Category Archives: Research

Apple Watch is going to hurt Twitter the most. Law of unintended consequences

I have been reading the multiple blog posts on the Monday “Spring event” for the Apple watch.

Having worn the Microsoft band for a few months now, I think I now know what I need from a wearable. Note I did not say “watch”. I gave up wearing watches many years ago and switched to a phone for time. I really don’t have a need for a watch and so don’t many others, but they will still buy the Apple “watch”.

I used the fitbit for activity tracking, so I was not actively looking for a fitness tracker before I got the Microsoft band. Being an active user, I think that I want most is “Smart Notifications” from a wearable. That it will track some fitness is an added bonus.

With the very small form factor, it is absolutely important that the right amount of “relevant information” comes to the wearable.

If you just take an email and strip out a few things and send it to the wearable, that wont help.

What you really need is a summary of the relevant portion of the email and the ability to dismiss, delete or provide contextual reply – the relevant actions may differ on the notification itself, but the action should result in not having to pick up the phone for quick responses, which your watch can handle.

Lets look at email notifications first and email call to actions.

I am really surprised the the Microsoft band has no delete or archive actions on the emails received. Which is pretty awful actually. I am pretty sure 60% of all emails that I receive are to be deleted after reading immediately or archived. Of the remainder, I could guess that 50% of them would be able to get a simple answer – Thanks, OK, Sounds good, Approved, etc. I am surprised that does not exist on the Microsoft Band.

The notifications on the Band are not “smart”, which I suspect Apple will get right, because of 3rd party developers.

If you get a bunch of smart app developers to focus on the 8 things most folks do every day, on the phone – check news, weather, sports, finance, email, social networks,  text messages or understand who is calling, then you can pretty much drop the need to pick up your phone by 50 – 60% of the time.

So here are the 3 unintended consequences of a successful Apple Watch launch according to me.

1. The battery life on your iPhone will “increase” since you wont “pick it up and use it as often”. Since 30% (at the low-end) and 60% (at the high end) of the stuff you use the phone for now, you can get on the watch. The battery life wont increase really, but you will charge the iPhone a lot less than every day or twice a day for heavy users.

2. Breaking news alerts, weather, sports news alerts will be more contextual and smart. So you know “just in time” instead of having to scan all of Twitter or social networks to find out what’s hot.

3. Over the longer term (5-7 years) obesity will drop among the “rich who can afford Apple watches” even further. Having a fitness tracker on your wrist that also does other things motivates you to take action.

Which brings me to Twitter.

I think of Twitter a global platform for “what’s happening as it happens” even before the media organizations get to know about it. Twitter knows first. And Twitter’s job is then to let everyone else know.

Well if you can summarize what’s happening and send it via a notification in a smart way, to all those who have the watch, then you dont have as many people posting on Twitter, or retweeting, instead you will increase the # of “consumers of the Twitter feed” even more, reducing the “producers”.

The folks that are “marginal users” of Twitter will use it even less. Why? Largely because they are in it to get information, not share as much. As much as 80% of Twitter’s users consume it but post < 10 times a month.

So, I think Twitter will become less and less relevant to them and more a “protocol” which can easily replaced by other systems.

Another loser from the Apple watch will be those that depend on Advertising on the mobile (Facebook, Twitter, Google, etc).

When you have a watch and use your mobile phone a lot less, the need to view ads on your watch do not exist.

I would short Twitter big time (I should put my money where my mouth is) because I think the Apple watch will drive its value down. I might add that Twitter may go down on its own because of other issues, but the Watch adoption will drive its irrelevance even faster.

The Market cap, revenue & profit correlations of top technology companies

Fortune has a post on the “market cap” problem for Steve Ballmer. During the period from Jan 7th 2000 to Aug 23rd 2013 here is the change in market capitalization of the top technology companies.

1. Apple – 1836.30%

2. Amazon – 222.22%

3. Google – 703.44%

4. IBM – 70.7%

Those are the winners. Now for the ones that lost in market cap.

1. Cisco – (54.13%)

2. Intel – (46%)

3. ORCL (70.21%) and

Microsoft itself is (40.46%).

That only tells you half the story.

Lets look at revenues:

1. Apple – 1861.3% increase

2. Amazon – 12118% increase

3. Google – 55389% increase

4. IBM – 18.2% increase

5. Cisco – 143.3% increase

6. Intel – 58.1% increase

7. Oracle – 266.4% increase

8. Microsoft – 222.9% increase

Here is the table.

 Profit Growth % 2000 – 2013 2000 Revenue 20013 Revenue Revenue Growth % Stock price %
Apple  3046% 7.98 B 156.51 B 1861.3 1836.30%
Google  736000% 19 m 55.39 B 55389.0 703.44%
Amazon  2948% 573.89 m 61.09 B 12118.0 222.22%
IBM  46% 88.4 B 104.5 B 18.2 70.70%
Microsoft  (45%) 22.9 73.73 B 221.9 -40.46%
Intel  284% 33.73 B 53.34 B 58.1 -46%
Cisco  73% 18.93 B 46.06 B 143.3 -54.14%
Oracle  (4%) 10.13 B 37.12 B 266.4 -70.21%

What’s the story? The revenue increase for Apple has been excellently rewarded, Google and Amazon have also been well rewarded but they have done better and been rewarded less. No clue on why IBM stock has done well despite the lower growth in revenues compared to everyone else.

Where is analytics headed in 2020? An insight gathered from 25 top #startups

The most amazing part of my job is that I get to learn from the smartest entrepreneurs in the world. I cant think of too many people who get a chance to talk to 3 entrepreneurs via video conference in California at 8 am, 2 startup founders from Singapore at 1030, have lunch with 4 amazing big data analytics company promoters in Bangalore and then wrap up the night with a conference call at 830 pm featuring a recently funded analytics company in Boston.

Most VC’s get a local perspective, Silicon Valley, Tel Aviv, Bangalore, or Beijing. I get pitched from all over the world. Most investors in the valley will tell you the best and brightest come to the valley, but I believe there’s a big shift happening. More on that later.

I wanted to share one very insightful thing I learned after 25+ detailed (over 1-2 hour) briefings with entrepreneurs who are all innovating in the analytics space.

The future of analytics is in offerings based on derived insights.

I just gathered this insight, so let me explain.

Historically the analytics space was filled with services companies. In fact  consultants would take loads of data and gather insights to help their clients with their business objectives. The best known analytics companies that dont call themselves analytics companies are Mckinsey, Bain and other management consultants. Then companies like MuSigma and others decided to “offshore” this insights service. The problem with this type of offshore services business is obvious – low margins (net of 20% and since they are people intensive, they dont scale as fast).

The purveyors of the software model of analytics are those that provided a SaaS product – names such as Cognos, Business Objects etc. Companies like Kaggle crowdsourced your analytics and there are hundreds of companies providing SaaS analytics, such as GoodData, Insights Squared, etc. The problem with this type of business is that most of these software products are “generic” hyper cubes and data warehouse / data mart models. Their margins are better than services, but still nowhere near the 80% gross margins that some industries command.

Since we all know that software is eating the world, many companies in industries such insurance, banking, finance, manufacturing are all facing a threat from new age software companies, who are re-imaging the businesses.

The next generation of analytics companies are those that take the insights gathered and create an offering in that specific area so they can benefit from the insights, instead of providing those insights to others in the industry who make more money from it.

Let me take a simple example. Global Analytics just raised $30 Million. They are an analytics company. They used to provide their insights to financial institutions by way of giving them “leads”. These leads were those customers who were worth extending credit to. An average lead in this case cost their client $30 – $100 (depending on quality).

While that in itself was a big and large market, the larger market is to extend the banking facility themselves, which means with their analytics and insights can directly offer short term cash loans to those that their analytics deems are the best. The average customer in this case will make them $500 – $5000 (depending on the size of the loan). They did this via their own offering Zebit.

Now, most founders with a background in software will say “Wait a second. what business are we in? Software or Financial Services”? That’s a good valid question.

But when you get into the “Financial Services” business there’s loads of things you can re-imagine and redo the right way with a “software frame of mind” as opposed to being a “financial services insider”.

Huge difference in revenue and margins.

That’s the future of analytics.

Using the insight gathered from the analytics to offer a product / service direct to customers and not selling the insight or analysis to existing players.

Let me give you some more examples.

Lets say you are foursquare. You have analytics and insights into where people check in, where they go, what their patterns are with respect to travel.

Would you rather sell this treasure trove of data to marketers (and face a bunch of privacy issues) or would you create an offering based on those insights yourself?

The value to a museum of information that a potential customer is near their location is possibly $2.5  (that’s quite high I imagine if the tickets are $25).

Instead if foursquare offered a virtual museum tour or a personal crowdsourced guide to the museum, then they could sell that for $10 and have 40% margin on that offering.

Imagine if you had driving habits data about car owners – how they drove, what time, how fast, how safe, etc.

Instead of selling the “best driver” data as a lead to the insurance companies, who might pay you $100 – $200 per lead, you could create your own insurance offering based on miles traveled, safety of the drive etc., changing the long standing model of one-size-fits-all car insurance.

There are lots of examples that entrepreneurs are dreaming up these days and the most audacious ones I am talking to want to upend large established industries. It is both exciting and scary at the same time.

That’s exciting. Software will truly eat the world.

The age of “speed gauging”: how entrepreneurs are changing cognitive decision making

I have been on a long road trip to meet investors and entrepreneurs abroad including, Sri Lanka, the US and Switzerland (besides many in India) over the last month. The schedule does not get any better for the next few weeks, so I am very disappointed that I am not able to write as much as I would like, but nonetheless, this is an important point that’s been brewing in my mind for the last few weeks.

Entrepreneurs the world over are changing one very important aspect of decision making – the pace and speed of it.

I spoke to over 135 investors in 15 min to 1 hour conversations (some in a group of 5-8 over dinner) over the last month to figure out that investors the world over are now under immense pressure to make decisions quickly. That was not the case a few years ago.

(P.S. I did read the PG piece on startup trends, so if he’s asking investors to move even more quickly than they are, he’s asking for a LOT, which I suspect most individuals are not ready to sign up for).

A few years ago a typical angel investor (individual, investing their own money) took 1-3 meetings and a month to make a decision to invest in a company. A venture capital investor (professional, investing other people’s money) would take longer, 3-5 meetings and at least 2 months. Then the legal paperwork and negotiations began post the “verbal commitment”.

Now it is not unusual to hear investors in the US taking 1 meeting and 60 minutes to give a verbal commitment and 15 days to funding. In India, that number is changing to 3 meetings and 45 days to funding.

Most investors have 3-5 top criteria and a subset of 5-7 sub criteria for every opportunity they evaluate. The criteria is usually entrepreneur, market, product, traction, exit potential etc. The sub criteria for market, as an example might be a) Size b) Speed of adoption c) Competitive landscape d) Pace of change in that market etc.

I am very intrigued by the sub criteria for entrepreneurs. Since I operate at the very earliest of early stages, putting money or resources when there’s just an idea, with very little or no traction, it becomes absolutely important to make sure you back the right folks.

Since I am on the plane a lot and have a new kindle I get to read a lot as well. I have been reading these books and research pieces to understand how to be a better judge of people when time is limited and the stakes are high.

a. How to read a person like a book

b. Cognitive decision making – a mathematical model

c. Thinking fast and slow

I have built a 21 criteria list for evaluating people quickly (well, quickly compared to the fact that I was not doing it at all before) and I am trying to figure out over the next year, which criteria matter and which ones dont.

Before you think this is too many criteria, let me tell you that most sophisticated investors have mentioned to me that they use between 35 and 50 verifiable and “soft” criteria” and keep tweaking their top 5. Some of these criteria can be a simple yes or no and others require you to ask specific questions. The most cultured investors, who bet lots of money have a cognitive sense of evaluating every word spoken by the entrepreneur and putting them into buckets while evaluating if the criteria they are looking for are met or not.

I am not ready to reveal the criteria since people will game the system, but I am now able to process those better. My evaluation takes now about 20-30 minutes to process each individual after I have a chance to meet them for 30 minutes. Usually I do this when I have some downtime – during commute, running, etc.

The most amazing revelation to me personally has been that nearly 30-40% of my “gut instinct” on people dont match my criteria. I used to pride my people selection based on gut feel a lot more before. Let me give you an example.

I met a really smart entrepreneur in Sri Lanka. who had thoughtful answers to nearly 7-8 very difficult questions that I had, and was articulate, concise and honest. When I went back to my evaluation checklist (which I have documented on my phone), I found that I had overlooked a few important questions and decided to talk to him the next day to ask him more questions. He stumbled on them all. Then I realized he had been asked by many folks the same 7-8 questions that I asked before, so he answered them with aplomb, but questions which he had not encountered before flustered him immensely. I dont have a problem with people not having answers to questions, but he seemed genuinely confused.

I think this field of rapid cognitive evaluation is going to see a lot more research and work being done.

Startup idea: Product attribute database

There are over a million online retailers in the US alone and over 2.5 Million worldwide. Many are in categories that are large and well defined (apparel, electronics, books, etc). If you are a online buyer one of the many things you want to do is to research a product well – understand the features, options and compare it to other similar products.

These are defined by what I call product attributes.

Comparisons & reviews are largely subjective and prone to long tirades and endless sentences without getting to the point. Here’s an example. Notice that current attributes that are already stored by Yelp include time the restaurant is open, expected attire, etc.

Those are some of the things I’d like to know.

A large number of things I’d like to know are not really comparable.

They are mentioned in the 88 reviews provided by end users. Taste of the food, visual appeal of the food, softness of the bread.

Reviews that are unstructured are a pain – to sort, filter, compare and review.

There are many who claim that the product attributes for products such as cameras and mobile phones are fairly complete and those are problems already solved.

I think that’s broken thinking.

If you look at how people search for cameras, many (not all) “lay people” dont search for HD pixel density, dual core Snapdragon processors etc.

They search for “how to take good pictures in the dark with your <favorite phone>” or “how to record a live band in <favorite phone> without the background noise”.

The attributes that customers want are those they use the product for. Unlike the specifications and features that manufacturers (or producers / service providers) build them with.

I think if you build a product to classify the attributes that matter for every product (start small and build by category) with a combination of technology and crowd sourcing (or any other mechanism), you will build a valuable company. 

Not to mention that its highly likely that Google, Yelp, Microsoft or others will buy you.

Insights into the anatomy of the Indian entrepreneur – Work-hobby and Work-life balance

Friends at Scibler came to me the other day to tell me about their customer development efforts. This is by far the one team I have encountered with the highest IQ across the board and the commitment to learning about their customers *while* they develop their product. Their rigor, analysis, consistency and dedication to understanding their target customer, the relevant messaging and positioning before launch is unparalleled among Indian startups.

They found 3 personas of people who would be their customers – Work-work, Work-hobby and Work-life.

The Work-work persona is a rarity anywhere in the world, but more so in India. Among those who work for a big company or at a government agency, this person is an absolute “blue moon“. This kind of person loves their work. They live, breath, eat, sleep their work. From when they were kids they dreamed about doing something in the area of their work. I find few Indian entrepreneurs in this bucket as well, but they are as rare in India as they are in the US.

The Work-hobby persona is someone that does their “day job” to keep the lights on. This is a finance person who does accounting at a large company to earn 2,000,000 (20L or $40K) per year to maintain her EMI, drive a foreign import to work and send her kids to a “good school”. But the passion, desire and fun is Bharatanatyam. I actually know a person who does this exact same thing. She devotes her waking hours outside of work to Bharatanatyam. She’s also a realist and knows that it wont put the food on the table in India. So she continues to slave away at the large company, doing mindless work just so she can make enough money or save enough to pursue her hobby full time.

The Work-life persona is someone that has a job, but he has a life as well. Meaning, he enjoys food, friends, art, culture, movies, books, music, and a whole host of endless options that “living” gives you. He’s not committed to the one “hobby” or is not passionate about that “one thing”. He’s yet to find that one thing that matters to him the most. If you ask him about the one hobby, he’ll likely say “cricket”, “family”, “kids”, “shopping” or “sleeping”. He is not too particular about the type of work as long as it gives him enough money to “live”.

I often meet all 3 of these types of folks becoming entrepreneurs. I have been known to go on record stating that very few of the work-life or the work-hobby will actually succeed. In fact if they do, I’d consider that an exception. For an entrepreneur, work and their startup’s work in particular has to be the thing they breath, dream, eat and sleep.

As an entrepreneur if you are not doing something you like, have a passion for and enjoy, I’d highly recommend you dont do it. You will likely be in two minds at the first obstacle and trust me there are many obstacles for startup entrepreneurs in India.

The big difference between Indian entrepreneurs I meet and those I meet in the valley is that most work-hobby folks in the US end up making their hobby their work. So they also become work-work personas.

They can do this and succeed since there is a market for unique, new, interesting hobby “stuff” given how rich the nation is and how advanced their markets are.

In India the best you can do if you want to make your hobby a big part of your life is to make it  a “side bijiness“. I meet at least 20-30% of employees at a large or small company in India, having a side-bijiness.

The question I get asked by entrepreneurs a lot is what persona type should I hire?

I see most entrepreneurs looking to hire that elusive work-work persona. There are so many Indian entrepreneurs, who claim to have a culture that attracts the work-work persona, and those folks that are passionate employees. I hate to tell them they are being fooled and really if I talked to their employees, they’d tell me they’d rather start their own company, but dont have the risk profile to do so.

Here’s the real truth.

The work-work folks will not be working for you in India. They would rather be entrepreneurs themselves, since they live their work.

So the best you can do as an entrepreneurs is to hire a work-hobby or work-life persona. I’d highly recommend you dont get frustrated if they dont give you a 100%, because really their mind is elsewhere.

As long as they give you what they commit to, be happy, move on.

Above all be a force of good.

A discussion with Rajan Anandan on #startup trends and the 2020 outlook

Prolific angel investor, MD of Google India and all around nice guy, Rajan Anandan was at the accelerator yesterday to meet our startups and other investors. He mentioned a few very interesting stats and trends that he gets to view at a macro level from his vantage point.

Along with Sandeep Singhal and Aarti Kapoor we had a chance to talk about key trends that will affect startups in India over lunch.

  1.  Android is growing very rapidly in India and smartphone growth has hit an inflection point (across all brands). The estimate for Indian smartphone growth is there will be 40+ Million new smartphones (of all types) overall this year sold and that compares to an existing base of 25 Million smart phones. So, 65 Million smartphones out of a total of 600 Million unique phone users in India. By 2020, over 350 Million phones will be smartphones in India and most of them will be connected (Compared to only 25M connected smartphones in 2012).
  2. Large brands (not digital companies like eCommerce and others) are now beginning to bring their brand campaigns online and digital is complementing TV and print in a significant way. Over the next 3 years brand spending will move to digital in a meaningful way.
  3. SMB spend online accounts for a small 10% of advertising spend online, but is growing dramatically. Given that some estimates put the # of SMB in India to be 45 Million, even 20-30% of them going online in the next 7 years is a dramatic increase in # of SMB  websites in India.
  4. Video will be a key driver of brand advertising in India. While search is a very powerful performance medium, YouTube has grown by leaps and bounds in India and is also strong growth engine.

What does this mean for startups?

  1. Companies focused on getting SMB’s online with a simple and easy to use product will do well he said.
  2. Since the number of English speaking Indians is much smaller than Indic languages, indic language focused startups will have a very bright future
  3. He also was bullish on the Indian eCommerce market, given that FDI in retail will be addressed at some point of time. Companies that have the wherewithal to last the next few years and grow profitably will be ripe for acquisition in a few years.