Archive for March, 2013


Meet the Investors of Social Networks and Social Media

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Which VC invested the most frequently in Silicon Valley Social Networks? Surprise! They’re from NY! This is part of my continue industry analysis of the changing digital space (see all posts tagged VC), but probing which investors are most active –and are bellwethers for finding future growth companies.


NY Union Square Ventures Invested Most Frequently in Consumer Social Networks

Ever wonder who’s behind the backing of some of the fastest growing technology companies? To find out, I created tables and collected public data to list out the specific investors of each of the major social networks, and social media sites, and conducted frequency analysis of the investors to find out. This is part of my continued coverage of investors in the social business space, read the rest of my posts, analysis, and insights to this important group in our industry. One caveat, I’m not a financial analyst, I’m an industry analyst, and this data shouldn’t be considered for investment purposes.

Financial investment data of these social networking companies seems like it’s easy to get, but it’s very unstructured.    The data was all over the web, it was hard to find a single repository of information, common sources were press releases, wikipedia, CrunchBase, and corporate web pages.  It’s difficult to tell the specific amount each VC put into a shared investment round, even probing through the S-1 filings would not yield the specifics of each investor.

There was plenty of information about how much funding each startup received, but it wasn’t broken down by VC group.   This analysis is based of the public available data on investment funding of the following consumer social networks: Facebook, Groupon, Foursquare, Gowalla, Twitter, Zynga, LivingSocial, LinkedIn, Branch, Pinterest, Digg, Reddit, Instagram, Tumblr, Yelp, WordPress (Automattic), and Snapchat. Of these players, only a few had public available data that they’ve been funded. Then, we segmented the investments by individual round, then looked for pattern analysis on which VC firm had invested the most frequently.  Here’s the findings:

Variations on Investments Segments VC Strategies

  • Early Stage Funding Modest. Research found there were over 120 distinct investors, which includes about 50 individual investors or angels.  Among them, most investment rounds in A-X had multiple investors in each round.  A handful of angel and seed rounds had individual investors.   Seed round amount across the 17 startups was a mere $3m, yet the sum of the angel rounds grew to $863m, a big chunk of that amount is Reid Hoffmans multi million dollar investment into Zynga, which in some categories can be considered to be as large as some C or D rounds.
  • Later Stage Funding Balloons. Across this category of 17 social networks, the largest rounds of funding were within C and D, each over 1 billion. A Rounds across these startups were a sum of $85m, followed by B Rounds of $620m, C Rounds of $1,2b, D Rounds $1,7b, then a tapering off as E of $452m F of $376m and G Rounds of $110m.  As usual the later rounds had institutional investors, banks, and larger VC firms.  The amorphous term “venture round” (a sum of $2.5b) in this space was often a late stage growth round, which, in my opinion, was used to bolster valuation before a startups material event.
  • NY Union Square Ventures Leads the Way, Frequency Wise.  While this doesn’t account for total size of investments, we found that NY based Union Square Ventures invested in many deals, and had up to 14 investments in social networks over the past years. Like most rounds, they were involved in multi-investor deals, and frequently was involved in majority of A and B rounds.   This investor, placed many investments a early A, then came back for B through C after they saw traction.

 


Data: Frequency of VC firms who invested in consumer social networks
1. Union Square Ventures invested in 14 distinct investments:
Partial investor in Foursquare, Angel Round ($1.35M)
Partial investor in Foursquare, B Round ($20M)
Partial investor in Foursquare, C Round ($50M)
Partial investor in Twitter, A Round ($5M)
Partial investor in Twitter, B Round ($15M)
Partial investor in Twitter, C Round ($35M)
Partial investor in Zynga, A Round ($10M)
Partial investor in Zynga, A Round ($5.03M)
Partial investor in Zynga, B Round ($25M)
Partial investor in Tumblr, A Round ($750K)
Partial investor in Tumblr, B Round ($4.5M)
Partial investor in Tumblr, C Round ($5M)
Partial investor in Tumblr, D Round ($30M)
Partial investor in Tumblr, Venture Round ($85M)

2. Greylock Partners invested in 10 distinct investments
Partial investor in Facebook, B Round ($27.5M)
Partial investor in Groupon, D Round ($950M)
Partial investor in Gowalla, B Round ($8.29M)
Partial investor in LinkedIn, B Round ($10M)
Partial investor in LinkedIn, D Round ($53M)
Partial investor in Digg, A Round ($2.8M)
Partial investor in Digg, B Round ($8.5M)
Partial investor in Digg, C Round ($28.7M)
Partial investor in Instagram, B Round ($50M)
Partial investor in Tumblr, Venture Round ($85M)

3. Spark Capital invested in 9 distinct investments
Partial investor in Foursquare, C Round ($50M)
Partial investor in Twitter, B Round ($15M)
Partial investor in Twitter, C Round ($35M)
Partial investor in Twitter, D Round ($100M)
Partial investor in Tumblr, A Round ($750K)
Partial investor in Tumblr, B Round ($4.5M)
Partial investor in Tumblr, C Round ($5M)
Partial investor in Tumblr, D Round ($30M)
Partial investor in Tumblr, Venture Round ($85M)

4. Andreessen Horowitz invested in 8 distinct investments
Partial investor in Groupon, D Round ($950M)
Partial investor in Foursquare, B Round ($20M)
Partial investor in Foursquare, C Round ($50M)
Partial investor in Zynga, B Round ($15.2M)
Partial investor in Pinterest, B Round ($27M)
Partial investor in Pinterest, C Round ($100M)
Partial investor in Pinterest, D Round ($200M)
Partial investor in Instagram, Seed Round ($500K)

5. Bessemer Venture Partners invested in 8 distinct investments
Partial investor in LinkedIn, C Round ($12.8M)
Partial investor in LinkedIn, D Round ($53M)
Partial investor in LinkedIn, E Round ($22.7M)
Partial investor in Pinterest, A Round ($10M)
Partial investor in Pinterest, B Round ($27M)
Partial investor in Pinterest, C Round ($100M)
Partial investor in Pinterest, D Round ($200M)
Partial investor in Yelp, B Round ($5M)

6. SV Angel invested in 8 distinct investments
Partial investor in Facebook, B Round ($27.5M)
Partial investor in Foursquare, Angel Round ($1.35M)
Partial investor in Foursquare, B Round ($20M)
Partial investor in Gowalla, B Round ($8.29M)
Partial investor in Twitter, A Round ($5M)
Partial investor in Zynga, A Round ($10M)
Partial investor in Branch, Seed Round ($2M)
Partial investor in Digg, A Round ($2.8M)


Highlight: Digital Sky Technologies
While not a frequent investor, Russian based DST (I’ve had a dinner with Yuri to hear his strategy), when they did invest, it was large sums, and large amounts, their current investments include:
Lead investor of Facebook $200,000,000
Partial investor of Groupon $950,000,000
Partial  investor of Twitter Round  $400,000,000
Partial Investor of Zynga  $15,200,000


Concluding Remarks: At first, it’s surprising that the most frequent investor of silicon valley social networks is NY based Union Square ventures, but if you look at the pattern, they placed early bets, saw growth, then double and triple downed their investments. While frequency doesn’t account for total fund performance, it demonstrates the specific strategy some VC firms are playing. On the other hand, Russian Based DST places few bets, but when does, places them big and strong, after seeing growth. Both investment strategies are needed for emerging markets, both for initial catalyzing, then followed by acceleration, then increased in valuation. These patterns help to define the market maturity of a space, and you should use them to identify maturity stages in the markets in which you’re acting.

 

Social Networks by Revenue and Employees, Facebook Stands Above All

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Facebook HQ
Above: Facebook’s employees hard at work in the open working conditions

As an Industry Analyst my role is to identify trends, market forecasts and publish my findings in research reports. As such, Industry Analysts are different than Financial Analysts, which I’m not. While I cite where I’ve found the data in the comments, I can’t ascertain the accuracy of some of these sometimes 3rd party data sources. Note that the 2012 revenues are reported at a different time from the employee headcount was likely reported (Q1, 2013) The following is not to be considered for investment purposes.

With that caveat behind us, the following analysis takes into consideration the following consumer and public facing consumer social networks.  To see enterprise class and business social business software vendors, see my additional posts on VCs and investing. While many of these startups did not have public available data, I conduct a breakdown of these startups:

Automattic (WordPress), Branch, Digg, Facebook, Foursquare, Gowalla, Groupon, Instagram, LinkedIn, LivingSocial, Pinterest, Reddit, Snapchat, Tumblr, Twitter, Yelp, and Zynga.  Here’s what I found:

2012 Revenue Per Employee
Comparing both revenue per employee, rate, we found some amazing efficiencies, in particular with Facebook, Zynga, and WordPress. Here’s a data table comparing the 2012 reported revenue over employee headcount, found from online public data.

Company 2012 Reported Revenues Employees Revenue Per Employee
Facebook $5,089,000,000 4,619 $1,101,753
Zynga $1,281,267,000 2,916 $439,391
Twitter $350,000,000 900 $388,888
Automattic (WordPress) $45,000,000 150 $300,000
LinkedIn $972,309,000 3,458 $281,176
Groupon $2,330,000,000 10,000 $233,000
LivingSocial $536,000,000 4,500 $119,111
Yelp $137,600,000 1,214 $113,344
Tumblr $13,000,000 151 $86,092
Foursquare $2,000,000 100 $20,000
Nasdaq 100: See how other companies fare Varies Varies Varies

Update: There are many comments coming in about Foursquare revenue, please see comment section, there is additional insights on fundraising, and their focus.

Facebook shows highest revenue per employee
As reported by public available data, Automattic, Zynga, Twitter, and Facebook are all making over $300k per employee, with tech salaries often ranging in 100k range, with additional costs, 300k is a benchmark number for revenue per employee that I often look for. For comparison, Facebook is pushing over $1m per employee, compared to Google (50b revenue for 53k reported employees) is about the same, at $946k per employee.  While WordPress team has a modest $45m their internal revenue per employee stands toe to toe with the big dogs.

Overall industry revenues in billions of dollars
Of these consumer social network, only eight had publically available revenue run rates for 2013, on average, they’re forecasting $3.7b. In total, they’re estimating revenues of $8.3b.  Last year, in 2012, ten of the consumer social network sites had publicly available revenues, which amount of $10.7 billion global revenues, averaged across the ten is $1.7b.

Some social networks boast rapid climb in revenues
These startups saw a rapid climb in revenues, on average these companies started in 2006, just seven years ago.  There were some startling accelerations in revenues, with Facebook achieving $5b in revenues in 8 years, reported by 2012 public revenues. While under business model scrutiny and executive change-up, Groupon started in 2008 and achieved $2.3b in revenues in four years reported in 2012.  Even with this acceleration, Facebook is still far behind Google, which boasts revenues of $50b in 13 years since inception.

Not all startups created equal, some have modest revenues
Many companies are no where near the $1b annual mark, in fact, several players are not on a growth trajectory.  Of the lower revenue performers of the group includes: Foursquare, (a low yield of $2m in revenues 2012), Tumblr blogging software ($13m revenues in 2012), and long time Automattic, the makers of WordPress ($45m revenues in 2012).

Industry workforce, over 28k professionals
We can’t look at revenues alone, as these numbers don’t take costs into accounts, and found that LivingSocial employs 4,500, and surprisingly, Groupon employs a whopping 10,000 employees.  All together, across these 17 consumer social networks, they employed 28,177 professionals.   Obviously, this number doesn’t take into account 3rd party software like social media management systems (SMMS) and digital agencies, consultants, and of course, industry analyst firms.

Coming Soon: Who made returns? Meet the VCs and Investors of the Consumer Social Networks

 
(creative commons usage of image by Jakob Steinschaden)

Index of 2013 Disruptive Technologies

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Lightning city
Above: Like lightning, digital technologies jolt us with energy, the savvy will harness their energy, those who ignore, risk danger.
 

One Line Goal:  List disruptive technologies in 2013 on one page, with your help in the comments.

The number of technologies that are creating disruptions to companies and ecosystems are increasing at an alarming rate. Even though Altimeter rated the technologies that matter from last week’s SXSW, we see even more technologies emerging on the heels of mobile world congress, and CES. Expect even more technologies to emerge, radically altering the power shift of those who use these technologies to gain power over existing institutions.

In an attempt to track and then analyze these technologies, I’ll host the following “industry index”, where I list out examples, and the community adds to it in comments. I’ve done this multiple times over previous years, which often results in discrete research projects, market definition reports, and ratings and rankings of technology vendors.

I’ve kicked off the list with 10 technologies I see (with help from colleague Chris Silva), and at Altimeter, we’ve embarked on looking at research themes that impact business. With your help through the comments, we can keep this list updated for the year.

Index: 2013 Disruptive Technologies 

Disruptive Technology Description Example
Proximity Based Communications Devices that capture and analyze a set of sensors, providing intelligence based on context of people, place, and time in a detailed manner Mobile devices that use Indoor Positioning Systems IPS, NFC, RFID, mobile/social data, and Wifi networks can identify a consumer as they move through a showroom floor, down to the inch.
3D Printing Technology that empowers manufacturing of 3D objects and production anywhere. MakerBot, 3D systems, Affinia, Formlabs, Stratasys, and now replicator technology quickly scans, and copies a 3D item.
Collaborative Consumption Web and mobile apps that enable users to share, rent, borrow, and gift products and services with low friction transactions. AirBnb, Lyft, Uber, see my list of 200, and brand examples.
Gesture Based Interfaces Technology that senses movement, and causes digital systems to respond.  Computer interfaces and sensors will emerge causing  keyboards and mice to fade away. Leap, Kinnect and other technologies give path to a minority report experience.  Eye tracking software such as Tobbi and retina tracking software even in store emerge.
Augmented Reality A layer of information is placed on top of our reality plan, using digital glasses, empowering users to access  and transmit real time digital information. Google Glass (we’re on beta test list) will emerge and empower consumers to access Google interfaces as they traverse world.
Virtual Reality Unlike Augmented Reality, this is an immersive experience across many senses that digital replicates sight, sound, feel. Oculus Rift, Stanfords VR Lab (I’ve visited) provide immersive headsets that simulate a world
Quantified Self Also called wearable computing, these body reading sensors harvest, analyze, and provide insight to how our bodies are working. Body API, Nike Fuel Band, Nike+, Fitbit Garmin, Runkeeper, most mobile devices track our movements.
Quantified World, Internet of Things Technologies that capture data from around the world, cities, and nature to analyze and predict future patterns. Open data economy, data in mobile networks and mobile devices, telematics in cars, Nest thermostat, and thousands of other sensors are actively collecting data and altering our world. hat tip Michael Fraietta for IOT reference.
Digital Screen Experiences There are evolutions happening to digital screens, from flexible screens that can morph to anything, to digital output devices everywhere, and 3D technology. 4k resolution (higher res than HDTV), 3D TVs, flexible OLED screens
Power Everywhere Wireless power, solar power, and efficient power sources enable transportation, devices, enable more computing, sensing, and information spread. Powermat, Powertrekk, eCoupled provide wireless power
Drones and Automated Robots Technology is empowering for humans to man aerial drones to also create self-driving cars, warehouse robots, and more. The impacts to business, technology, government, privacy, and warfare are just starting to surface. ARDrone (I owned version 1), Google’s self driving car, and Amazon’s robot warehouse are just the start of the automated planet. Submission provided by Annalie Killian
Leave a comment below ? ?

Next Steps
These technologies will continue to arrive at an accelrated pace, while many corporations will not be able to react to these companies, there’s already a growing list of companies that are investing in physical innovation labs. I kicked off this list with 10 distinct technology sets, I look forward to reading your comments, and adding them to this list. I’ll be sure to credit those who participate.

Image Credits used with creative commons attribution by WVS

Altimeter’s Take: The Technologies That Matter from SXSW 2013

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By Chris Silva (who’s cross posted on his blog) and Jeremiah Owyang, Industry Analysts at Altimeter Group

Technologies are Emerging at an Increased Rate –Making Tracking Harder than Ever
SXSW is no longer about disruptive technologies being launched, instead, it’s a mainstream, it’s a mainsteam festival, actually) and digital leaders at today’s large corporations are already present, and you should be too.  In fact, the amount of data created about the topic had nearly double year over year.   Altimeter Group was well represented with 9 analysts or researchers at SxSWi this year, with a large team in Austin tracking what’s disruptive. Long known for launches of big names such as Twitter and Foursquare, as well as those with more hype that long-term staying power like Highlight – would be past its prime and recycling yesterday’s news.    If you weren’t able to attend, Altimeter has captured the salient highlights to showcase here:

Major Festival Themes

  • Hardware was king.  Hardware was king at an event long vaunted as a software and service launching ground, as evidenced by long lines for keynotes by Makerbot founder Bre Pettis, and Tesla, SpaceX founder Elon Musk who spent a lot of time devoted to how hardware-based endeavours like the recent Dragon rocket launch can disrupt an industry as complex as space and airline transportation.
  • Android curiosity is getting the better of early adopters. We had many conversations with current iPhone users who were openly discussing their desire to “try the other side” and get an Android device. Interestingly, this curiosity was based more on their gripes with iPhone than with specific Android features they sought. Further, most of the users we spoke with were not working for organizations that had adopted Google Apps for Enterprise and were hoping for tighter integration, they simply felt that, as one person put it, “it has to work better than this thing,” while shaking a shiny new iPhone 5 in the air. Granted, as screen sizes on Android devices continue to trend up, Samsung’s battery-wielding bike messengers may be a needed accessory to make it through a day of SXSW with our new Android handsets.
  • Software innovation continued, but mobile enterprise was a star. Software was not forgotten altogether, and from the festival that’s brought us many a fun app and game, this year the interest was in work. It seems the developers and mobile-centric brands are finally on-board the billion-dollar-bandwagon that is enterprise mobile development. Crowds lined up around the block to hear about mobile apps for major brands and to help people do their jobs. The era of Angry Birds millionaires while not quite over, is waning and the future is better tools for work that act like the toys we all enjoy on our mobiles. I’ve never been to a conference in a yoga studio – Austin’s Wanderlust Yoga played host to a packed Mobile Saturday event – no less one that’s populated by contorted bodies and over 100 degrees all due to the high demand.
  • Brands were at SXSW in force –followed by the vendors who seek to cater to them.   A number of brands were present, with sponsored pavilions or lounges including Samsung, Pepsi, Oreos, esurance, GE, American Airlines and Chevy.  While many early adopters criticized the infusion of large brands, this event has gone mainstream as every company is a digital company.  To cater to these brands, there were a number of enterprise software vendors present who had sessions, parties, lounges and concerts, including Oracle, Salesforce, IBM, PR agencies, and social software startups including Hootsuite, Sprinklr, Spredfast, Expion, UrbanAirship, MutualMobile, Dachis, Bazaarvoice, Gigya, ExactTarget, and on.

The Technologies That Matter from SXSW 2013

Technology Showcased Example Disruption What it Means
Our rating system includes: Watch, Experiment, Invest, Ignore. Who’s doing it today? Who will be impacted by this new technology if it comes to fruition. Insights and forecasts from our perspective.
Gesture Based Interfaces. (Leap motion, Microsoft Kinnect)Our Call: Experiment Leap Motion, a small, $79 USB device launching in May allows users to control their computers using hand gestures in mid air. It’s able to sense individual finger movements for fine manipulation of objects and apps on screen Leap controllers have the potential to change the way we interact with our computers and will launch for Mac OS and Windows, immediately making the tech available to a wider audiences than Microsoft’s Kinect. Being able to physically interact with the digital will disrupt many software markets. They key to this disruption taking hold is developer support. High levels of developer support, though, or a major buy in from a CE vendor like Samsung for TV use will make or break Leap. Expect to see heavy interest from software vendors in the creative space like Adobe; Corel was running live demos at the event.
3D Printing and Replicators (Makerbot, Factory.org)Our Call: Ignore A number of 3D printers were on display both in the demo hall, and including one brave entrepreneur who wore one on his neck at parties while it was successfully printing.  Among the vendors include MakerBot, Factory.org and others. Every brand involved in electronics, consumer package goods, transportation, packaging, supply chain and beyond will be impacted as consumers start to act like producers. Although Altimeter is investing in a demo unit to trial, this market is still very young.  We’ve identified business model opportunities for brand marketers, IP creators and owners of CAD diagrams, and supply chain of the composite and plastic materials needed to print. We believe a significant ecosystem is required before this is a ready market.
Proximity Based Communications, Near Field Communications (NFC, Samsung)Our Call: Invest Austin was awash in proximity based interaction points this week such as the Samsung tectiles; one can imagine that these same pieces of real estate were occupied by QR codes in years past, though the QR was also readily present this as well and not dead. NFC-enabled badges, stickers and posters were everywhere. NFC, due to the potential for quick, almost passive interaction with a mobile device means potential for higher uptake, the problem? Not many devices yet support it and fewer users know what it does. This is still education time. Companies with NFC-enabled products hawked them hard – see Samsung entry below – but users’ have yet to process the idea that, beyond payments, using NFC as an event control point or trigger can usher in instrumented environments. This is a key Android differentiator that we’d like to see more manufacturers support.
Collaborative Economy (Airbnb, Uber, Lyft, Sidecar)Our Call: Experiment Sidecar, Uber, and Lyft were in full force in Austin this year showing how shared resources can make getting around. A great deal of attendees we spoke to used AirBNB to find local rooms and houses to rent, as many Austinites skipped down to avoid the fray. Austin, traditionally short on taxis and public transit – not to mention woefully unprepared for 20k+ visitors, is a perfect market to breed affinity for these tools. These services are disruptors to the taxi service, and hotel and hospitality space. We’ll see many, many more of these services before the market shakes out. If transport, a leading industry in terms of getting to market early, is an indicator, users will have more and more need for distinct value props as many more “me too” services come online.   At SXSW Tesla made motions to offer their car as part of the Uber fleet.
Android’s Rise (Samsung, Google)Our Call: Invest The Samsung marketing machine was working overtime at SXSW attempting to show that a superior experience is possible to the still-ubiquitous iPhones many were carrying. This is good for Samsung and arguably drives Android awareness and interest.  Samsung demo’d their TV and Phones were interconnected. The awareness and interest in Android is great news for Google except that it comes from Samsung and, therefore, muddies the Android brand. That said, when users are shown extremely high levels of service – to wit, bike messengers delivering fresh batteries to Samsung device users – it’s hard to argue with this approach. The Samsung brand is beginning to define Android. This will be difficult for other brands playing in the Android ecosystem like HTC and even Google itself. We can see why there’s some concern from Mountain View around Samsung’s reign in Android. Not investing in Android as an app player or a hardware concern is no longer an option.
Space Exploration (SpaceX)Our Call: Ignore One of the highlights of the show was Elon Musk’s keynote where he demonstrated the privatization of space flight.  His famed quote resonated throughout the event: “I want to die on Mars, just not on impact” The obvious disruption is the impact to commercial airlines as well as government space programs.  That said, the technology is out of reach for all but a very few, though the promise is inspiring. The featured Grasshopper had VTOL capabilities meaning these space capable vehicles could land and depart from regular airports. While exciting, there’s little brands can do to interact with this trend, unless you’re a direct partner.
Augmented and Virtual Reality (Google Glass and Occulus Rift)Our Call: Watch We had many discussions about Google Glass and its implications with many individuals at SXSW. Main concern? How will it work and what will the etiquette be? Everyone from mobile device manufacturers to the purveyors of content on those devices will have to figure out how to play in the AR realm, we have not talked to anyone yet, either mobile developer, hardware player or content magnate that has a plan in mind. Too soon, they all say. We’re bullish on Google Glass and, while we’ve not yet received our Explorer units to demo, we think the market will be very receptive to technology that augments daily tasks and does it in a lightweight way. We see a market emerging for AR-centric content and interactions and brands should be ready to play.
MicroMedia Video (Vine, Memoto)Our Call: Experiment One emerging technology, that could grow is the Vine app that enables iPhone users to create 6 second video clips and share online.  To experience this yourself, see this real time gallery. We also saw a lot of discussion on the Memoto camera. Now that journalism has extended to all consumers and citizens, the simple addition of video can extend a rich media format to micro communications. Expect marketers to enable Vine related campaigns and marketing to condense from the 30 second spot, to the 6 second spot.  Then again people may simply adopt it as a way to “lazy tweet” as videos are so short. Twitter’s backing will certainly help
Quantified Self (Google Shoe, Nike)Our Call: Watch Last year Nike debuted FuelBand at SxSW, this year the technology was everywhere, including a show that quantified activity tracking and encouragement, including a hotly discussed show by Google Shoe that gave recommendations on your fitness activity. The traditional athletic manufacture industry is now inundated with tech companies getting involved.
To a lesser degree, health and fitness services and facilities now find that consumers are self-managing their health by using Google.
We think this market is real and growing, but, much like we see in the enterprise space, a lot of data is getting created and the use cases for that data are lagging behind; further, this is a series of walled gardens that don’t talk with one another yet, and require user-lock in.  Right now the data is dirty and not being aggregated into a way that can be digested.
Memes (Grumpy Cat, Harlem Shake, Meme Generator)Our Call: Ignore Grumpy Cat live appearance, a number of meme generators, popular from the website Reddit.  In particular, Edelman exec David Armano was prolific. Traditional marketing communication may not resonate in the high churn of digital conversations.Harlem Shake, pretty much over with this hip cool kid crowd. Our take?  Good riddance. Real time marketing, while a buzzword, requires modern communicators to morph, bend, and make topics of the moment their own through curation or creation.

Technologies on Life support
So what’s going away? We found that QR code will quickly be disrupted by NFC.  While we saw a few QR codes  present for marketing giveaways, we don’t believe this will persist year over year.  This year, wifi and cellular networks were able to stand the high demand of network, as a result the stunt to make homeless wifi spots, will not re-occur.  Location based apps, such as Highlight, Sonar, and Banjo were not the talk of the town, unlike the year before.

Next Steps
Altimeter identified a number of new technologies and tried to centralize in one comprehensive document.  We will continue to follow these technologies and reference them in our upcoming research of disruptive technologies, for additional coverage, we found the coverage from Verge, of the highest quality, see their 2013 greatest hits.  Companies who want to leverage and take advantage of these new technologies should do the following:

  1. Assemble teams to review the preceding list
  2. Weight, re-rank and rate the technologies as they may apply to your company
  3. Integrate into your existing roadmap for marketing, customer experience, and product roadmap
  4. Don’t try to do it all; many of these technologies will have a long “watch” period, some may never matter to your vertical. However, if you’re spending budget making office Harlem Shake videos, perhaps it’s time to re-allocate some budget to R&D on these new disruptors. Only, of course, if you’re interested in being ahead of what’s new.

We’d love to hear your point of view, what technologies and trends did you see that could matter, let’s start a dialog.

 

SXSW is a Festival –Not Just A Conference

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Crowd in the Hallways

Is SXSW for Business or just a Boondoggle? That’s the wrong question.
More than ever, I heard more folks debating if SXSW was good for business, or just a big party. Those who have attended the event for over a decade swear the soul has been stolen, and local Austin denizens often leave town and rent their place on AirBnb for a pretty penny, there’s no shortage of critics.

Looking closer, the components for a unique petri dish are present, including: 1) Big brands, 2) software vendors who are trying to sell to them, 3) device manufactures who are trying to reach influencers, 4) digerati and A-List tech celebs (which means they are D-List celebs in real life), 5) mainstream media celebs including actors, sports stars and more, and perhaps most importantly, 6) an engaged set of over aprox 25,000 interactive attendees ready to trial new technologies. (see demographics)

Here’s the arguments both for and against SXSW as a business event vs a boondoggle.

Business Goals: The Upsides and Downsides of SXSW

Use Cases Upsides Downsides
Unique Interactive Experience Concentrating over 25k people into a a few small blocks enables unique social and tech interactions The chances of you experiencing a unique breakthrough moment are rare, as the event is dispersed.
Quality Speakers and Panels The keynote speakers are grade A quality: Al Gore, Elon Musk, Wholefoods CEO, and others, deliver earth shaking insights. The crowd influenced panels are hit and miss. Most panelists are not professional speakers, and quality is a crap shoot.
Reach Influencers Many of the tech influencers are present, launching books, on stage, hosting parties, or milling about. They’re overwhelmed with requests and trying to get their attention to pitch them is very challenging.
Learn about new trends Historically, new technologies have gained grown here, from Twitter, to a rash of location based apps. We’ve not seen any major breakthroughts in the last few years, with the exception of Grumpy Cat memes.
Network and expand connections One of the best ways to quickly become immersed with the digital and interactive scene. For the first timer, this is a daunting festival, there’s too much to do, events are sold out, and there are many crowds and often bad weather.
Accessibility and Logistics The entire festival officially and unofficially spans the entire city, walking or pedicab rides enable quick access to most events. Yet due to headcount increase, the event is straining housing, and unless you book 9mos early, you’ll be paying an expensive travel and expenses bill.
Grow your business A strategic company can host an event, attract prospects, engage customers deeper. This requires significant planning, knowledge of the venue, budget to cut through clutter, and extensive influencer outreach.
Socialize and Have Fun This is a fantastic event to see live music, eat great Texmex, and drink from bottomless bar tabs and dance all night. Perception of being a party can spill over to workplace, and not everyone will uphold the privacy code to not sharing online.

The Right Question: What are your Goals at the Festival?
At Altimeter Group (I’m a partner/owner) we funded nearly half of our small company to attend, to both conduct research, network with clients, and have fun.  Staff members have specific goals, and will be reporting back the trends that they saw with an event report, and pass on business contacts to the right internal teams.  To me, it’s an investment well made as much of our industry descends into a single location for a few short days.

So to put this topic to rest, I’m going to assert that SXSW is a festival, which includes both business presentations, networking get togethers, and downright riotous all-night parties.  There’s so many options for any individual to partake in whether you’re a first timer, a corporate executive, a new media innovator, or just someone who’s interested in interactive technologies.

If you’re going to go, or are requesting your boss to attend, or are sending your staff, it’s important to set expectations with everyone around you.  SXSW isn’t a normal business conference, it’s a social activity.  Make it clear to those around you the opportunities of the event and the goals of your specific participation.

The Bottom Line: SXSW is what you make of it, but whatever you do, don’t call it a conference, it’s a festival.

(There’s a discussion brewing on my Facebook newsfeed about this post, Photo by Ahockley, used with attribution under creative commons license)

The Rhythm of The Software Industry Impacts Business Buyers

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ice age

Above Photo: Like analyzing the rings on a tree stump,  our natural environment gives us clues on where we’ve been, and where we’re going.

Have you ever noticed a set of patterns in the industry that come in sequence?  A series of startups getting funded, or acquired in rapid sequence?  Or perhaps, a series of software suites that offer you the chance to be a lighthouse early adopter client with all the bells and whistles at a low cost?  For the astute, you may be noticing a natural pattern that our industry goes through, every year. Just as our bodies, the planet, and weather go through natural rhythms and cycles, technology markets also have their own set of cadence and flows. While the below patterns aren’t universal, I’ve observed over the years the software space has it’s own natural rhythm, and I’d like to share my industry observations.

  • Winter VC vacations influences market moves.  Strangely, much of this stems from when VCs go on vacation. I’ve been spending more time on Sand Hill road, to understanding how their funding impacts the market years out.  VCs have competency in guiding a company, influencing direction, and brokering a sale. The second half of Dec is often the quiet period from Sand Hill as many a VC takes an extended vacation. During this time, deal flow comes to a crawl, and people spend time with their families.   It’s very difficult for a startup to quickly sell if their investors and board of directors are away.  Brands also prepare their budgets in winter, and ready for purchasing or renewing contracts, causing an influx of resources in software startups.
  • Spring spurs funding and acquisition talks.  In the second and third month of the year, we start to see some checks being written, and I saw two B rounds funded in my own space, and a handful of others. Often, the corp dev leads start the acquisition hunt in spring, and I witness many a CEO and CTO touring up and down highway 101 where the large blue chip software companies are located, in hopes of striking up partnerships or posturing for a sale. Teams from both sides often end up at local events, or even at meetings in my office, so I can see this particular cycle, first-hand.   Buyers of technology are in roll-out mode of their annual plans, and aligning software to their business goals including campaigns, new product launches, or system integration.
  • Summertime focuses on lighthouse customers. A lighthouse customers is an early adopter of a technology that a tech vendor will want to feature in marketing efforts, conferences, and as a customer reference during sales cycles. While last year had a rash of M&A in 2012, we should expect more acquisitions to occur around summer, so the large blue chip software companies can complete their suites, and onboard lighthouse customers. For companies that made mass acquisitions last year, they’re often tearing down the software and rebuilding it in the native software stack, they also onboard lighthouse customers.  This is an opportunity for passion brands to cut deals with software vendors at lower cost, but expect to be amplified and used as a customer testimonial in Fall.
  • Fall vendor conference season fosters solution selling. Solution selling is the practice of combining multiple pieces of software, services, and strategy to offer increased value-add to buyers.   These solution messages are the primary banner being waved as the large software vendors initiate their conferences. Often these conferences feature the newly on boarded lighthouse customers and made their acquisitions they prepare for the culmination event which is to tell a solution-based story on stage at their own conferences. The lighthouse customers from the prior bullet can use this as an opportunity for low-cost marketing as the vendors want them to tell their story, or will reference the good work the customers have completed. Expect this above cycle to continue to repeat.

Buyers of Technology Must Watch Market Nuances. 
So there you have it, VC vacation schedule can actually influence how brands are featured on stage at a large conference in the fall. Buyers of technology must understand the rhythm of the space as it will impact the level of service they will receive and pricing of software and services.  It’s important that buyers also know the relationship of the investors of a vendor they choose as they help to indicate a pattern of a company seeking to go it alone to IPO, or a player seeking to be purchased by a larger player, forcing the brand to consider a suite of services that may not be compatible with their existing stack.  System integrators and digital agency shops must also follow these dance moves, as it will cause rifts in technology integration, which yield both pain, but business opportunities to integrate for brands at a cost.  Brands seeking low-cost marketing by leveraging a vendor to tell their story should cozy up to software suites right after an acquisition, in hopes of being featured on the main stage of the software vendor’s fall conference and webinar series throughout the year.

What patterns and cycles do you see in business that have greater ramifications to business? Leave a comment below, let’s have a dialog.

Thank you Lithium CMO Katy Keim for spurring me to write this.