Showing posts with label O2O. Show all posts
Showing posts with label O2O. Show all posts

Saturday, June 21, 2014

The next Facebook may not be found online after all

It’s not very often one comes across an article, a cover story at that, in Newsweek on the start-up scene & VCs – So there was no which way I could have let-up an opportunity to read through, read in between the lines, postulate, extrapolate and generally make my own merry conclusions on stuff the article never intended to dwell on - Call me extreme, that’s okay – like the partners at Greylock, I don’t back down easily either :-)

It isn’t perhaps about trying to find/ fund the next Facebook at Greylock

While the title has enough oomph to grab eye-balls, it could be fundamentally misleading. A quick look at the recent investments (mentioned within the article) of Greylock partners shows it is bullish on startups that are waltzing back into the realm of real-life albeit through cyber gateways – i.e. ones that have built revenue models on O2O commerce platforms;  think Airbnb; Coupons; OneKingsLane; Shopkick (all Reid Hoffman investments..); Sprig; (Simon Rothman) – Though it’s just one subset of investments primarily by one partner, the sheer millions pumped in indicate there’s a lot of enthusiasm at Greylock on O2O commerce.

Just may be David Sze should display a real apple (besides Apple Newton & Apple iPhone) in his timeline collection of technologies – a sweet reminder that any technology’s ultimate potential lies offline

Incubate a potential acquisition? – Sounds like a nice strategy or is it?

It is perhaps a strategy/ wish to utilize the (insider) knowledge of a current investee companies that are avid deal-hunters themselves by way of incubating a few custom designed startups & facilitating (evetually) their acquisitions by the aforesaid companies – Consider the investments in Nextdoor, Path, Jelly, Medium, Pandora (all David Sze investments..) & the likelihood of these companies getting acquired by either Facebook or Linkedin at some point of time.

Startup scene in USA is raining Asoks* – and they’ve been raking in some moolah, finally

The article starts with Gagan Biyani (Sprig), dwells on Aneel Bhusri (Greylock) and mentions the likes of Nirav Tolia (Nextdoor) – not an inconsequential acknowledgement of the increasing presence of Indians in the American entrepreneurial scene.  
*’Asok’ is used in the context of any techie of Indian origin rather than just the IITians.

A final dig I can’t help – The article by Katrina Brooker is far superior to anything related I’ve come across in HBR magazine till date.

Tuesday, April 23, 2013

Does the SEC validation of TFC model pave way to cyberization of venture capital? – a SWOT

It’s always exhilarating when the old, routine systems and approaches evolve by embracing and respecting the newer technological trends – the recent endorsement by SEC (The US Securities & Exchange Commission) of the TheFundersClub (TFC) model of venture funding is surely an exciting harbinger of things to come.

Some suppositions & sweeping statements before a SWOT

  • Even as the Venturebeat article is upbeat about this validation of SEC being ‘significant for the venture capital and finance industries as well as start-ups looking for more flexible methods of fundraising’ – I’d consider that TFC is essentially a platform for individual accredited investors to spread their investments and risk & NOT (still) a VC firm that went online!
  • At this juncture, this is indicative of the strong trend towards of ‘gamification of investing’ rather than ‘cyberization of venture funding’.

STRENGTHS - This shift, whether or not paradigm, is promising

  • NUDGE TOWARDS A VC PROCESS UPGRADE: Like the Venturebeat article says, while VCs routinely chase investments into innovation, VC process itself has been largely untouched by technological advances – THIS is definitely is a nudge in the right direction
  • ENHANCED ANGEL INVESTOR BASE: The ability of an individual investor to bring down the investment size than otherwise possible offline will potentially open up the angel funding domain to a lot of HNWIs that else would go in for more conventional investments such as equities trading, real estate et al.
  • IMPROVED DECISION TIMELINES: The USD1K - 250K window for investment allowed by TFC is pretty much within the risk-threshold of an individual investor (the median deal size of an angel investor is ~0.6mio USD) & considering TFC makes screening of potential deals easier for the angel, it does appear TFC and the likes (clones that’ll invariably emerge & soon), can potentially get popular among the non-regular, domain-neutral angels that have a need to invest but very little time & inclination for any kind of foot work/ due-diligence.

WEAKNESSES - Good to be aware about what to be wary of
  • IMPATIENCE FUND: What helps the current ‘offline’ VC model is that the relative smallness of PE/VC funds in the total investment pool of an LP, essentially makes VC a patience-fund & this in effect is largely true with Angel investors that behave like the VCs. An open, online competitive crowd sourcing of funds may change the expectations of the investors and take the patience out of the fund.
  • CROWD BIAS V/S TRUE POTENTIAL: Again, the same transparency that lets the investor see the cumulative investments a particular company is attracting may also trigger a crowd-bias categorization of the hosted investee companies as attractive or unattractive merely by their ability to attract funds & not necessarily by their true potential, thus making it a gamble rather than an investment.
  • INVESTOR ATTRITION: And, while the range of investments allowed could lure a lot more investors like it has been mentioned before, it is also highly probable that the investor will compare it with his other investment options that may offer a quicker ROI & get disillusioned
  • SCALABILITY ISSUES: I’d think the scalability of a venture funding follows the path; angel investing --> venture capital --> private equity. Looking at the regulatory scenario & the way LPs operate, it doesn’t look plausible that this model can be applied in a scenario that i) Involves fund raising from traditional LPs & ii) Involves funding rounds involving multiple VCs  

THREATS - Being the devil’s advocate in an angels’ gathering
  • OFFLINE IS THE EVENTUAL DESTINATION: It is interesting to note that the SEC ‘no-action’ letter substantiates the non-action mostly based on operational relevance of the offline arm ‘FC Management’ rather than online TFC as such. – If not anything else, this indicates the omnipresent importance of an offline validation of an online user interface – But what’s the threat perception in this realization?... ponder this; It’s a well acknowledged fact by now that the real-money is offline & the scalability of any e-commerce platform is only when it triggers the quintessential O2O retro transition – This is particularly true in a case wherein it becomes necessary for TFC or the likes to generate more carried interest in order to be sustainable & the requisite scale of operation makes it pertinent that the investor & the investees are physically & comprehensively attended to – thus there exists a threat of the model progressively getting offline & hence get inconsequential.
  • CYBER-CONSUMERS ARE A DIFFERENT BREED: I always felt that the absence of
    scope for a visual prejudice or lack of pressure in conforming to imposed stereotypes makes the worldwide web a great leveller wherein most consumer demographics tend to blend and behave in a very similar fashion in being impulsive, adventurous, trend-junkie, impatient – meaning essentially everyone’s a teenager on Cyberia. 
    For a marketer this means that the average risk taking capacity of a consumer online is higher than when the same consumer is offline – but on the flip-side this also means that the cyber-consumer is seldom loyal & quick to get bored & that’s a definite & short-term threat.

OPPORTUNITIES - It’s eventually the potential of the Opportunity that prevails

  • The SEC endorsement qualifies the current TFC model as being the proof of concept for (eventual) handling of venture capital non-conventionally. As postulated above, there appears to be a lot to sort-out before the model can be scaled-up successfully, but the opportunity of defining a paradigm shift in VC is out there & I'm sure someone's already cobbling together a design to overcoming these road-blocks to scalability.
As Heraclitus said long ago, the only constant is change!