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8 Tech Trends for 2011

14 Jan

This being January it is fitting that we take a look at the next twelve months and consider themes that will likely come to define the new year. Given the intense pace of innovation across IT broadly, I’ve kept these themes at a fairly high level.

Last month, we looked over our 2010 predictions and conducted a fairly detailed post-mortem. As such, let’s jump right into a discussion of the themes and trends that I believe will characterize 2011.

1. Globalization:  While many appeared not to notice, some of the biggest names in consumer internet enjoyed robust growth in international and emerging markets in 2010, in some cases dwarfing their US numbers. Expect venture investors in 2011 to spend a great deal of time thinking about globalization, studying the best practices of companies executing successfully overseas, and paying particular attention to web services that can scale effectively across both emerging and mature markets.

2. LBS 3.0: As I touted in my recent piece on the Consumer Internet revival, Location-Based Services is entering what could be considered its 3rd wave of innovation—one defined not by “check-in” gaming mechanics, but by robust applications offering rich, customized user experiences via applications residing at the intersection of location data, identity and content with mapping technologies and couponing/revenue incentives as the connective tissue binding it all together. Travel is the most obvious segment, but expect to see LBS-driven tools and products penetrate a number of new and interesting markets in the coming year.

3. Demand Aggregation/Social Buying penetrates unconventional markets. Groupon and HomeRun are successfully focusing upon restaurants, salons and other SMEs that lend themselves particularly well to discounted group buying. Expect to see a number of new entrants cleverly leverage social buying/demand aggregation mechanics in less obvious ways. Examples of emerging categories are Travel and Events, where start-ups are developing ingenious ways of enabling emerging music acts to aggregate their global fan base to pre-sell venues in advance of tours—mitigating the risk of financial loss from engagements that don’t sell enough tickets to cover costs. If successful, this approach could revolutionize how live events are produced, promoted and underwritten. Are you listening, LiveNation?

4. Dramatic growth/influence of ad platforms/exchanges. I expect 2011 to be a watershed year for online advertising given the impressive growth and continued innovation in display ad exchanges, bidding platforms and the increased effectiveness and monetization of online marketing campaigns. Direct marketers are being more effective at reaching their customers than ever before. Moreover, traditional media buyers that until only recently eschewed some of the early exchanges and bidding platforms are refocusing on these channels and more readily embracing social media strategies and “promoted” ad campaigns and putting significant resources behind them. 

5. ‘Institutionalization’ of Secondary markets. Many regard 2010 as a year when the secondary market began to gain credibility as a legitimate exit path for companies, early employees and for direct investors themselves. While there appear some clouds on the horizon—i.e., potential regulatory entanglements and frothy valuations/new entrants putting a squeeze on performance—expect 2011 to further institutionalize the asset class. The stigma that was once often attached to being involved in a secondaries transaction seemed to lose its sting as well-known private equity names tapped the secondary market to either provide much-needed liquidity to their investors and/or to “rightsize” their portfolios to prepare for new investment vehicles.

6. E-commerce is sexy again. A new generation of innovative e-commerce companies has emerged in the past year that is pushing the proverbial envelope and turning the notion of traditional e-commerce on its ear. The two micro-themes behind this renaissance in e-commerce are The leveraging of the Social Graph and Customization/Long-Tail Economics.

Shopping online should be fun; it should be an experience of discovery, of sharing, and of leveraging the wisdom of crowds–ideally, crowds of people users already know and trust. A number of  startups are developing ecommerce platforms that cleverly stack recommendations and opinions from friends across one’s social networks with past order history; get instant feedback before the purchase decision; and, then layer in group buying/daily deal mechanics to drive urgency. 

7. Big data has its day: More data is becoming available as more computing devices come on-line through public and private networks. Moreover, the nature of information processing is changing as more analytic work (business intelligence, data mining, decision support) is being leveraged for competitive advantage.

The nature of data is changing as the number of “entities” in any given database has gone from millions to billions to, potentially, trillions.  Unstructured data is becoming the predominant data by sheer volume and is still relatively unaddressed. Traditional database implementations (Oracle, DB2, MS SQL Server) were not designed to handle these types of data, capacity or distributed nature. Finally, the success of Netezza, DATAllegro, Greenplum and others in taking on the big three (Oracle, Microsoft, IBM) and successfully returning value to their investors through acquisitions by IBM, MS and EMC indicate that there remains plenty of headroom in the sector. Companies such as Algebraix are well poised to exploit this market opportunity in 2011.

8. Tablet boom. The Apple iPhone was not the first smartphone, but it was an iconic, game-changing device that revolutionized the category and spurred a wave of innovation around software and services that is far from over. While consumers use tablets quite differently from smartphones, the tablet category is poised to continue on its torrid growth path in 2011. The Consumer Electronics Association estimates that some 30 million tablets will be sold in 2011, nearly double last year’s figure of 17 million. New entrants such as Motorola, Samsung, Acer and Toshiba either have tablets now in the market or will launch offerings shortly. Not surprisingly, expect to see a wave of innovation around applications and services delivered from and focused specifically on tablets.

The deepening penetration of tablets is impacting the launch of new applications and even new startups seeking to leverage the white space between smartphones and laptops. It is already evident that many companies consider tablets a clever way to extend their services and brands into environments where the options heretofore were unsatisfying. Companies such as Athleon, an online coaching and team management collaboration platform, are developing tablet applications that will enable ‘in-field’ use much more effectively than a smartphone application ever could.


Eco-friendly: Finally Going Mainstream?

19 Feb

I spent a fascinating morning with the founding team of green product e-tailer and I’m happy to see how well this eco-friendly product category is developing. For years now, those of us on the “coasts” often fell into the groupthink or bubble mentality that drove the flawed thinking that products and services that got traction in markets like the San Francisco Bay Area or New York would be embraced by the rest of the country. People with an interest in eco-friendly products and practices were reasonably concerned that these were “niche” areas for investment. Outside the “dark greens” – those that might grow their own vegetables, compost their waste, and eschew most things one might consider typical of an American lifestyle – there were not that many customer groups that could reliably support many green-oriented products. This was particularly the case when most anything bearing the “organic” or “eco-friendly” label came with a 30-50% price premium over more mainstream, branded products.

Any reasonably talented farmer or craftsman can create an eco-friendly, organic, or fully biodegradable foodstuff or knicknack of some sort of another, but the reach of that product would almost always end up being fairly local and the market for it miniscule. The challenge has long been for more mainstream manufacturers to provide everyday products — batteries, fabric softener, etc — that were both environmentally sensitive and price competitive to branded products commonly and traditionally available for consumers.

Happily, I think we might be getting there. While garden variety ‘green-ish’ household goods like low-watt light bulbs and eco-friendly detergents have been around for some time, we are now seeing some exciting new product categories come along that offer a ‘green alternative’ for most any household good or clothing item imaginable. Even product categories that would appear to be by their very nature ecologically hostile — auto care products and supplies, for example — are now offering greener, cleaner and more sustainable options.

If is successful it will be in large part because the “crunchy, hacky-sack” connotations eco-friendly products have long battled are slowly being shed. There is also the matter of the greater reliability of green products. Growing up, I remember trying household cleaners, shampoos and other products that were ostensibly environmentally friendlier. Often times, they were terrible. They smelled bad and couldn’t clean worth a damn. I yearned for my Clorox wipes and my Prell. Fortunately, product efficacy has come a long way just as attitudes have shifted. To be sure, Runka’s site needs further refinements and the company could benefit from a tighter product mix, but if there is room for a “green”, Runka could be as ideally suited as anyone to be that kind of dominant market player.

Dare I say it, the green movement is growing up. This May 1st will be the 40th anniversary of the first Earth Day. Not quite an overnight success, but a major accomplishment nonetheless.

RepairPal hits accelerator with new $4m raise

17 Dec

I wanted to take a quick moment today to congratulate RepairPal and its indefatigable CEO David Sturtz on news of the company’s recent $4m funding, led by new investor Tugboat Ventures and some prominent angels. David is a longtime friend – he and I having shared an office some years ago at a technology-focused investment bank – and I have had the pleasure of watching RepairPal take shape from its earliest and humblest origins to the industry leading company it is today. Watching that maturation has been a rewarding experience and there have been a number of “teachable moments” – for both of us.

Virtually all early stage companies evolve dramatically as they add talent, sharpen their focus, and learn things about their respective markets and customers. Some become almost unrecognizable as they adapt their businesses to address market realities. Others still hew closely to the original idea but learn to make adjustments around how and where they choose to compete in their ecosystems. What has impressed me about David and his team is how they have held firm to their original hypotheses about their market, how they invested sufficient time and energy to prove (or disprove) those hypotheses, and how they have always sought to apply new insights and revelations in a way that the business has been able to leverage.

RepairPal, for the uninitiated, provides accurate auto repair and maintenance information for almost all passenger vehicles within every zip code in the country. The company has built patent-pending technology from a team of factory-trained and ASE-certified technicians, which generates more than 70 billion unique RepairPrice Estimates. It also has the most comprehensive directory of auto repair facilities in the U.S. and a proprietary database of each model’s common problems. [faulty timing chains, anyone?]. The idea, simply enough, is to be able to see the expected cost of a typical repair and then see all the local shops that can perform that repair, along with appropriate reviews and other content.

RepairPal is an attractive business on a variety of levels, but I am most excited by how the company is cleverly applying a host of new web and database technologies to remove the opacity that effects much of the $180 Billion auto repair market. However, unlike many other B2C and B2B web businesses of the past, RepairPal is delivering this new transparency without necessarily pitting repair shops against one another or enforcing price compression that can have the effect of undermining the participation of shops on the network. Bringing transparency to an infamously opaque and perplexing industry is not a simple task. Too many other web businesses that have sought to create this kind of ‘marketplace function’ in their respective industries made the mistake of going after quick and easy revenue by seeking to lock up service providers before they fully developed a product that was truly compelling. Too often the result has been an adverse selection problem whereby lower quality providers (dentists, contractors, plumbers, etc) are disproportionately represented while higher quality providers stay away — the logic being that higher quality providers don’t seem to require the additional business or marketing opportunities that inclusion in such marketplaces can sometimes provide.

I believe David and his team succeed because they chose to focus first and foremost on building a robust price estimating engine that drew users to the site and great early reviews by reputable auto authorities. In turn, those usage metrics organically created a network effect whereby shops felt compelled to be included in the RepairPal network. Solid, reputable strategic partners have followed closely behind and become part of the RepairPal network.

Kudos to the RepairPal team. Keep up the great work.

Gowalla, Foursquare and the Location-Based Services boomlet

9 Dec

TechCrunch reported today on the new $8.4mm Series B round for Gowalla led by our friends at Greylock Partners. This announcement comes on the heels of recent news that Gowalla competitor Foursquare pulled in $1.4mm shortly after its much-publicized appearance at the SXSW conference.

Regular readers of this space may recall earlier pieces in Adventure Capitalist on the broad Location-Based Services (LBS) space and my bullishness on the emerging sector. In 2006, my firm, Citron Capital, was involved in a promising LBS venture, Open Planet, backed by the team that founded GoCar Tours, that was focused on the travel and tourism segment. The company developed a robust tour creation and delivery platform that enabled consumers to enjoy customized tours on their GPS-enabled cellphones virtually anywhere in the world, guided by GPS waypoints linked to the content. The experience was similar to that of a very robust navigation system in a top-line vehicle. The key difference was that instead of receiving mundane driving directions or locations of nearby bank ATMs or gas stations, the consumer would get the kind of rich content you’d expect from a good travel guide like Frommer’s or Fodor’s tailored to the route the consumer chose, and based upon preferences selected by the user. Because the content was delivered via GPS-enabled phone, the “tour” could be experienced in any number of ways – on foot, in a vehicle, on a bicycle, etc. The user would select the length of the tour, the route, their interests and preferences, and the software would create the tour, pulling together bits of content from a massive database of content linked to GPS-waypoints, and deliver it to the user’s cellphone. The preferences were so fine-tuned that a husband and wife could feasibly walk down the same streets in Paris and listen to entirely different tours. He would get content that interested him (sports, Renaissance literature, military history), while she received content related to her interests (say, music, sculpture, culinary, etc.)

The announcements on Gowalla and Foursquare and the attention they have received only serve to underscore how hot the LBS space has become. We wish them well and look forward to additional entrants to a sector that has long been bandied about as a “next big thing.” Unlike a lot of “next big things,” however, LBS actually looks like it’s poised to live up to its enormous potential.

Social Networking: Let’s Get Vertical

11 Nov

Apologies to Olivia Newton-John  and her bandana might be in order here for taking such license with this post’s title, but I’ve been getting pretty excited–nay, worked up–about the evolution of the broad social networking/social media meme in the past year. Ever since the promise of social networking platforms began to bear fruit with the growth of MySpace and its followers, a nagging issue among investors in the space has been around (a) long-term, sustainable monetization of the social web and related platforms; and, (b) stickiness. Some time back I took issue in a post with a then-$15B valuation for Facebook imputed by a Microsoft investment and pointed out some of my rationale for why that lofty valuation, at least at that time, seemed wholly unhinged to reality. Yes, I took some flack. That valuation has now floated down to a more palatable $10B range based upon more recent financings and other matters, but the arguments made in that post related to my concerns about long-term utility of most social networking platforms remain fairly relevant today.

Rather than rehash those arguments here, let me point to a company that I suspect might best represent the direction of where a good piece of what we call the social web is actually going–namely, vertically. Briefly, Citron Capital portfolio company Athleon is a web-based team management platform that delivers a suite of elite sports team management applications, previously reserved for professional teams, to the mass market of coaches. These coaches manage some 535,000 high school sports teams and more than 2 million club, youth and intramural teams across the country. Not included in that number are the tens of thousands of junior- and full-time college sports programs that don’t have the budgets of Big Conference universities and, hence, can’t avail themselves of the many point solutions offered to NCAA and professional teams.

Like many start-ups nibbling at the margins of social media, Athleon began life as a social communications platform of sorts focused upon the affinity group of prep school athletes. The usual suite of applications around messaging, calendaring, pix and postings followed. As the applications rolled out by the development team became more robust and customized to the needs of amateur and prep sports teams, however, the market began to take notice. Athleon had begun to win the ‘value’ argument and, in so doing, win over the toughest and most critical decision maker in its ecosystem–namely, coaches.

While we are very excited with what Athleon has built and with the clear value proposition that they are delivering to their users–better communication, integration, greater time efficiency for coaches, cost-savings, information and media sharing– that all lead to improved team performance on the field, we are also excited about the impact that these solutions will have on the greater social web. Our view is that vertical markets have unique and idiosyncratic needs that broad-based social networking platforms are ill-suited to address. Athleon founders Brent Lamphier and Ryan Kosai have built a potentially game-changing company at the edge of a new wave of social media platforms that we feel has tremendous promise and we are privileged that they have invited us to take this ride with them.

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