the majority of iOS users may not be aware of how to kill active apps running in the background, how to manage which apps can access their GPS in settings, and so forth. And, to be fair, mobile developers continue to improve their app’s own battery management, using Apple’s APIs to grab location during active use or periodically throughout the day. Certainly, it’s easy to see why developers salivate over having location always on — the ability to collect more user data, an opportunity to send more precise and contextual notifications, and the chance to predict user behavior inanticipatory ways.
About 18 months ago, I wrote about how various apps grab user location either implicitly or explicitly, and suggested that few apps in the market, if any, offered consumers enough value or benefit to warrant the battery cost associated with ambient location permissions. At the time, my belief was passive or ambient location data collection would be hindered by battery concerns, but now I wonder if we are right on the cusp of an app which gets to scale with ambient location permissions. In fact, some of the smartest app developers I know (those with deep location experience) seem to think we are right at this juncture, which is exciting, and they themselves are seeing promising percentages of users going along for the location ride. In particular, apps likes Moves, recently launched HeyDay, and a bunch currently in stealth about to hit the market.
So, there we have it. We will have to wait and see how app makers and the market responds, but with better battery optimization techniques, better location APIs, and a potential divide between early-adopter techies (who fight to preserve battery at all costs) and the normal consumer, who may not care to manage settings or know how to, the stage may be set. Of course, the onus ultimately falls on app developers to create something which not only justifies the API calls, but also creates enough value for users to engage and re-engage with the app beyond just data collection, organization, and presentation. And, as it is with all things, the market here will also decide if this is indeed the time ambient location enthusiasts have been waiting for. That once-dreaded location arrow in the top-right status bar, whether full or greyed out, may quite well be a thing of the past.
The post below was originally published in May 2012. I’ve been thinking a lot about location-based apps (and also apps that use location persistently). The tide seems to have shifted, where users are becoming more and more comfortable with giving up location persistently, and app-makers are getting smarter about battery drain. I’d love to hear your thoughts on the issue. Thanks in advance.
Location, location, location. Whether you’re a real estate agent, a traveler, or building mobile applications, location matters a great deal. As far as phone sensors go, the GPS sensor appears to be one of the most coveted by developers, after the camera. For a consumer, the trade is quite simple: offer your location at a specific point in time, or your patterns, and in exchange for that information, an application will offer you something — a deal, a coupon, or information about who and/or what is around you.
It’s been chronicled before, but bears repeating: In the great race to grab a person’s location, there are many entities who could already map out interesting — and spooky — data about our whereabouts. For those of you using plastic to buy things, your credit card companies know where you purchase items, and for those living in the future with Square Card Case, they know, too. The cell phone carriers that charge you monthly fees for questionable signals certainly know your location, as do the handset makers and those who make operating systems on those phones. And, the big social networks — Facebook and Twitter — know our whereabouts, as well, capturing data about us every time we log a status update on the go.
Of course, en masse we don’t fully trust these kind of entities with our location data, even though they hold the keys to it. As a result, this has created an opportunity for developers to build software systems at the application layer to extract a user’s location in exchange for something useful, delightful, or both. It has been discussed endlessly “why” these applications want your location, but I want to take a slightly different tack — let’s explore “how” they go about getting that data, as well as the challenges and opportunities it presents to all participants.
There are three main ways a mobile application can collect your location data: (1) via explicitsignals, such as checking in at a location (e.g. Foursquare); (2) via implicit signals, such as revealing your location at a specific point in time when you take a specific action (e.g. capturing a picture using Instagram); or (3) via passive data collection, or tracking, where the application works in the background to grab your location, whether or not you are actively using that application (e.g. Highlight).
Obtaining this location information is not easy work. Despite this, my belief is that there isn’t just one type of “location” that users create, and that because of these different types of location that we can generate, map, and broadcast, the “location category” can and will likely produce multiple winners, some with potentially big outcomes.
One of the biggest surprises of Facebook acquisition of Instagram is that we realized how much access Instagram had to location data that Facebook can now tap. While Instagram did an incredible job innovating around the camera software and social engagement features, they were also able to briefly capture a user’s location implicitly at the time an image was captured, so much so that if you took an Instagram at a Giants game and then clicked on the location-stamp, you could see a kaleidoscope of other Instagrams from the same ballpark.
The mindspace around mobile location at the application layer is currently owned by Foursquare, a company and product that, in my opinion, is one of the best mobile applications out there. Like Instagram, it is on my iPhone home screen. Everyone knows that Foursquare collects your location data when you explicitly inform the application that you’d like to check-in at a particular place. By creating an addictive game around this behavior, Foursquare also built out a database of places on the backs of gallivanting users, additionally encouraging them to broadcast their whereabouts into other social networks, as well as leaving tips for others and creating checklists for yourself. I now use the app for as my primary tool for local searches on the go, benefiting from others’ location data, behaviors, and recommendations.
Some products work to passively collect location data. These include Highlight and Glympse, among others, as well as apps used to help people track items or other people, find their friends, or track their children, such as Lookout and Footprints, among others — and also creeps people out more. While great software technologies are present today, battery degradation seems to be roadblock today, though one would have to imagine that battery performance will get better eventually and widen opportunities in this space.
Which each type of location data collected, there is a trade between the application and user– in exchange for being able to filter and share my photographs, Instagram knows where I am; in exchange for unlocking rewards or broadcasting that I’m at a cool place, Foursquare knows where I am; and in exchange for alerting me as to who may be around, Highlight grabs my location, too. I’ve been willing to offer my location to each of these applications, though I’d argue it’s not a relationship to take for granted — the product has to generate enough usefulness in order for me to continue using it.
Ultimately, I believe there will be winners in each “type” of location data collection, and some could be large outcomes, most likely through M&A. There are also new apps emerging, such as Pinwheel and Kullect, that could disrupt the current leaders. Despite the fact that these applications have yet to uncover robust business models (a common yet misplaced gripe), they could be incredibly valuable to larger companies (or even handset makers) who want to act on this data but don’t want to be seen as grafting it without permission.
Certain segments of consumers seem likely to trust applications with their location data, rather than larger platforms, but the tricky part is that consumers may grow suspicious if their location apps fall into the hands of larger entities they don’t trust as much. This is what *could* happen with Instagram now that it is in the hands of a powerful and capable owner, though by the looks of my Twitter feed, the rate of Instagrams is only increasing. For the moment, both Facebook and Twitter’s mobile apps don’t naturally incorporate location data into the mobile experience, which in turn creates opportunities for startups to help fill the void. This seems to indicate that for the right mobile product experiences, some consumers will continue to offer their location, and the developers building these applications have many great prizes to pursue.
I wrote this post about a year ago (Oct 2012) but came up again in conversation, so wanted to share it here…one of the few I write which is kind of evergreen.
The topic of this week’s column is time-honored when it comes to business, perhaps even overused in many cases, and in the startup world, sometimes mocked, and at others, romanticized, but usually only in hindsight: The Pivot. This is a loaded word, so I should be clear that its more to describe a business decision on a spectrum, with “slight shift” on one end and “complete reinvention” on the other.
If a startup company matures and is able to achieve some level of success, we sometimes begin to hear from the founders about how they changed course along the way, either through a slight tweak, massive reset, or something inbetween. Fab, which now drives one of the fastest-growing e-commerce properties, originally started as a gay social network called Fabulis. Before entering the daily deals space as Groupon, the founders started The Point, trying to catalyze action by using the crowd to reach a certain “tipping point.” More recently, the small team behind Instagram initially began with Burbn, a location-based mobile application which struggled to find its way.
As founders know all too well, things change between the creation of fundraising slide decks and a diminishing runway, and it’s nothing to be ashamed of. It is simply part of the struggle in creating something new, big, lasting, and meaningful. In fact, considering the stodginess in many traditional, larger workplaces, it is a luxury to re-roll the dice, the creative license to continually question direction paired with the nimbleness to optimize for a bigger opportunity.
Most of us don’t hear about all the slight tweaks or bold pivots early-stage startups make, partly because there are too many, aren’t of consequence (yet), and usually are only relayed once the move can be linked to a good outcome, in the same way that failure is discussed often only after success is in hand. In hindsight, the changes made by Fabulis, The Point, and Burbn look like strokes of genius (and they probably are), but what about all of the pivots and transformations currently unfolding, the shifts that are not too far removed from re-incubation, those gut-check moments when founders elect to rewrite their plans or come to the conclusion that while today’s opportunity looks rosy, they set their sets to change in order to address the larger markets tomorrow’s brings?
In 2012, there have been some “pivots” that, while early, show just how powerful (and risky) these moves can be. I’ll share a few recent examples, but of course cannot begin to list them all, though if you’ve encountered similar decision points, please do share in the comments.
Two years ago, a small team formed Greplin to power a new kind of search engine for people, places, and things. The service worked reasonably well, and I even used the iPhone app as a way to check up on people before meeting them in person, as sort of a quick, lightweight piece of context. At some point since 2010, Greplin’s team elected to pull back, reset, and rebuild, this time focusing on mobile with a web tie-in. The team came back reincarnated with Cue, which on the surface looks like a basic calendar utility application, but is in fact a bold attempt to collect and harmonize data between email, social networks, and your personal and professional networks, tied to your calendar and location, and all rolled into one service. While the app’s performance isn’t quite ready for prime time, it’s one that I certainly use and can see the future value in. Eventually, Cue could provide an intelligent background service that helps prepare us what we stuff our calendars with. (There is another service I’ve seen in this space is Sunrise, which emails a daily digest of your calendar, but it isn’t as deep.)
Almost four years ago, thredUp launched to be a “Netflix for used clothes.” The idea was to help facilitate peer-to-peer transactions, where customers would pay small fees to swap out the clothes in their closets that were never worn. The founders changed tack a few times, focusing on men’s shirts and women’s blouses, only to find that the real demand was in kids’ clothing. So, they brought their model to kids’ clothing, trying to facilitate those swaps. Through these iterations, the founders realized that in order to reach any meaningful revenue scale, they needed to power an extremely high number of transactions. Winding down this path, albeit one that was working and making money, wasn’t big enough. Luckily, their years of experience focusing on their market enabled them to have their potentiallybreakthrough idea — to actually physically handle used clothing, centralize operations in a warehouse, and attempt to create the largest online brand for “certified, pre-owned” clothes, which is a much larger market. Investors liked the idea, as well, recently helping the company raise a Series C financing round.
Perhaps the most notable pivot of 2012 is when Zimride launched Lyft. Originally designed to help facilitate ridesharing, mainly at college campuses and corporate partners, Zimride was founded and is run by folks who are obsessed about making transportation efficient, so it’s not all that surprising that their newest creation, Lyft, is taking San Francisco by storm. While the original Zimride is up and running, we perhaps don’t have a sense of its potential to scale, but for Lyft, it’s becoming evident in the Bay Area. While Uber certainly deserves credit for opening up the “on-the-demand” transportation market, Lyft entered the market byleveraging the team’s experience with Zimride and adding a slight twist to the model — and so far, it’s working.
Sometimes, pivots can be disorienting. Launched almost three years ago by a talented team, Blippy received significant hype (and money) for a big idea: to make credit card purchases social. No harm in taking a big swing, and while their approach may have either been off or too early, the team recently pivoted to the curated daily deals space with Heartsy, which helped the well-capitalized team with revenues, but was ultimately shut down. More recently, the folks behind Blippy tried their hand with Tophattr, a virtual auction house that unfortunately resembles the offspring of eBay, Etsy, Groupon, Zaarly and Turntable.fm. I hear that the team may be on to another idea, and while it’s easy to mock the changes and turns, it’s worth keeping in mind that they still have more shots on goals. It’s all a function of their talent retention and will power at this point, to keep stacking the deck and resetting the plans. I don’t know if they’ll shut the company down and return money to investors, or keep grinding.
Not enough time has passed for us to assess whether these were all good transitions or not. In hindsight, we’ll know, hopefully. In looking at these few examples above, what strikes me is that in most cases, it involved a close-knit team that had accumulated experience and expertise in their respective domains, accumulating knowledge by doing constantly. Making these changes are often very difficult decisions among founders and their teams, thinking through all the risks against the opportunities, reflecting on their learnings to date, and communicating those new decisions to existing users or customers, colleagues, investors, and even family and friends. I am not advocating for gambling blind, but if the experiences founders build up is truly unique, it may lead to new insights that could transform the business, if the dice is rolled properly. As a friend and former venture capitalist recently remarked, “if you’re a founder whose business doesn’t have a chance to be #1 in its market, pivot. The risk/reward question doesn’t make sense for you.” And economic incentives aside, isn’t that why we’re all here playing this beautiful game, to take big risks and constantly reinvent?
In hindsight, we marvel at the evolutions, pivots, and slight flashes of genius successful founders make. It is quintessentially American in nature, the ability for a person or business to constantly evolve and reinvent. Whether its individuals trying to pick up new programming languages or business model techniques between jobs or companies that rely on markets, platforms, or customer bases that shift, change is inevitable. But what about those business moves that are happening right now? How do we know if we’re witnessing something routine or something transformative? How could we know if Cue is going to help us to prepare for each meeting, or if Blippy can change again, or if thredUp can actually become the leader in the second-hand clothing space, or if Lyft and ridesharing takes the country by storm? The truth is, of course, we will only know in hindsight, so for a moment, let us pause and admire the changes these and scores of other founders take, often in the dark of night, setting their sights on the largest opportunities for the chance to look brilliant — in hindsight.
I didn’t realize the debate around consumers’ future use of the web versus native apps was so intense and nuanced…my column for this week…
I’ve been fascinated with mobile startups like Uber and Snapchat, among others – but not for the standard reasons. Yes, they’re both great products and ideas, but the one aspect I found most interesting with Uber and Snapchat is its users never directly interact with the web. Even Instagram, Twitter, and other fast-growing mobile-focused products can be touched through the web browser. Over the weekend, I tweeted out a thought along these lines which turned out to be slightly inaccurate, and it somehow initiated an incredibly rich discussion and debate about what the proliferation of mobile devices and native applications may hold for the future of the web.
Here’s what I tweeted on Friday: “To me, the most amazing thing about Snapchat, Uber, and a few other apps is they all don’t need the web.” If you click on the link to the tweet and open the thread, what you’ll see are many replies and different conversations kicked-off from the original tweet. It’s quite awesome and worth scrolling through.
Now, a few days later, some reflections and observations:
First, I was not precise with my use of words in that tweet. Snapchat, Uber, and other apps do in fact “need” the Internet. What I had intended to tweet was that Uber and Snapchat users don’t need to interact with a website in any way whatsoever. With Uber, just download an app, register, upload a credit card, and you’re on your way. With Snapchat, pictures are not published to other networks or as static website pages (such as Instagram).
Second, based on the thread of replies and conversations from Twitter above, it’s worth pointing out again the difference between the Internet and the web – the Internet is a network infrastructure that connects many computers to each other, where information travels over the network through a variety of protocols, while the “web” is a way of accessing and sharing information over the network using the HTTP protocol. This was a good reminder for me to be more careful with these terms, as it’s too easy to use both words interchangeably from a consumer point-of-view given how popular they are in our vernacular.
Third, the subject of the tweet turned out be a contentious issue in some unrelated ways. Many participants seemed to welcome a world where they’d never have to interact with a web page again – to never have to type in the letters “HTTP” again. Of course, mobile apps where users don’t touch a website themselves still often rely on servers and APIs. Others, as expected, rushed to defend the open nature of the Internet (including the prospect of HTML5), a world where anyone can build on top of the network and not have the life squeezed out of them by gatekeepers such as Apple or Google.
Fourth, speaking of the mobile gatekeepers – how this all shakes out on iOS versus Android presents complex scenarios. For now, Apple has little incentive to move developers away from native apps, and consumers continue to prefer native apps. And, if the “cards“ concepttakes off from Passbook, that will create another mobile interaction unit which harnesses the Internet yet where a consumer never directly touches a website. The story may be different on Android – for one, Google may have an incentive to keep users interacting with the web on mobile, as their business model and data sets are tied to browser activity and the search paradigm, and two, Android can be and is being altered (or “forked”) by other device-makers, where HTML5 could present information in native-like ways or where apps are indexed and deep-linked to one another and users can navigate through a mobile web without friction. (All of this can change, as well, if another device or OEM hits the market and captures consumers’ heartstrings.)
So…one tweet turned into an incredible, two-day conversation and learning experience about the Internet, the web, and mobile apps. And while the distant future always remains an unknown, for now and the foreseeable future, I’d have to stand by the spirit of my original tweet – that is, when one steps back to think about the potential for a company like Uber or the sheer growth and scale of a communication tool like Snapchat, it remains a fact that those users are not directly touching a website. Yes, I know, they’re using mobile software that communicates with the Internet, but the larger point is that the web – as an interface – may not be used by the next billion people who are set to come online.
Put another way, as mobile devices proliferate exponentially, many new users’ first online experience will likely not involve any direct interaction with a website. Yes, I know some apps will have wrappers and other users will search for information and end up in a mobile browser, but the growth of and appetite for services like Uber and products like Snapchatpoint to clear shift – a shift developers, UX designers, large corporations, PC manufacturers, venture capitalists, and even Wall Street recognizes: mobile is the key touchpoint in the network. In a fierce competition for consumer attention, native experiences – not reincarnations of a website on a mobile device — is what most consumers prefer. For the majority of today’s consumers and for future generations , the world of websites will likely seem a distant planet, something they may learn about in school but one that may never matter in their day-to-day lives.
This week’s column is about the hottest consumer mobile app out there, QuizUp, and some nonobvious lessons other developers can learn from how this product was built, designed, and launched:
About every three months or so, the early adopter tech crowd fixates on a new mobile app as the hip, new thing. It’s not too similar from fashion, I’d imagine, when certain looks go in and out of style. With mobile apps, however, those that break through the noise of the App Store do usually have something unique and compelling about them — for instance, FrontBack designed a mobile interface which made it easy and fun to combine pictures from two cameras into one image, or before it, “Dots” from Betaworks used simple, elegant design and the fear of a 60-second live counter to capture users’ attention. Today, the “hot” app is QuizUp, a new social, mobile trivia game. From the app’s design, the mobile ecosystem may be able to draw new lessons from its success (for a great background on QuizUp, make sure to read Ryan Lawler’s piece, here):
One, most mobile app successes are games. QuizUp is a game…check! Yet, it is not just a game in the traditional sense, as QuizUp could transform into a learning platform where users consume information and even get to contribute content that turns into future trivia. Moreover, unlike traditional games, QuizUp won’t likely be under pressure to create entirely new games, like the hits-driven business of most games, but could rather expand its content (akin to Angry Birds) while keeping the experience fresh.
Two, natural competition among friends encourages users to authenticate with Facebook for login. This gives Plain Vanilla, the parent who birthed QuizUp, access to real names, avatars, and most coveted — the friend graph data associated with each login. The advantages here are obvious, as QuizUp scores are explicitly shared in various social channels as a vanity share, as well as giving the company the data to create richer user profiles with game data and history, to find new people to play with. In a way, QuizUp feels like the mobile-equivalent of what Zynga provided to Facebook on the web, back in the day — something to do that was fun. In fact, it would seem that Facebook would want to provide a similar type of experience inside its mobile app and web site to keep users around once they’ve skimmed through their notifications and newsfeed.
Three, giving users other things to do inside the app “may” be worth the development time and effort. Right off the bat, QuizUp has a packed settings menu, giving users the option to private communicate with other gamers through messages, or by offering digital goods related to the game. Competition for mobile eyeballs is intense, especially in an area as fickle as gaming, so offering users additional options once inside the app may, at scale, help control bounce rates. Plain Vanilla has a larger team and perhaps had the time and resources to pull this off before launch, whereas most startups on a tighter budget may not have had that chance.
Four, social trivia on mobile devices maps to a regular, historical, social, offline behavior. For millions of people who go to weekly or monthly trivia nights at their local pub, QuizUp brings that functionality — minus the hops, of course — to users’ fingertips multiple times a day in an asynchronous fashion, making the app feel as if it’s a live-multiplayer experience when in fact people are playing at different times.
And five, the most striking aspect of QuizUp is they seemed to have built the ontology and infrastructure to classify information by various categories and also planned to accept additional areas of trivia (knowledge). The content of trivia today may be just trivial, but things start to get interesting when you group experts around topics and allow the community to expand the game’s footprint within a known structure. Much in the same way SF-based flash-card site and app Quizlet has grown on the back of user-generated content, what if QuizUp could benefit from a similar model? Of course, it’s too early to tell, but so far in this game of Trivial Pursuit, the folks have QuizUp seemed to have earned three pieces of pie in their game piece: One, for creating a slick, novel mobile game; two, for cracking distribution early and having a chance to break out; and three for building an infrastructure that could help the content of the game grow in new and exciting ways. Of course, the remaining pieces won’t be earned easily and are the hardest to obtain. The big, overarching trivia question is — will QuizUp be able to keep users engaged and coming back to the app with new games, or will it be stuck on the board with three pie pieces? The answer to this question, no matter the result, will be fascinating to watch.
This weekend, Dave Lerner wrote an outstanding post on how the venture capital industry has undergone changes over the past 10-15 years. If you are interested in private technology investing, it’s a must-read — it’s not that Lerner uncovers any new angle, but he presents the changes within a narrative that captures the essence of the shift. At the end of his post, he posed the following questions (see below), and I felt compelled to log my own two cents, so here goes:
Lerner’s Questions (my answers in regular text):
What are the best investors doing to reinvent themselves right now? At the institutional level, the best firms are doing a mix of “getting smaller” and smartly attaching various sidecars to their anchor funds. Take Foundry Group, for instance. Each fund they raise is about $225M (small, relative to how big VC fattened up), and their latest was the same, but also included an “opportunity” fund (presumably with lower management fees) to be reserved for winners from the anchor fund, and paired it with FG Syndicates, their AngelList sidecar. Union Square Ventures just announced their latest fund size, a bit smaller than before, as well as their own opportunity fund, and I’d suspect a firm like USV will smartly experiment with an AngelList sidecar or syndication in 2014. At the individual level…for starters, there aren’t many true angel investors out there (investing their own money), but one example of someone who I think is outstanding as an angel is Scott Belsky. If you talk to any founder he’s backed, he has a clear filter, he takes a product approach, and he has taste. When he makes a move, people notice because he moves so rarely; rather than taking a portfolio approach, he takes the opposite approach, gliding through his network with his product sense and letting that guide him. It doesn’t scale, and that’s why it works in investing.
Who is generating the best process/manual for judging early stage investment prospects and how? I’m not sure one process will work for every investor, but one that sticks out is Nextview’s Rob Go, who earlier this year blogged “A Seed VC’s Decision Tree” and created a graphic to go along with it — click here to see it.
What will be the key to being able to form and build a great syndicate on AngelList? Right now, it appears to be social proof (as Hunter Walk blogged on this, and presented some alternatives he’d like to see). Eventually, whatever I think could matter most probably won’t matter in a few years, when people can start scoring investors on a number of dimensions. If that’s true, then there’s a window right now, for a period of time, to build up a syndicate base — though people should be aware those backers aren’t 100% committed until those first deals happen. I can only imagine some backers rushed to sign up but will have second thoughts when a deadline hits their inbox. The other path which could be powerful (but requires some real work) is for an enterprising new investor with a killer network to create a syndicate and hand-hold his/her network to get onto AngelList and publicly back him/her, to give a founder an access to a network that’s powerful yet not from central casting.
How to identify the new breed of low-life investor who uses these platforms?What’s the new camouflage they wear? I don’t know how this will work, but I’d imagine AngelList will be able to record individual accounts which ask to be referred but don’t follow up, or ask to invest but don’t wire, and so forth. It will take time for more reputation metrics to come online and standardize, but I would bet it happens.
On the other side- quality investors who didn’t have a knack for social media and blogs but were good with entrepreneurs and added massive value are now obscured from view and can only be found through the old ways, ie. practitioners who respect them “bigging-them-up” and making warm intros to them. How to find and identify them? A platform like AngelList makes it a bit easier to see cohort patterns of how investors can both pick and be helpful. For instance, asking for a referral will be commonplace, where it will just be weird if a founder doesn’t write some kind of endorsement or review for one of his/her investors.
I have speculated about two subsequent tech/software led waves (four and five above) that may further disrupt the VC industry. Where do you see it going? This won’t be a popular statement, but I don’t think the answer lies in fancy data analysis or predictive algorithms. Those sorts of tools help with some higher-level findings, but let’s be honest, the tools are in place today and all the firms rushing to find the next big thing in the fickle consumer category didn’t find Snapchat. In fact, the one firm which found it early and really put wood into the company is one of the smallest firms, in terms of partners and employees overall.
Will there be a new breed of super-angel that sucks up all the air in the room due to their huge social profiles? Will they emerge from AngelList Syndicates or elsewhere? The bottom-end of the market (I don’t mean bottom in a bad way, but meaning the angel/seed level) will remain crowded and more capital (and therefore investors) will come into the category. Crowdfunding, on the whole, is a mega-wave.
Will most funds get raised on AngelList in the future? “Most” implies at least or over 51% of total angel/seed funding and venture capital. In the “future,” perhaps we will get there, but it will take at least a few years, if not more. For now, most deals will happen the old-fashioned way, but there will be outliers and also deal leads who take deals to AngelList for syndication, which will get the flywheel going.
With SEC rules loosening how will this transform the fundraising landscape for funds? One dynamic many founders don’t pick up on with respect to investors is that investors, too, are always raising money. Always be raising.
As Thiel would put it, where are the remaining hard problems to solve in this space? Are convertible notes on their deathbed? What will the newer structures and instruments look like? My two cents…I think we’ll see more notes early-stage, but fewer and fewer companies taking money from traditional institutions — only until they reach certain milestones. In terms of instruments, the one area I’m curious about is the expansion of secondary markets to include startups who aren’t that big yet. That would be disruptive in many good and not so good ways, to provide true liquidity in such a high-risk area of finance.
This post may sound too Grinchy, at this joyous time of year, but if I have my investment hat on, one thing I worry about are startups aimed at the holiday season and specifically those that build and sell “tech toys” to kids. I feel horrible writing this, especially as a new father, but these types of ventures scare me while they should be inspiring me. When it came to these mobile “connected toys,” I became no fun at all. And, I know a whole new set of connected toys have been recently funded, which all seem incredible — startups like Ubooly, Tiggly, Tangible Play, Play-i, Anki, and many more — and all created by top-notch teams. (I had incorrectly written ToyTalk here, but was pointed out it is a software-only system. Apologies.)
A few disclaimers: (1) I’m probably going to be proven wrong; (2) some of the teams in the space I’ve gotten to know are A++ teams, so some of the best people are tackling this; and (3) it’s easy to be skeptical of a category or market because most endeavors fail, though I wouldn’t be surprised if someone or something broke through. In other words, in this case truly, I will be happy to have been proven wrong. Briefly, here’s what flies through my head when I think about the real challenge of “connected toys” today:
Where will parents hear about these toys?
Where will parents physically buy these toys?
Is the back of the Apple Store the best place for this?
How long will it take for the toys to get delivered if ordered online?
Are these one-time purchases or hits, or is a razor + razorblade model possible?
How will parents be able to distinguish between sets of connected toys?
Will it be easy for parents (or kids) to set up (beyond assembly)?
Would a startup have a better chance of creating brand awareness and distributing related hardware by building (gaming) software first? (See: Angry Birds)
Will the cost of hardware production make for unsavory early-stage financing requirements?
Do kids actually want these, or do parents want their kids to have these?
Can anything compete with MMOGs like Minecraft or iPhones, iPods, or Kindles?
Will future generations want material things or will they prefer experiences?
If the underlying technology is a platform play, who will design the showcase games?
Should kids even have “connected toys”?
This may be a post I regret in the future — who would write something anti-toy!? — but it is what I truly feel today. There is a deep desire among many (myself included) to individually support such endeavors (especially when kickstarted by passionate, exceptional people focused on using toys as educational tools) through crowd-funding or similar mechanisms, but the thought of getting institutionally committed strikes me as risky. Of course, no risk, no reward, right? Yet, these “connected toys” pose a combination of classic startup problems — the platform versus killer app problem, the (continual) cost of manufacturing hardware problem, the physical product distribution platform, and a more fundamental “are these the toys kids want?” problem.
All of this makes me conflicted. I’m reticent to invest, yet I want everyone to succeed. Every year, there are a few toy “hits” (usually just normal toys) and that’s a fun game to play, but I wonder if what ends up striking a chord with kids are things that most adults couldn’t conceive of to begin with. Adults do make the purchasing decisions for younger kids, but at a certain point, kids start to ask for what they want — or seek it out — rather than taking what is sold. Ultimately, this is just something that’s been on my mind and I wanted to share my thought-process and solicit your reactions and feedback. I’m probably missing something big here. Please tell me what that is.
My column this week is about SnapChat, and how it provokes the hopes and fears of the Valley…
In many parts of Silicon Valley and the consumer technology world, the zeitgeist surrounding SnapChat is undeniably the talk of the town. In a way, it has been for most of 2013. I wrote a post on SnapChat’s rise in February 2013 and it generated an intense level of feedback. A seemingly small, unassuming outfit which builds a social, mobile application from the shores of Venice Beach, the company has grown into one of the world’s most dominant photo-sharing services, has reportedly turned down billions in acquisition offers from some of the world’s most powerful technology companies, and in a complex yet simple manner, continues to extend its brand as the hyper-growth symbol for the anti-web, anti-Facebook, anti-permanent network.
While few deny SnapChat’s growth and engagement, plenty are skeptical regarding the number of zeros tacked on to the company’s valuation as this year unfolded. Common refrains include “they have no revenue” and “it’s a frothy environment” and “it’s a bubble” and “they’re stupid for not selling and taking the money.” Yet, it wasn’t too long ago that another hyper-growth photo-sharing service was acquired for a handsome sum by one of the largest technology companies. At that time, a small chorus did want Instagram to remain independent to see if it could unseat Facebook. The majority of the crowd, however, realized that a team of under 15 could build a billion dollars worth of value in a few short years — “take the money and run.”
In 18 months from Instagram to SnapChat, we find ourselves with a bit of hypocrisy.
Scores of Internet-famous startup “gurus” constantly peddle their theories, bemoaning founders and investors who help create more social media properties, more photo-sharing services, and more new companies which don’t start out with lofty ambitions. The implication in this line of criticism is to suggest that there are too many companies getting funded going after the same, small problems, a cycle which stifles innovation. Then, when valuations creep up, especially in the absence of a clear revenue model and/or for services the chattering class in technology doesn’t often use themselves, we hear more criticism about the frothiness of the market, how SnapChat will never be able to sell a proper ad unit, and how the company is overvalued on paper given all the hype surrounding the technology sector worldwide today.
The Instagram team is applauded for taking the quick exit over playing the long game. They could have potentially turned their little toy into something potentially bigger than Facebook. I tip my hat to them, no doubt. The SnapChat team is, on the other hand, often the subject of public scorn and perhaps a bit of jealousy as they brashly play a high-stakes game of courting acquisition or investment and turning up the heat. “Of course, SnapChat should take the money and run.” “It’s hard enough to build and distribute a great product, let alone slapping a robust business model on top of one.” “If SnapChat rejects these offers, they’ll have to go it alone and may flame out.”
All the chatter and pontification in the world does not change some hard facts. SnapChat and other big, growing mobile messaging platforms such as, but not limited to, Line, WeChat, Whatsapp, Kik, and others are all in the middle of a high-stakes, lucrative mobile land grab. Regardless of “how” these new networks grew to such large scale, the fact remains mobile growth only continues to march on, unbundling and fracturing the concentrated graph Facebook has collected on the web. It’s not hard to imagine a future where mobile messaging apps become the predominant platform for new mobile products and services, distribution and commerce. In the eye of the storm, it’s nearly impossible to model what these apps are worth on paper — that can only be determined by the market, and in the case of SnapChat, if the reports are true, it is worth somewhere between $3-4Bn.
It is more precise to say that SnapChat is worth $3-4Bn to Facebook, or to Google, or to Tencent. Each potential acquiring company is playing a slightly different game, but their strategies all converge at the same place — in the palm of our hands. Tencent, which owns WeChat, may view SnapChat as a key piece on its chessboard; Facebook may see SnapChat as a potential runaway freight train that needs to be bought and killed; and Google may either want to bolster its mobile portfolio, or simply just get under the skin of its social network rival.
Dollars and sense aside, the larger question for me revolves around the emotions and confusions a company as seemingly simple as SnapChat can arouse among so many. The crowd wants more big ideas, more founders attacking real problems, and more investors and entrepreneurs who align incentives to build for the long-term. Yet, when a certain amount of cold-hard cash is put on the table and rejected, the crowd reaches its reserve price and calls into question the rationality of such a decision.
And, herein lies the rub. Entrepreneurs often play a series of complex, concurrent, nuanced games. Entrepreneurs often don’t have a reserve price when momentum is at their back and probably aren’t economically “rational” in the way most of us believe to be sane. In dramatic instances such as these, I go back to the silver screen — in this case, to Heath Ledger’s immortal performance as The Joker, who in one scene lectures a greedy criminal while setting his own cash bounty on fire: “All you care about is money…It’s not about the money, it’s about sending a message.” Unlike its photos which expire, SnapChat’s recent message has an aura of permanence around it, reverberating through startup technology circles and trickling into the mainstream consciousness. By publicly rejecting latest eye-popping Facebook’s offer, SnapChat reinforces its anti-Facebook message and simultaneously taps into our collective imagination and disbelief, exposing a hypocrisy in the charlatan mantras, the greed in the crowd’s thirst to make sense of valuations, and the insecurity in the harsh reality that a little app which appears to be a simple toy “could” potentially grow so large byriding the biggest technology platform wave of our lifetimes, it could render the giants before it obsolete.
Welcome to the sixth “Sunday Conversation,” this week featuring Chris Dixon of Andreessen Horowitz. Many of you reading this will already know of Chris and have read his blog many times. Dixon was the first “tech writer” I followed when I began to get interested in this stuff back at the end of 2009. Since then, Dixon has started a seed fund, built and sold a company, written some of the most influential blog posts on the investing climate and venture capital, and recently made the big move to the west coast to become a general partner at Andreessen Horowitz. When the news went down, I pinged Chris and suggested we do something, and the timing finally worked out for us to catch up and have this conversation. For those of you interested in Dixon’s writing and the transition from seed investing to venture capital, these videos are a must-watch. ♦
Part I, The Step From Angel To Institutional VC (4:15) — Dixon explains the key differences between angel investing versus institutional investing as a venture capitalist. ♦
Part II, Lessons Through Angel Investing & AngelList (5:29) — After investing for over seven years, Dixon explains how he developed a pattern recognition for companies as an angel. Separately, on AngelList, Dixon offers his views of the platform. ♦
Part III, On The Future Of AngelList (2:38) — Dixon suggest VC firms could soon bringing A-round institutional deals to AngelList to syndicate a part of the round to the marketplace for investors and other directions the platform could go. ♦
Part IV, On How VCs Approach Markets (5:31) — Dixon explains his thought-process around market analysis in the context of a venture capital investment, especially investing in markets which don’t exist today. (Looking back, this answer references this old post.) ♦
Part V, On An Old Blog Post, “Climbing The Wrong Hill” (4:06) — This is my personal favorite blog post in Dixon’s archives, so I asked him to explain his application of hill climbing to one’s career path. I’m going to write more about this topic next year. ♦
Part VI, On Twitter Conversations and New Discussion Forums (5:17) — Dixon uses Twitter less than before and argues the medium has changed, and has become more promotional and less conversational. ♦
Part VII, How Dixon Began Angel Investing (5:17). ♦
Part VIII, On The Level Of VC Engagement (3:30) — Dixon articulates his views and expectations on how he, as an investor, interacts with his portfolio, particularly through the lens as a former entrepreneur. ♦
Audio Recording, Full Conversation via SoundCloud
A special thanks to the team at Scaffold Labs for sponsoring the Sunday Conversation series on Haywire. Scaffold Labs is a boutique technology advisory firm based in Silicon Valley which designs and builds scientific and predictable talent acquisition programs that helps technology startups hire great people. Scaffold Labs has previously partnered with companies such as Cloudera, Appirio, and Nimble Storage, among others. For more information, please visit www.scaffoldlabs.com
I started this fund with the idea of investing in four areas: marketplaces, online-to-offline, all things mobile, and core infrastructure. This last category is a bit off the beaten path for me, yet I found over the years I had lots of friends who worked on enterprise-facing products and infrastructure. It all came to a head when I met the founder of Hashicorp, thought the space was out of reach, and then began talking to friends in and around the VMware community and realized something important — I didn’t need to be an expert on infrastructure in order to invest in the space.
That may seem counterintuitive, but what I found is that I had a small network of 3-4 close friends who could help me learn and evaluate investments. I had my own sense that Mitchell was a star technical talent, so I made a few calls and tried to learn more about Vagrant. After three conversations, it was clear Vagrant was great. Mitchell is great. Decision made. There is such a thing as trying to be too smart, so I went on my instincts.
From this process, I learned more about VMware and the ecosystem of technologies (and people) within and around it. So, when a good friend introduced me to the Vnera folks, I already had a good idea of the value they could create. It was a different investment for me but also one I saw as opportunistic given the caliber of the team. Now, as I’ve been writing the stories behind my investments, I wrote to the team to ask them if it’s OK. Often in core enterprise tech startups, folks have to remain quiet because initial development cycles are so long, startups can’t afford competitive leaks. As a result, the founder shared this with me, so hopefully this briefly explains what they’re up to:
In order to achieve true business agility, enterprises must be able to deploy new business critical apps quickly and eliminate any downtimes associated with them. To reach this utopia state, the underlying datacenter infrastructure, hosting those applications, needs to become more agile, efficient and predictable. A software-defined datacenter promises to deliver those benefits. At Vnera, our vision is datacenters that are software-defined and always-on. We are building a technology that will accelerate the movement towards software-defined datacenters and ensure they stay always-on. We want to make datacenter downtime a thing of the past.