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Miovision, an Internet of things company, announced a $24 million ($30M CAD) funding round led by MacKinnon, Bennett & Co this week. The Ontario-based company says it plans to use the new capital to “expand its team and accelerate its vision of smart cities and cloud-based traffic management technology.

Miovision’s plan is to engineer the foundations of smart cities by modernizing transportation networks and bringing outdated city infrastructure into the 21st century

Miovision and 6 Companies Laying Down the Foundation for Smart City Solutions

At DataFox, we compile and curate lists of companies across sectors, regions, and industries (e.g., Companies Collecting data for Smarter Cities). Below are featured Miovision and 6 other private companies installing devices and creating methods to control traffic and make modern cities smarter  through video surveillance, high-tech hardware and Artificially Intelligent Software:

Miovision empowers transportation professionals, through data and infrastructure, to improve the transportation experience. With over 500 customers in 50 countries across the world, Miovision provides meaningful solutions to real challenges facing today’s traffic systems.

INRIX, Inc. offers real-time, historical, and predictive traffic information solutions. INRIX offers multiple information services, such as INRIX Connected Services, a suite of content services providing navigation OEMs and location-based service application developers with private label and go-to-market solutions for in-vehicle, PND, wireless phone, and other connected devices.

  • DataFox Score: 1059
  • Location: Kirkland, WA
  • Total Funding: $143 million
  • Recent Funding: $10 million in November 2014
  • Investors: Intel Capital

Quantenna delivers seamless multimedia video and data anywhere indoors and outdoors through ultra-high-performance 802.11ac and 802.11n Wi-Fi semiconductor solutions, establishing benchmarks for speed, range, efficiency and reliability.

Waze is a social traffic and navigation app using a community of drivers sharing real-time road info. By driving around with Waze open, users contribute traffic and other road data, and can share road reports on accidents, police traps, or any other hazards.

  • DataFox Score: 1061
  • Location: Palo Alto, CA
  • Total Funding: Acquired by Google for $996 million

Placemeter is a platform that senses and unlocks massive amounts of data about activity in physical places. Through the use of proprietary and crowdsourced sensors combined with large real-time data feeds and computer vision algorithms, Placemeter indexes the physical world in real time and make it accessible to users, businesses and cities.

SmartDrive is an innovator in fuel management and driver safety. SmartDrive gives fleets and drivers unprecedented driving performance insight and analysis, helping save fuel, expenses, and lives. SmartDrive's video analysis, predictive analytics and personalized performance program help fleets improve driving skills, lower operating costs and deliver significant ROI.

Sensorist is a Danish company designing and producing a range of small hardware devices collecting measurements about users' local environments. The data is collected in the cloud and can be visualized either in an App or on the web.

  • Location: Copenhagen, Hovedstaden DNK
  • Total Funding: Unknown
  • Recent Funding: Unknown in January 2013
  • Investors: SEED Capital

Quarter-Over-Quarter Funding

DataFox assists investors, analysts, and other users in discovering new trends through DataFox's visualization tools. Below is a graph of funding rounds by fiscal quarters for the 7 aforementioned companies. The Quarter-Over-Quarter Funding graph shows that there were multiple deals in Q3 2014, involving INRIX, Quantenna, and Placemeter for a total of $87.16 million.

Investor Co-Occurrence

DataFox assists investors, analysts, and other users in discovering new trends through DataFox's visualization tools. Below is a graph of investor co-occurrence between the aforementioned 7 companies that are indexing the physical environment. The investor co-occurrence graph shows that MacKinnon, Bennett participated in the $24 million funding round for Miovision, along with  Comerica Bank, Plaza Ventures, Renewal Funds and Investeco Capital

squawk box

DataFox Co-Founder and CEO Bastiaan Janmaat was on CNBC this week!

The Squawk Box crew asked about the applications of Big Data to the world of investing; and had some interesting questions about our scoring algorithms. The 3 minute video is embedded below - but can the most interesting point be summed up in a tweet?

DataFox Twitter

For context - Uber (datafox.co/uber) is the highest rated company in our database when it comes to the sharing economy. You can follow the Sharing Economy sector list that was discussed on the air (login required). You can sign up for your free 30-day trial here. Another option is tweeting @datafoxco and we'll send you some screenshots.

Here is the video:

Analysts, you can now cross "make use of Big Data" off the bucket list!

DataFox Twitter

DataFox Co-Founder and CEO Bastiaan Janmaat was invited onto Bloomberg TV last week to discusses the origin of DataFox and the application of big data to ranking private companies.

The segment, which originally aired on June 24th, was shortly after the venture capital firm Andreessen Horowitz announced a $90 million infusion of Series A capital in Tanium (datafox.co/tanium), a company that is revolutionizing the way the IT environment is managed, and more importantly; is enabling enterprises to respond - or prevent - cyber attacks in real-time.  For people who had never heard of Tanium prior to the funding announcement, and for others who are not too familiar with the Enterprise Systems Management space, it was a good opportunity to put our algorithms to work and demonstrate how DataFox can quickly illuminate a sector - with a live demo on the air. The video is about 5 minutes long and the demo is towards the end.

If you've only recently found out about DataFox, the Bloomberg segment provides a great overview for what we do and is well worth the watch.

Notes from the video you should have watched. —Brought to you by DataFox

Howard Lindzon is a serial entrepreneur, a hedge fund manager, and invested in over 50 early-stage startups through his angel fund, Social Leverage. He is best known as the co-founder of StockTwits, where he is now Chairman of the board after stepping down as CEO at the start of the year. In 2006 he created Wallstrip, a daily business satire news video podcast that was bought by CBS in 2007. He has also authored two books, The Wallstrip Edge and The StockTwits Edge, and blogs actively at howardlindzon.com.

If you’re interested in the markets, startups, Bitcoin, anything finance related, and you have a sense of humor, you should follow him @howardlindzon.

http://youtu.be/qhvHvPXopw8?t=1m14s

Episode #309 of This Week in Startups was published on November 28, 2012.

Hedge Fund Manager

5:00

Howard is still managing the original hedge fund he started in 1998. Back then it seemed like everybody was starting a hedge fund, now the asset class has a bad reputation. So what exactly is a hedge fund?

“A hedge fund is just a fancy word for a limited partnership that allows the manager (Howard) to do whatever he pleases, which is usually stated in a document, and Howard's document says Howard may change his mind a lot, so you are giving him your money and his job is to do well, and he gets paid 2% of the assets (which he has waived for the last 6 or 7 years) and 20% of the profits.”

It also means that you have friends who trust you immensely, your partners are wiring you money to do as you please. That’s the relationship with most hedge funds - not so much with the $4B mega-funds. At that level the GP-LP incentives can get misaligned. When managing $4 billion, all it takes is one good year to make $800 million (20% performance fee). After that the risk tolerance can disappear - you’re living off the 2% management fees. At the same time, if you do take risk and have a bad quarter (or if $AAPL is down 3 days in a row) the LPs can ask for their money back, which means you’ll earn less management fees. The multi-billion dollar funds end up being a really expensive way to preserve capital.

This is why the industry broke - it became about gathering assets, just like the mutual fund business which is dying towards ETFs, which will then die back towards individual companies, through AngelList and the Stock Market. It's a big circle.

Although the industry standard in venture capital is to charge 2 and 20 as well, the incentive to gather assets and collect the fee isn’t there because the funds are closed-end (no redemptions). The larger funds, most notably Andreessen Horowitz, are reinvesting the 2% management fee by hiring an increasing amount people on staff to help their portfolio companies. The investing partners (who share the carry) have actually been known to take a reduced salary when joining a16z, which aligns the monetary motivation towards the greater goal of helping build valuable businesses.

As a thought exercise, here is what a hypothetical 2% management fee comes out to for the 5 largest hedge funds in 2013:

 

Learn the Stock Market!

9:10

Jason asks if investing in stocks makes you a better entrepreneur? Howard believes that “Knowing the stock market is being an entrepreneur.” Buy a stock as soon as you get a little bit of money, the lessons that the market will teach you are profound. Back in the day it didn’t make sense to invest a mere $200 when your broker charged $35 in commission. Today, E*TRADE charges $7 per trade, and the market is getting even more efficient... Later this year a startup called Robinhood will be launching it’s commission-free trading platform. There’s a waiting list so claim your spot! Naturally, Howard is an investor...

I am amazed when I walk into business schools or talk to entrepreneurs that have never opened a brokerage account. 10 years ago taxi drivers had a brokerage account, now the smartest kids in the world don't want to buy a stock. It's a language that they need to learn, they are not thinking about making money. You have to start early. You need to read about this stuff and surround yourself with positive reinforcement. If you are a hard working person you are going to make money. Therefore one day take control of your money, don't hand it off to anybody.

The Markets Are Connected

10:50

This is a great time to learn the market. Howard tries to teach people around finance that all the markets are connected. If you are an angel investor and you want to raise money it's your job to understand the bond market, the stock market, and venture capital market. If you're trying to raise money as an entrepreneur; knowing how all the markets work will give you an edge, and will make you sound smarter when talking to investors.

You have to understand how everything is connected. That’s why the data on AngelList is so interesting, because the data on AngelList is now connected to Wall Street.

Tools like AngelList have only been around a few years, and people need to learn how to use them. Howard points out how investors thought OpenTable ($OPEN) was overvalued (in 2012) and whether they knew it or not, what they were really saying was that OpenTable is going to get disrupted. Howard was seeing lots of startups on AngelList working on yield-management for restaurants, meaning that if OpenTable didn’t buy a couple of them they really would be in danger of getting disrupted.

SalesForce ($CRM) is the opposite example. Marc Benioff will buy anyone who poses a threat and absorbs them into Salesforce. He is setting back innovation, but he is also owning the food chain. This is what Microsoft has been doing for 20 years...

Advice for entrepreneurs::
  • Understand how all the markets are connected
  • Learn to play a game, it will teach you social etiquette (golf)
  • Networking is critical

 

Wallstrip

35:00

Howard knew that if he started a company it would have to be for himself, and what he really wanted to do was make fun of CNBC and Wall Street. From that, Wallstrip was born, and people were loving it. In the first episode Lindsay Campbell is covering Apple, and Howard makes a special appearance to deliver a message to Steve Jobs.

 

http://youtu.be/wLhKw2uKUE8

 

Financial Tech

37:00

Howard is a strong advocate for financial tech, although the finance industry is resistant to innovation. Bloomberg has been charging $2,000 a month, Fox and CNBC don’t get charged for what they put on the air, and Twitter is filled with too much noise when it comes to stocks. So one day Howard calls (then) Twitter board member Fred Wilson and says, “Twitter.Finance.com - let's disrupt CNBC."

Twitter should have disrupted Bloomberg but had more important things to worry about (like not crashing). Google doesn't want to take on Bloomberg (they should). Yahoo Finance is better than Google Finance (that’s not saying much). Google Finance’s performance relative to Yahoo Finance on the day of the $TWTR IPO sums up the bunch.

You can't disrupt a commodity (Schwab). Silicon Valley is attacking Wall Street from the very wrong angle. Naval (AngelList) is attacking Wall Street from the very right angle.

Howard is also attacking Wall Street from the very right angle. StockTwits is a Twitter for stocks. It’s a place for people that only want to talk about stocks to share ideas and get real-time insights, curated in a way that cuts through the noise. But StockTwits wasn't always a company - it started as a feature!

StockTwits was formed out of a simple (yet brilliant) idea for organizing conversations about stocks on Twitter, putting a dollar sign before ticker symbols. The “cash tag” is now the universal way of adding financial context to an online conversation. When you tweet about $TSLA people will know you’re referring to the stock, rather than the inventor. Howard invented that.

Where our true value lies is that we have interesting data, we have interesting sentiment, we are building a brand that people trust, and trust is an important thing. They trust StockTwits to get a picture of what's going on in the market. We need to give the 99 percenters a snapshot that they trust.

“I am a big believe in the stock market - it’s one of the greatest things that capitalism has. It's crazy that people are not putting their money in the stock market anymore. There are great opportunities, and that's because people aren't learning. That's what StockTwits is about. We are a mentoring, education tool. If I want to learn from smart people, I want to learn from people who sit and talk about stocks all day. I want to learn the chatter, I want to learn the language. That's what StockTwits is. Tune in. Listen in. You don't have to say a thing. Sit there, curate, absorb.”  (41:17)

 

Cheap & Expensive

40:00

Howard is a momentum investor in the public market so he looks for stocks that are trading at or near their all time high - which is the opposite of what most people do. Although when investing in a startup, you have to buy cheap. With private companies it’s about ownership percentage, not the number of shares.

As an example: Howard could have invested $25,000 very early in Twitter at a $20 million valuation - but passed. At that price the round was considered very expensive for such a young company with no revenue. You have to start thinking about a $200 million exit to get a good return, and very few companies can get to that level. Twitter’s shares are now trading at a market cap of $32 billion. That said, Howard did back into quite a lot of shares when Twitter bought Summize (through an investment in BetaWorks) and TweetDeck (Howard was the first investor). When TweetDeck was acquired, Howard received a lot of Twitter shares because he invested at a $1 million valuation, which is why valuation is important.

In the stock market, cheap and expensive are the two most dangerous words. When investing in startups they are the two most important words.
  • “In the private market you need to invest cheap because you've got nothing, and your entrepreneur is gonna get punched in the face. Nobody knows what it's gonna be like so you have to invest cheap… Cheap matters a lot in the entrepreneur world.”
  • “In the public market it's about liquidity, and you have liquidity. You can change your mind every minute so who cares about cheap and expensive? Have a thesis, have some risk management, have an idea... You can go buy Facebook, but the good news is you can sell it tomorrow too. You can change your mind.”

 

Individual Investors

45:00

Most people don’t beat the market. The averages make sense. What makes sense for 99% of investors is to put in $100 to $500 a month into a well diversified pool of securities, and it’s important to be consistent. If you’re truly going to take the time to learn the market and used the tools that are available (like StockTwits), than invest with the mentality of making 80%! Why work so hard just to make 8%?

“I believe that an average investor, if they actually learn the language of this stuff, can really do this. I am not saying they need to invest in stocks. But by learning the language of the stock market you're going to learn the language of all the markets. Sentiment, mood, timing, networking, all those things.”

 

The Original Social Network

52:00

Bloomberg has such a dominant market share because investment professionals pay $2,000 a month to access it - not despite of it. It’s a way of curating all the people that ‘know’ what they’re doing, otherwise you wouldn’t pay that kind of money. It’s like a country club, and even if you wanted to leave, you wouldn’t. You want to be where all the smart people are, and everybody is on Bloomberg.

“Individuals should have these tools. You shouldn't have to pay $2,000 a month to get a snapshot. Bloomberg is just some nice packaging and good customer support, wrapped around a communications product. The reason Bloomberg works is: it's the original Facebook. Bloomberg is the best social network that was ever created.”

Surround Yourself With Smart People

53:30

Jason: The public is obsessed with the media.

Howard: I just don't watch TV and I don't watch the news. I am obsessed with smart people. I am obsessed with the crack of opening up my (Twitter) stream, and it being smart.

Jason: Whose smart? Bill Gurley?

Howard: Super smart, but you’re never gonna see him when you tune into Twitter.

Jason: I don't know if you saw him in CNBC...

Howard: Did they let him talk?

Jason: They let him talk and he just crushed them with his intelligence. They were just sitting there and didn't even know how to respond because they've never heard such intelligence on their program.

 

Startup World

59:40

  • Stop reading the news - your startup is not affected by the news

  • Reduce the friction that you can control (price, number of founders, cap table, good lawyer)

  • Startups are about going fast, work to succeed, and do it fast

  • Use the tools that are around you (Fred Wilson’s blog, This Week in Startups, Howard’s blog, etc.)

  • The world needs people to quickly dismiss ideas - it’s your job to just start polishing

  • Mobile is a wide open game, still very new, nobody has domain expertise (everyone figuring it out)

  • Be mindful of valuation, stop with the $8 million pre (what’s wrong with giving your investor a deal?

When I did StockTwits at a $600k valuation I didn't have to do that. Sometimes you give people a deal and it grows, it blossoms. Giving people a deal and not being greedy is very important.

 

Do you agree with Howard's viewpoints?

Are the markets interconnected?

Let him know!

What other videos do you think we should summarize? Tweet @DataFoxco or reach out to me directly @Nivo0o0.

Best,

Team DataFox

Notes from the video you should have watched. —Brought to you by DataFox

A Framework for Thinking About the Future

Fred Wilson is AVC. He’s also Managing Partner of Union Square Ventures (USV), and is an early investor in Twitter, Tumblr, Foursquare, Zynga, and recently joined the board at Coinbase - the leading Bitcoin wallet.

Fred was asked to speak at this year’s LeWeb conference about the types of technologies we are going to see in the next 10 years. He decided instead to talk about his framework for thinking about the future - which centers around the most important macro trends.

Fred talks about the 3 big megatrends:

  1. Networks
  2. Unbundling
  3. Smartphones

These megatrends are changing the way we interact with each other and within our society. They're also having an effect on how markets form, and the way businesses are structured. Fred highlights a couple of interesting examples for each megatrend, and also mentioned 4 interesting areas to watch: (1) bitcoin, (2) wellness, (3) data leakage, and (4) trust/identity.

http://youtu.be/R43OKYmGbhU?t=01s

"We don't think about technologies, we think about trends, we think about what's happening in society, what's happening with people, in terms of how people behave." "The technologies are important; but we don't like to invest in mobile, or big data, or machine learning. We think about those types of things, they matter to us, but we really think about things from a behavioral and a societal point of view."

Megatrend 1: Transition from Bureaucratic Hierarchies to Technology Driven Networks

(2:45)
We see bureaucratic hierarchies in government, in business, it's how the world has been organized for hundreds of years. In the Information Age, it’s not a particularly efficient way of doing things. We are now in the post-industrial world; where technology driven networks are replacing bureaucratic hierarchies.

Example 1: Twitter replacing the newspaper

  • “A newspaper has an army of reporters, reporting to a team of editors, who report to a publisher. They collect stories, the editors direct what stories are going to get reported, they get edited and eventually published. Then the paper needs to be printed and delivered.”
  • Very slow and bureaucratic approach to delivering the news - yet this was the dominant way news was produced for a long time
  • “With Twitter, all the sudden all of us are the reporters, the crowd is determining what news is most Important; by follower count, retweets, things like that -  which gets surfaced to the top and we get our news instantly, in a newsfeed, on our phone."

Example 2: YouTube democratizing the studio model

  • Video used to be produced in a very hierarchical structure with lots of decision making at level (very difficult to produce video content outside of that system
  • With YouTube, all of us are video creators, we publish the video, the crowd determines what's important, and quality rises to the top

Example 3: SoundCloud bypassing the record labels

  • Fred met the founders of SoundCloud at LeWeb 5 years ago, and USV invested in 2011
  • "In the SoundCloud model, everybody creates audio, everybody creates music, they post it to SoundCloud, you don't have to get signed by a record label, you just put your content up (which Lorde did a year ago), you get found by the crowd, and you become the most popular act in the world outside the traditional hierarchical system of radio and the music industry.”

It started with Media & Entertainment... But now we're now seeing technology driven networks replacing all kinds of industries.

  • Hotel Industry : Airbnb and Onefinestay (European
  • Creative Industries: Kickstarter and VHX are replacing the traditional Hollywood studio system (USV portfolio companies)
  • Learning : Codecademy and Duolingo (USV portfolio companies) both use a similar network model, where everybody teaches everybody, delivered on a phone/browser

Megatrend 2: The Unbundling of Everything

(8:10)

In the traditional world it was very expensive to package and deliver things to market, so products were bundled together... Technology is changing that. Everything is getting unbundled, and people are delivering more focused best of breed services. You can get everything a la carte (iTunes songs, Tesla, Amazon drones) The unbundling has more to do with how services are packaged up and taken to market, than with the way organizations are structured.

You used to buy one newspaper and get: world news, local news, sports, business, fine arts, classified ads - all in one package, you pay one price. Now with mobile and the internet, you get all of those services from different people, and they are better, because the people producing them are focusing on their area of expertise.

Example 1: Banking

Think of how expensive it is for a bank to open a new branch. Which is why everything is offered in one place: consumer loan, mortgage loan, credit card, small business loan, big business loan, working capital finance, etc. Entrepreneurs are taking these very profitable lending franchises away from the banks and delivering them in a technology driven model. This is happening very rapidly through the power of networks.

  • Lending Club - the leading peer-to-peer lending network for consumer finance
  • Funding Circle - the leading small business lending peer-to-peer platform
  • C2FO - a global collaborative exchange for working capital
  • Ox Money - a peer-to-peer lending company for the German market

Example 2: Education

The classic university model has been around for 600-700 years, but we no longer need to be confined by the walls of a classroom - with a professor up front. We don't need to build a library and fill it with books (we have eReaders now). The current university model is very expensive.

Even the research aspect is getting unbundled. USV has an investment in a company called Science Exchange, which uses a marketplace model to allow researchers all over the world to collaborate together on an open public network.

Find out more by starting your Free 30-Day DataFox Trial today.

Example 3: Entertainment

If ever there was an industry that mastered the art of bundling premier content with everything else you could never care to imagine, charge top dollar for a monthly subscription, and still squeeze in multiple 5-minute commercial breaks to a half hour segment - it’s the entertainment industry.

With Netflix, YouTube, Hulu, VHX, and others,  we can combine the entertainment products we want a la carte, and access it anytime, anywhere. Through AirPlay and Chromecast we can connect it to the big screen and control just how we want to receive it.

 

Megatrend 3: We’re All Connected, All the Time

(14:10)

Fred started things off by asking the audience a simple question:

“If you were forced to choose between your laptop/desktop computer and your smartphone, and you can only have one, which one would you choose?”

A quick poll, with a clear verdict. The smartphone. About 80% of the audience would choose their phone over their laptop or desktop computer.

"I raised my hand for the smartphone. If I had to choose it would be a no brainer for me, because I can do almost everything that I can do on my phone.”(short of writing code or writing a book - that would be very difficult)

“There are things that I can do on a phone, that I just cannot do on a desktop because of the sensors that are in the phone, the fact that it's location aware, and most importantly - because it's on me all the time.”

“In many parts of the world - particularly the developing world - this choice has already been made. They’ve leapfrogged the desktop/laptop world because they could never afford that world. And they can afford the cheap $99 or $49 unsubsidized Android smartphone. The world is adopting them at a very very rapid rate.”

“The reason the mobile smartphone trend is important is because we are all now nodes on a network, we are connected to each other all the time. Not just part of the time, but all the time, and that's really really important.”

Example 1: Ridesharing

  • Uber, Lyft, and Hailo (USV portfolio company)
  • Because we are a node on the network, and somebody driving a car is also a node on the network, we can instantly connect and be taken where we want to go
  • Although this may seem like a small change; it is profoundly impacting the world of transportation - not just the taxi and limousine businesses (impacting rental cars, delivery, logistics, etc.)
  • A really simple move, that in hindsight was kind of obvious, is changing the world we live in very rapidly

 Example 2: Payments

  • Square, Dwolla, Venmo, and other services that allow you to effectively have a wallet on your phone
  • Venmo and Dwolla in particular are peer-to-peer, so you can send money to anyone who has the app on their phone (Square recently introduced Square Cash, allowing you to send money to anyone with a debit card)
  • "It's peer-to-peer, it's a network, and it’s changing the world of payments dramatically."

 Example 3: Dating

  • Tinder (and a host of other location based dating/messaging apps)
  • "I haven't dated in 30 years so I don’t use Tinder, but everybody who is young in my life tells me it's a great way to meet people. It leverages location, it leverages photos - all the things that phones do so well, and it's a network. Everybody is connected to everybody on the network."

The Future

(18:00)

The 3 big megatrends: (1) networks, not hierarchies (2) everything unbundled, and (3) always being connected; make up USV's framework for looking at the future and for evaluating investments opportunities. Within this framework, here are 4 sectors that Fred finds particularly interesting:

(1) Money: Bitcoin as a Protocol

(18:26)

A lot will happen in the world of money because of Bitcoin. Not for it’s use cases as a currency, or to profit from volatile price fluctuations, and not for it’s attractive commodity-like characteristics (finite, limited built in inflation). The reason Bitcoin will have a profound effect is because at it’s core; Bitcoin is a protocol.

Bitcoin is the financial and transactional protocol for the internet.

  • "We have not had a layer of internet infrastructure that was global, that was distributed, that was not owned and operated and controlled by anybody.”
  • "What's most interesting about the Bitcoin protocol is that there is a ledger (called a block chain) which is global and peer-to-peer, it exists on every Bitcoin wallet that's out there, so every Bitcoin transaction clears publicly, in the block chain."
  • This is a technology based architecture that looks like TCP/IP, HTTP, SNTP, that entrepreneurs can and will build a tremendous amount of technology and services over the next 5 or 10 years, and we will now see money flow on the internet in the same way that content, images, and everything else that we have come to know happens on the internet

(2) Health & Wellness

(20:16)

Healthcare is a complicated industry in every part of the world - government is involved, heavily regulated,  expensive, and the situation is probably getting worse. Health and wellness is the opposite side of Healthcare. It’s what keeps you out of the Healthcare system in the first place - and it’s also right at the intersection of the 3 megatrends.

  • Some devices are already out there (RunKeeper, Nike Fuelband)
  • People are starting to wear devices that can report their vital signs to themselves and to others (doctors)
  • “We’re going to see much more of this coming very quickly. We will see genetics, we will see the biology of our own bodies become available on devices that we will wear; in many cases  even on our phone.”

By monitoring our health and wellness with these devices, we’ll be able to live for much longer

(3) Data Leakage

(22:50)

Ever since the Industrial Revolution we’ve been polluting the environment - it’s only recently that we're doing something about it.

  • “In the Information Revolution the pollution is data; it's the data exhaust, it's the data that leaks out, it's the data that's letting our government spy on us. It's the data that's letting Google and Facebook and other services spy on us when we don't want them to.”
  • "In many cases I am happy to have my government and Google and Facebook and others spy on me, but there are times when I would prefer that not to have happened, and we don't have control over that."
  • Very important to start getting control over our data leakage - both at the individual, and societal level

 (4) Trust & Identity

(24:05)

The tech industry has allowed Google, Facebook, and to some extent Twitter and Amazon, to be our identity service. We login to places all over the web using those services to authenticate ourselves. Although it may be convenient... What we’re essentially doing is giving those companies access to everything we do.

"There will be, I predict, a Bitcoin like service, a protocol, that's distributed and global, not controlled by anybody, that's architected like the internet, that will emerge and allow us to do the same thing in a manner that we control and it gives us control over our identity, trust, and data."

That’s the end of Fred’s talk from LeWeb 2013. Was this summary useful? What did you guys think? Let us know in the comments section and by tweeting @datafoxco!
Best,
Team DataFox

Notes from the video you should have watched. —Brought to you by DataFox

Elon Musk is an incredible entrepreneur. From a young age he believed there were 3 things that would most affect the future of humanity: (1) The Internet, (2) Sustainable Energy, and (3) Space Exploration. He went on to revolutionize every one of those industries. A serial entrepreneur in every sense of the word,  Elon has inspired a generation to take on the world’s biggest challenges. The success of Tesla, combined with SpaceX’s out of this world ambition launched Elon firmly into the public spotlight. Today, the smallest tweet from @elonmusk is reason for headlines.

We at DataFox believe in the great value of long form journalism, so today we are bringing you an intriguing PandoMonthly Fireside Chat with Elon Musk, who is co-founder/CEO of Tesla and SpaceX (where he is also Chief Designer), and Chairman of SolarCity. You can also call him Iron Man.

Elon talks about retiring on Mars and not resting until the majority of new cars are fully electric. In that context... a year old video is truly timeless. (PandoMonthly first published the video on 7/17/2012)

Billion Dollar Companies

In the history of the Silicon Valley only two people have started three companies worth over a billion dollars - Jim Clark (with Silicon Graphics, Netscape, and Healtheon - all in the same industry) and Elon Musk, who has arguably started four:

● PayPal (payments) one of the hardest industries to disrupt on the web ● Tesla (automotive) at the time American auto manufacturers are going bankrupt ● SpaceX (rockets) going to space, at a fraction of the cost ● Solar City (solar energy) largest solar utility in the world ○ Could have been named a co-founder, but decided against it ○ Co-founded by Lyndon and Peter Rive (Elon’s cousins)[/vccolumntext][vccolumntext]

The McLaren F1 Incident

Video Link: PandoMonthly

In 1999 Elon bought a one million dollar McLaren F1, which he used for his daily commute and trips between SF to LA. One day on Sand Hill Road, with Peter Thiel in passenger seat on their way to see (Sir) Michael Moritz at Sequoia, an incident happened.

● Elon to Sarah: “lets see how the story you tell compares to the reality, because the reality is pretty messed up" ● The Reality:

Peter to Elon: What can this do? Elon to Peter: Watch this. “I floored it and did a lane change on Sand Hill. The McLaren has no traction control, its massive power to the wheels. 640 horse power and it only weights a ton. It can break the wheels free at 80 mph... so the rear end broke free and it starts spinning. I was going straight, turned, and I remember seeing the cars coming towards me while I was going backward. Then we hit a 45 degree embankment on Sand Hill, which tossed the car in the air like a discus and it kept rotating with about 3 feet of air clearance according to witnesses. Then the car slammed down on the ground going the original direction." The car was not insured.

After PayPal

At a time that everyone thought the web is dead, a lot of people who worked at PayPal were very successful at starting web companies - now known as the PayPal Mafia. See this great interactive map from PandoDaily. Elon prefers to spend his time on industries that don’t see a lot of innovation, and with his share of the proceeds from PayPal’s sale to eBay he finally had the resources to do so.[/vccolumntext][vcrowinner][vccolumninner width="1/1"][vccolumntext]

  • Innovation is a byproduct of a lack of new entrants into an industry
  • High capital intensive industries don’t see a lot of new entrants (space, automotive)
  • Elon's proceeds from PayPal’s were about $180 million - here is how he spent them:
    • SpaceX: $100 million
    • Tesla: $70 million
    • Solar City: $10 million


  • At one point he had to borrow money for rent (2008)

SpaceX

The origin for SpaceX started from a conversation with Adeo Ressi, his college housemate and founder/CEO of The Founder Institute. Elon kept thinking that there would be a plan to send people to Mars, the obvious next step after the Moon, but space innovation basically peaked with the Apollo Program. So he decided to do something about it.

● Wanted to send a small greenhouse to Mars as a philanthropic mission, which would demonstrate: ○ The furthest a plant has ever traveled ○ The first life on Mars ○ "Money shot" of a green plant with a red background ○ Goal was to get people excited about Mars and increase NASA's budget

● Traveled to Russia 3 times to buy a couple of the largest ICBMs in the Russian fleet ○ Negotiated a deal... but decided to build the rocket himself ○ "It turns out that Russia is quite a Capitalist society" (implying they wanted too much money)

● Rockets are pretty much out of the comfort zone of most VCs ○ Didn't raise outside funding for SpaceX in the first 3 rounds ○ First questions investors ask are: (1) Tell us one of your prior successes in this field? and (2) What can we compare this to?

● Able to raise a round of funding after the 3rd launch (almost reached orbit) ○ Founders Fund deserves a lot of credit (Peter Thiel)

● The goal of SpaceX is to build the technology that will get people to Mars ○ Important to build a self-sustaining civilization on another planet ○ The Shuttle program was a big mistake (could only get to low earth orbit)

  • "The reason why we haven't advanced in space was that the cost of space transportation has become unaffordable."
  • "It's become more and more expensive to do less and less in space, and we really need to improve the technology of space transportation, so that's why I started SpaceX."

"Staring Into the Abyss" (2008)

2008 was the most difficult period in Elon’s life. It looked like all of his companies were about to die, SpaceX had its 3rd launch failure in a row, the Tesla financing round fell apart because of the financial crisis (hard to raise money for a startup car company when GM and Chrysler are going bankrupt), and he was going through a very public divorce.

● Needed to make a choice between SpaceX and Tesla ○ “It's like if you have 2 kids, do you spend all your money to maximize the probability of success of one, or do you try to keep both alive?” ○ Decided to allocate all of his remaining assets between SpaceX and Tesla ○ Very real possibility that both companies would still die, and his net-worth would be wiped to zero

● Tesla Financing ○ Committed all of his reserve capital to Tesla, and had to step in as the CEO ○ Closed the round in the last day on the last hour it was possible to do so (Christmas Eve 2008, 6pm) ○ Tesla was a few days away from running out of money and going bankrupt

The Importance of Tesla

Elon thought that the big car companies would start creating electric vehicles, and GM did, with the EV1. But when the federal tax credits changed less favorably, GM recalled all the EV1 and crushed them. That’s when he knew that it would have to be a startup that brought an electric car into the market.

  • "To what degree is Tesla serving as a catalyst for the advent of electric vehicles?"
  • At some point when most cars manufactured are electric, the catalytic value of Tesla would have been realized, and Elon would no longer need to run the company.

Update: GM is learning.

  • The goal of Tesla is to serve as a catalyst for the advent of electric vehicles.

Experience with VCs

Video Link: PandoMonthly

Elon’s advice for raising money from venture capitalists is to optimize for the quality of the investor, not for valuation.

● “If you have a choice between a lower valuation from someone that you really like, or higher valuation from someone you have even a slight question mark on, take the lower valuation” ○ "It's sort of like getting married, although maybe I am not good at that"

● Tesla Series C Round ○ Multiple competing bids - one from Kleiner Perkins, the other from Vantage Point ○ Kleiner offered a $50 million pre money valuation, Vantage Point offered $70 million ○ If John Doerr agreed to join the Tesla board they would have done it at $50 million, but John had too many obligations / another Kleiner partner wanted the deal

● Elon would only do the deal with Kleiner at the lower valuation if John Doerr joined the board ○ Reflecting on that decision, Elon admits that it was probably a mistake ○ Sarah: "and then they did Fisker instead" ○ Elon: "and that was their mistake"[/vccolumntext][vccolumntext]

Differentiation Between Tesla and Other Electric Car Companies

What differentiates Tesla from other electric car companies is that Tesla is a hard-core technology company taking on very serious engineering challenges. Elon goes on to say:

  • "You only build value in a company if you're doing tough work to solve hard problems"
  • "Tesla does real manufacturing. For the Model S, coils of aluminum and plastic pods come in... and cars come out"
  • Tesla did all the vehicle engineering, powertrain engineering, software, styling, design, etc.
  • Toyota and Daimler (Mercedes) buy electric powertrains from Tesla
  • "If this was easy, they would just do it themselves”
  • "Tesla will be an extremely valuable company in the long term"

[/vccolumntext][/vccolumninner][/vcrowinner][vccolumntext]

● Fisker thinks it's all about styling (Henrik Fisker comes from a design background) ○ Elon: "the reason we don't have electric cars is not for a lack of styling" ○ Update: Fisker filed for bankruptcy on 11/22/13

[/vccolumntext][vccolumntext]

If Elon Musk Started Another Company…

Although he is a bit preoccupied at the moment running SpaceX and Tesla, while also being a father to 5 kids (twins and triplets), Elon can’t help but think through an idea that could improve the world around him. Here are the four ideas he could see himself working on in the future, but not any time soon!

(1) Supersonic Electric Jet

● Elon wants to build a vertical takeoff and landing supersonic electric jet

● Disappointed to see the Concord retired - was a step back for air travel / technology improved dramatically since the 1960’s (when it was designed)

● An electric aircraft gets better the higher you go (reduced air density), where's a combustion engine does not (starving for oxygen) ○ "You can get super efficient and super fast with an electric aircraft"

● Vertical takeoff and landing works well with being supersonic

● Possible that Elon may work on an electric supersonic aircraft at some point in the future, but not any time soon ○ "Between SpaceX and Tesla I kind of have the ingredients, so it's very tempting”

(2) Pre-Fabricated Double Decker Highway

● Significantly improve traffic by having pre-fabricated double decker highways

● Placing a steel box over the center divider with a lane on the inside and a lane on top that's made out of prefabricated sections

(3) Fusion

● “I think you could make fusion work, and by that I mean, magnetic confinement fusion, or relatively standard fusion"

(4) Hyperloop

● Hyperloop could be a 5th mode of transport

● Idea for the Hyperloop came from the California "high speed" rail project that has the distinction of being the slowest bullet train and the most expensive per mile ($60 billion dollars to go from SF to LA)

What are the attributes that you would want in a new mode of transport?

  • Can never crash
  • Immune to weather
  • 3x or 4x faster than the current bullet train (or twice the speed of an aircraft)
  • Downtown LA to Downtown SF in under 30 minutes
  • Cost less than any other mode of transport
  • Self powering (solar), with a way to store the power without the use of batteries

Update: Elon released the Hyperloop design on 8/12/13[/vccolumntext][vccolumntext]From Q&A

Hydrogen Fuel Cells

● "The math is so super obviously in favor of batteries that it's like staring facts in the face and saying they are not true"

● “If you take the best case scenario for a fully optimized fuel cell and see how it compares to current lithium ion batteries in production, it loses. Success is not one of the possible outcomes.”

● At Tesla they used to call fuel cells "fools’ cells”

● According to the auto manufactures... fuel cells are the technology of the future (a future that’s always 10 years away)

The Capital Markets

● Elon finds the public markets to be an effective source of capital

● "Worked out well for Tesla, Solar City will probably go public later this year (2012), and SpaceX could go public at any point - SpaceX has been cash flow positive for a few years so it doesn't really need additional capital”

● Doesn't consider the additional public company regulatory requirements to be a problem (already has the proper controls and effective governance in place)

● "Not that bad to be a public company, unless you are going to get very concerned with the daily fluctuations of the stock price - you shouldn't worry about the daily fluctuations of the stock price too much"

SpaceX's Plans of Going to Mars

SpaceX is continuing to develop the technology that at some point will be at the level required to get us to Mars:

  • "We can conceivably be at Mars around 15 years from now" (by 2027)
  • Developed a system that could achieve Mars colonization (on paper)
  • Concluded only 2 years ago that it is possible to create a self sustaining civilization on Mars
  • Far from having that system exist in reality (first we have to be able to get there)

Was this summary interesting/ helpful? Too long or too short? Please give us some feedback so we can make our next iteration better. If there are any videos lingering at the top of your “to watch” list, send them our way and let us summarize them for you!

Best,
Team DataFox

We all do it: we drop whatever we're doing to read an article on tips, tricks, and best practices for how to build a winning business. Whether reading it on the spot or saving it to read later, we're all constantly on the prowl for the insights that might make us better entrepreneurs, investors, or advisors.

We've found that some of the best content is going undiscovered, because so much exists outside of the blogs we read and newsletters we receive. One goldmine of information is in interview videos... but who has time to sit down and watch a 38 minute YouTube clip? So we're taking it upon ourselves to stay on the lookout for great video content relating to high growth businesses, and share key notes with you for quick and easy digestion...

Startup Video

We're kicking it off with an informative interview with AngelList founder Naval Ravikant on "This Week in Startups" (from 11/19/2013). Check out the full summary!

Startup Funding Environment

We’re not in the midst of a startup-bubble...but valuations of businesses are frothy. Angel investors ought to think about the following...

  • Portfolio dynamics & diversification
  • It’s a winner take all market - the majority of your returns will come from 1 or 2 big outcomes

The current series A crunch equates to an exploding number of companies, while the the number of VCs has stayed the same. [For more info on check out this Inc.com article on “Why the Series A Crunch May Be a Good Thing”. Image from Inc.com]

money-p80-3_26875-2

VC Evolution

In today’s startup market, the cost of starting a company has decreased. What used to cost $5 million in the 1999 bubble dropped down to $500,000….and now $50,000 is enough.

What Venture Capital does now is really Growth Capital:

  • Series A is done by the accelerators and the Hackathons
  • Series B is done by the angels, superangels, and seed funds
  • Series C and up is where the VCs start

Financing a Startup

There's currently a fundamental misunderstanding about how to build a company. Many people think that the right way is raising $1 million from angels, then prove that you have something - only then go to VCs for a Series A. This is the classic startup financing model (and it fails).

 There's a better way to raise:
  • $50,000 to build your product and launch it (accelerator style)
  • $500,000 to prove you can reach escape velocity
  • $1.5 million to get to profitability
It just doesn't take as much money to build a profitable, successful company anymore.

JOBS Act

The JOBS Act is the only major bipartisan bill to pass Congress and get signed into law in the past 4 years - how can you vote against something called the JOBS Act!? There are many elements of the JOBS Act that specifically benefit startups:

  • Streamlined IPO process
  • 500 shareholder max raised to 2000
  • General solicitation ban is lifted (can publicly fundraise)
  • True (equity) crowdfunding

Consumer vs. Enterprise

The bar has moved up for raising venture capital, particularly for consumer startups. No "Series A VC" wants to talk to you unless you’ve reached escape velocity or unless you're an extremely branded entrepreneur. Otherwise you must show a lot of traction or that you're doing something really unique or difficult. Pre-money Series A valuations are also evolving:

  • 2007 - 2009 valuations were around $2-$4 million
  • 2009 - 2012 valuations got a little crazy - as high as $6-$10 million
  • 2013 valuations are coming down to the $3-$5 million range

Accelerators

Accelerators are a very complicated topic, as there is a range of quality between accelerators coupled with the pros and cons of giving away 6% of your company. We are witnessing the unbundling of: Advice, Control, and Money. No one wants to give away control and that's where the angels come in (they require less ownership percentage).

Accelerators have branded advice and have institutionalized it. Venture capital is a lot about branding yourself, so you are able to get into to the hot deals.

Accelerators are like the new graduate schools, except:

  • Instead of paying to go you get paid to go
  • Instead of going out and getting a job you go out and create jobs
  • Instead of doing derivative work you do original work
  • Accelerators are a better graduate school, and they are shorter / faster
 You should go through an accelerator if:
  • You are young and just starting out
  • Don't have the contacts
  • Need some help with what you're building
  • You need a network
  • If that first $25k - $50k really matters to you

Conversely, you should make careful consideration before giving away any equity to an accelerator. Going through an accelerator could be an expensive deal if:

  • You already have a product built
  • You have some traction in your space/industry
  • You can get to escape velocity on your own
  • If you know how to build a company
  • Already have a solid network in place

Successful Outcome (Probability)

Naval speculates on the successful outcome of startups...and his projections may surprise/scare you:

Consumer company the success rate is less than 10% (from an angel investors point of view under 1/10).

Enterprise company the success rate used to be 1/3 or 1/5, but now the enterprise space is getting crowded so the ratio has diminished to 1/10.

That said, most companies will fail. Naval himself started 7 companies and launched 40 or 50 projects in his career. AngelList is the first one Naval would truly say has "product-market-entrepreneur fit" so that's it might succeed.

A few considerations for entrepreneurs and startups:
  • You'll have a low hit rate over your career, but you only have to be right once (it's like a relationship, you only marry one person).
  • It helps if you have some sort of common problem that you are trying to solve over your career, and you just have to keep on trying (while getting better and better. A prime example of this is Evan Williams, founder of Blogger/Twitter/Medium, who addressed micro and easy web publishing.

AngelList is Unbundling VC

AngelList is improving access to deal flow by bringing in transparency, so everyone is able to see what each investor’s value add is (it's not enough to say that they just bring value). In doing so, they're also bringing in a lot of people who might have a lot of value to offer (specialized domain expertise) and who have good access, but don’t necessarily have the capital (syndicates solves that).

The idea that some people can only invest in Seed and some only invest in Growth is a false dichotomy. If everyone can see everything (transparency) you can cross boundaries:

  • There are angels that should be able to do a Series C or Series D.
  • There are VCs that might want to set up an accelerator in the cloud, offer $100k-$150k for 6% instead of the standard $25k, and be able to offer their own structured network and resources as a value add.
  • The moment you take all the companies and all the investors and throw them together, people can start “cross-pollinating".

What Makes A Great Company?

The factors that make a great company are different from what makes a great syndicate: One is a reality while the other is a perception of reality.

Reality of what makes a great company:

  • Great Founders
  • Great Product
  • Great Execution
  • Great Market (open market)

This is why the Syndicate Lead is so important because someone has to go out and do the due diligence, spend time with the founders, etc (it's a judgment call).

What Makes a Great Syndicate?

Essentially what makes a great syndicate is Signaling - being able to convey to people that you do in fact possess the factors that make a great company.

  • Are the founders accomplished?
  • Have the founders done something in the past that would indicate that they are able to do things in the future?
  • Is the Syndicate Lead a good judge?
  • Does the Syndicate Lead have a good track record?
  • Does the company have early traction?
  • Is there an indication that "the dogs are eating the dog food" (company uses it's own product to demonstrate the quality and capabilities of the product)
  • Is the product visually appealing?
  • Is the space not too crowded?
  • Is the product novel, is it new?

Novelty matters. On AngelList people see everything, so by the time the 3rd or 4th company gets in there, most people have already made up their mind about the space or if there is a conflict from an existing investment.

Syndicate backers actually turn out to be very high quality angels. Naval thinks that those people shouldn't really be backers in syndicates (as opposed to leading their own syndicate). The intended backers are going to be:

  • Limited Partners (LPs)
  • Funds
  • People who are out of the market (geographically)
  • Wealthy individuals who aren't professional investors

For the real Backers (listed above) to invest in a syndicate, they need to see not only a strong signal from the deal, but also difficulty of getting access. This difficulty in getting into the round is important. This is why they need the Syndicate Lead for, otherwise they could have simply invested directly in the round themselves (and not had to pay the carried interest to the Syndicate Lead and AngelList, if any). This can be thought of as "High signal, low access."

Syndicate Communication

The Lead Syndicate really needs to convey to the backers and make sure they understand:

  • What deals the Lead Syndicate is showing them (so that they know there is no adverse selection - not keeping the best deals for themselves).
  • Clearly understand that angel investing is extremely high risk, and that they should spread their bets over a long period of time, be very careful, and go slowly.

Angel Investing vs. Gambling

The distribution curve of outcomes looks a lot like gambling:

  • Negative expected value when gambling, and the house is actively working against you.
  • Positive expected value when investing in startups, and it's also good for society.

People have to understand and be comfortable with the risk, and the fact that there is no liquidity.

Optimal Number of Deals in an Angel Portfolio

Angel investors need to invest in at least 25 to 30 companies (maybe more) in order to have a decent angel portfolio. There are practitioners (VCs) who do less deals (around 10) but they do lots of due diligence / spend a lot of time with each company.

This is the classic early-stage VC approach. Unless you are willing to put in a significant amount of time and diligence into the company you cannot narrow your portfolio to only 10 companies.

Diversification can be seen as a hedge against a lack of knowledge. For early-stage deals: no matter how much work you put in, you will not get more than 30% knowledge. The other 70% is up to the market, up in the air, and anything can go wrong.

The Rolling Close & Convertible Notes

Convertible notes have their advantages because you can keep fundraising all the time. The idea that you fundraise once, it's closed off for 18 months and suddenly reopens (only to close again) is an artificial old model driven by the realities of how VC and fundraising used to work.

The reality today is that fundraising is now more of a blend:

  • You can do your fundraising over 6 month and keep a convertible note open.
  • To keep it open beyond 6 months you'll probably need to show some real traction (the signal from the original investors would have died down).

Was this summary interesting/ helpful? Too long or too short? Please give us some feedback so we can make our next iteration better. If there are any videos lingering at the top of your "to watch" list, send them our way and let us summarize them for you!

Best, Team DataFox