The definition of VIRAL

I started to get suspicious when my 14 year old son volunteered to join my wife on her weekly visit to the grocery store.  Other than a grunt requesting more milk or peanut butter, he rarely responds to the offer, ‘Want anything at the grocery store?’, let alone an offer to join her on the trek.  Turns out that the Safeway parking lot was fertile ground and he wanted to hit the streets to do some Pokemon hunting.Pokemon

My suspicions continued the next morning when my older son explained how he was hanging out with some friends the night before, when the host of the get-together abruptly left with another friend because there was word of several animated characters roaming the ball fields near the local rec center.  In other words, he left a room full of people at his own house in order to be the first one down the street to capture some virtual varmints.

On July 6th, Nintendo released a mobile version of the 20 year old gaming classic Pokemon GO which adds an augmented reality spin allowing players to roam real-life neighborhoods in search of Pokemon game characters.  By July 8th, the game was already installed on more than 5 percent of Android devices in the US according to web analytics company SimilarWeb.  The game is now on more Android phones than the popular dating app Tinder and is passing Twitter as we speak.

And this is no kid’s game.  Since its release, shares of publicly traded Nintendo have soared and the company gained $7.5 billion or 25% in market capitalization in just two days.

Of course, this type of viral success also brings out predators.  There is word that a group of criminals in Missouri were apprehended trying to lure unsuspecting Pokemon hunters to an isolated location and then robbing them.  And researchers at Proofpoint found versions of the Pokemon GO program that included a remote access tool, or RAT, called Droidjack which can give an attacker full control over a victim’s phone.

It has yet to be determined if Nintendo or its partner Niantic will make any actual money from the game (it is a free download in the app store currently).  But in the meantime, happy hunting and as Sargeant Phil Esterhaus on Hills Street Blues used to say to open every show, ‘be careful out there!’

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Other cool stuff at CES

By now everyone has heard about the FFZero1 concept car from Farraday Future.

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But there were plenty of other exciting advances at CES that we may or may not be hearing about in the coming months and years.

There was the connected bed that will keep track of all your vitals and let you know if you had a good night’s sleep or not.

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One of my favorites was the automated window washer, in just 2 short years it can wash every window on the Empire State building.

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There were smart suits, another option to track your vital signs and smart belts that tell you when it’s time to put the fork down (no thank you).

 

Of course there were robots marching all over the convention center.

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Another smart garment – this warm-up jacket connects to your smartphone and if you put your run/bike course into the app, it will tell you when to turn left and right.

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Drones took up a large swath of real estate on the convention floor, but this was the only one claiming to carry a human passenger (at least in a couple of years).

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The smart home hit the mainstream, with every type of appliance available in a ‘smart’ version.  These washing machines were sleek, but I have yet to figure out why I need to pay a premium for bells & whistles that essentially do the same as the annoying buzzer that sounds when my laundry is done.

Old school tech was represented as well and according to the guy in this booth, spinning vinyl records is making a comeback.

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The price of 3D printing is moving to consumer levels.

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And of course 2016 is predicted to be the year of Virtual Reality ((VR).  This guy is playing a first person shooter game against a competitor and they both are ‘running’ around a virtual scene as they stalk each other and earn points.  They were working hard!

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Two of my all-time favorite NBA players were at CES filming their nightly NBA on TNT show and shilling products (not sure why, but it was cool to see Sir Charles and Shaq (and Kenny).

My favorite entry at CES was this contraption that will take a pile of clean clothes and fold & stack it in the appropriate pile in just 4-7 short hours, available at a store near you (in about 5 years).

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Once again CES was amazing with over 2 million square feet of exhibition space occupied by over 3,000 companies including close to 1,000 from China alone.  I hope to file a report again next year.

Livery in Las Vegas

For anyone who has been to CES in the past (or any big event in Vegas for that matter), getting around town is one of the biggest issues that you need to deal with (discounting the gambling, drinking and hookers of course).  Waiting in taxi lines becomes a regular part of the experience and you plan meetings and activities around the time it will take to get from Point A to Point B.

I was in Las Vegas last spring and spoke with several cab drivers and bellman about the car-sharing companies coming into Vegas and everyone said it would never happen due to the ‘alleged’ ownership of the cab companies by organized crime and their ‘alleged’ ties to local government.

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Well due to some good ol’ American lobbying and tax legislation, that all changed in September when Uber and Lyft officially launched in the Entertainment Capital of the World.

Which brings me back to my experience getting around Vegas for CES earlier this month.  I have always leaned towards Lyft over Uber for a variety of reasons:  support #2 in the market, sit in the frontseat, bottles of water, more laid back persona, etc.

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I was fascinated with the launch and acceptance of the car-sharing service in just 3 months and polled all of my drivers to learn about their respective back stories and employment experiences.  My drivers covered a variety of demographics:  Men/women, seniors, white/black/Hispanic, multi-generational Americans & recent immigrants, part-time and full-time drivers, Vegas natives and recent transplants.

All of my drivers except one worked with both Lyft and Uber-the one woman who did not said she was new to the role and was still waiting to get certified to be an Uber driver but planned to.  Two of my drivers were former cab drivers and were elated to become independent contractors in the new economy model.  One guy had a day job working for the local Transit Authority.  One of the former cab drivers had moved from Vegas to Miami to drive cabs there, but as soon as he heard about Uber/Lyft moving into Vegas he packed up and moved back.  One driver was a portrait photographer and another was a banquet server for events at the hotels.

One of my curiosities was driver preference between the two services.  Unlike other markets that I have traveled to and asked similar questions, every single driver said they liked Lyft better than Uber.  when I probed on the reasoning, the general consensus was that the User Interface (UI) was better for both driver and customer, especially with the recent upgrades rolled out in December by Lyft.  There was also agreement that the drivers preferred the clientele of Lyft over Uber.  When I pressed the 60+ year old African American driver who picked me up at the airport on his preference for Lyft customers his response was, “Uber users just seem to be more ghetto.”  And of course, there is the compensation, Lyft pays a larger percentage of the fare to the drivers and has a lower threshold to earn bonuses than Uber.

Uber has done a fantastic job leading the charge in disrupting an old world business (although I continue to question the company’s valuation but that is a blog for another time).  They have been first in almost every market they have attacked and have a sizable lead over Lyft in just about every one.  But Las Vegas, and my small sample size is a great example where the two competitors entered on equal footing and Lyft, the young upstart trying to keep up, may have come out of the gates on top.

12 Predictions for 2016: technology, start-ups and beyond

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It is always fun to review predictions from the previous year and see who who nailed it and who was smoking crack.  With that as my backdrop, I present the first annual FamilyJules predictions for 2016.  (Disclaimer–these thoughts are solely my own and do not reflect views of my employer).

  • The US economy has been ticking along at a slow and steady growth rate which will allow the Fed to make two additional 25 basis point interest rate hikes in 2016.
  • We will see significant investment in African entrepreneurs and will have a $100MM exit by at least one African company in 2016.
  • This is the year that the use of ingestible sensors and cameras will become more mainstream and insurers will start recognizing their value and paying for them in 2017.
  • The cannabis business will take off nationally and the stigma of investment will dissipate  as the opportunity to get in early with the purveyors of the ‘picks and shovels’ presents itself.
  • ID cards carrying all personal data (bank info, medical records, demographic data) will start to become standard operating procedure around the world, with the US finally joining the party in 2020.
  • A consumer drone will be the cause of a fatal small plane accident which will result in a knee-jerk regulatory reaction to this growing industry.
  • Virtual reality will finally reach a price point and use case that brings it to the masses for home entertainment.
  • Although it is a tool used by almost every white collar worker in the world, LinkedIn is still clunky when trying to use basic functions (ever try to reply with anything other than accept/reject to a stranger who has asked to connect with you?)  This year they will finally listen to user complaints and release a new and improved UI.
  • For the first time, we will see at least one incumbent taxi company in a mid-market city declare bankruptcy due to pressure from ride-sharing competition (I’m looking at you Orlando, Cincinnati, Austin, Denver and others).
  • Speaking of the ride-sharing industry, I predict that Lyft will merge with an international rival such as Didi Kuaidi in China or Ola in India to take on Uber for global dominance.
  • 2016 will be the year that e-commerce takes the next step in the maturation process with 2 or more of the independent fresh food delivery companies (Sprig, Bento, Munchery, SpoonRocket, HelloFresh, DoorDash, GrubHub, Eat Club, Plated, etc.) will merge .
  • And finally, no prediction would be complete without the mention of IPOs.  I believe there is a lot of pent-up demand among investors and unicorn Boards which will result in 2016 topping the 23 tech IPOs (per Renaissance Capital) in 2015 fairly easily .  Some likely candidates from the higher valuations club to file their S-1 are Dropbox and Airbnb while notable absences from the 2016 IPO list will be:  Uber, Snapchat, Pinterest & Palantir.

If you read this far, I appreciate it.  Please feel free to call me out on any of my predictions and I look forward to trying this again next year.

Happy new year!

Observations from Web Summit

It was nice to be back in Dublin for Web Summit earlier this month.  It felt like the city and F.ounders had finally worked out the kinks.  Unfortunately we start all over again in Lisbon next year, should be exciting indeed.

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Over 1000 companies showed off their wares at demo stations at the Summit.  Most were just a level up from two guys in a garage, but many really had legs and I expect good things in the years to come.

3D printing once again was well represented.  The technology seems to be maturing and yet I can’t get by the feeling that it’s primary value at this point is still making chess pieces and dolls, with the occasional customer using them to crank out models and prototypes of real components.  There are rumors of applications for life-saving devices but that may be a few years away still.

There were companies selling new-fangled pet supplies, online video tools, daily fantasy options, all kinds of IoT devices, personal marketing tools, electric hoverboards and of course cannabis delivery services.

Some of my favorites were:

Jaunt, not typical of the pre-A round crowd that predominated the attendees, Jaunt is at the forefront of the VR revolution and I expect to be hearing more from them in the near future.

Did you know that you can hire Philip Phillips or Neymar (Brazilian soccer phenom) for your kid’s birthday party or to tweet on your behalf?  It will cost you up to seven figures for the honor, companies like Ad.ly can make it happen.

Collaboration software is all the rage these days with the success of Slack as lead unicorn in the space.  A couple of my favorites at Web summit were Wrike and Trello.

Selfiepay is taking retina scans to the masses, offering their authentication solution to online and offline retailers.

Americans take 911 service for granted, especially if you are in the enviable position of never having to use it.  But did you know that much of the world does not have an ubiquitous system for emergency calls?  MUrgency is successfully bringing 911-like services to India.

Gold has lost its luster as the currency of choice for most transactions, but with the advent of bitcoin and the block chain, gold is coming back into vogue-at least in some small but influential circles.  Bitgold strives to be the easy-to-use platform for global gold transactions.

Paddy and company put on another great show with interesting speakers, random celebrities (author Dan Brown?), and cool technology.  Let’s hope that Lisbon can match the energy and joy that Dublin has provided over the years.

Who, Where, When & How much: Funding action in the Bay area

Approximately 14 months ago, I began tracking the daily funding activity in the 6 counties that make up the Bay area (San Francisco, San Mateo, Santa Clara, Contra Costa, Alameda & Marin).  The parameters are simple:  Any fundraising round of $10MM or greater reported in that geographic region was captured.  I wanted to share some observations from the data for the 12 month period June 2014 – May 2015.

There were 458 deals tracked in that timeframe.  It is likely that I missed a few (some stealthy companies and their investors chose to not make their transactions public and it is possible a couple slipped through the cracks of my sophisticated tracking process) but I believe this data is at least 95% accurate.

We have become accustomed to large deals of late and the data bears that out.  Of the 458 deals tracked, almost 10% (44) were in excess of $100MM led by the $1.2 billion raised by Uber.  Another 15% of the deals tracked (68) were between $50MM and $100MM.

Most people in the Silicon Valley ecosystem will readily admit (though some reluctantly) that the entrepreneurial action and resulting funding activity has moved decidedly north from San Jose and the surrounding communities to the city-San Francisco.  But there is still plenty of cash being dropped south of Route 92.  While 202 of the deals (44%) were signed by companies calling San Francisco home, including 29 of the $100MM+ variety, there were 126 transactions coming out of the south Bay’s version of the 5 towns-Palo Alto (43), Mountain View (32), Sunnyvale (18), Santa Clara (14) and San Jose (19).  Another notable HQ home was Redwood City with 26 deals over $10MM.

The number of deals over $10MM has accelerated over time as well.  during the tracking period, the highest number of deals occurred in April (54) and May (51) of 2015.  while this is clearly an indication of the market heating up further over time, I think it is also a function of VCs and entrepreneurs trying to sign on the dotted line before the start of the summer vacation season when things usually slow, even in Silicon Valley.  The next most active months in order were:  March (46), December (43), February (43) and October 2014 (36).  May and December were also the clubhouse leaders for total $’s in funding with each logging approximately $3.1 billion in total commitments to pre-IPO companies.  Next highest was March with $2.7 billion and February with $2.35 billion.  Let’s thank Thanksgiving for November coming in at the bottom in both categories-19 deals raised a total of only $654 million.

So who is writing these big checks.  Sequoia Capital participated in the most deals with 41.  That was followed closely by Andreesen-Horowitz doing 39 deals and the rest of the top 5 including Khosla Ventures at 34, and Kleiner Perkins and Accel tied for 4th by participating in 32 deals respectively.  Remember we are only tracking Bay area funding rounds in excess of $10MM.

It is difficult to do an apples-to-apples comparison of rounds of funding even from 2 years ago with the acceleration of investments these days (seed is the new A round, $20MM A rounds are not uncommon, etc.) but here is a brief breakdown based on reporting on the deals tracked.  Even though there is a general feeling that VC funding is in a barbell effect, with most deals happening at the seed/angel stage or at the late-stage/growth rounds, a surprising amount of activity is still occurring in the middle. 35% or 160 of the tracked deals were identified as B  rounds while C rounds represented a healthy 86 transactions (19%).  There were still 70 deals over $10MM classified as A rounds (very rare only a few years ago) and approximately 48 (11%) were identified as later than a D round.

I hope you found this compilation interesting or at least pulled out some anecdotal items for discussion around the water cooler.

*Special thanks to KPMG intern Misael Cortes for helping to aggregate and decipher the raw data.

Waiting for Fonzie

Waiting for Fonzie.

From the Desk of the Family Jules

The term Jumping the Shark can be traced back to the fifth season of the celebrated sitcom Happy Days when one of the main characters, Arthur Fonzarelli (Fonzie) played by Henry Winkler, proved his toughness by jumping on water skis over a shark in a cage while the 50’s era group of friends were visiting Los Angeles.

While it is true that the show continued on for another seven seasons after this fateful event, any Happy Days aficionado (I know you’re out there) will tell you that the scene with Fonzie jumping the shark was the beginning of the end for arguably one of the most popular shows in network TV history.

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The term jumping the shark now signifies the moment when something has crested, a bad decision was made, we took a wrong turn, etc.

Have private company valuations jumped the shark?  Let’s review some of the recent largesse garnered…

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