At Episode 1 we think of ourselves as stage specialists, investing in amazing founders with compelling insight into important problems. We try to be the best partner in leading them on the journey from Seed to Series A, and we invest opportunistically with no overarching thesis.
However, we do research ideas we like and develop patterns we see in the market, and we wanted to share some of our thoughts in this multi-post blog.
Theme 2: Is That a Supercomputer in your pocket or are you just pleased to see me?
One of the most important questions you have to answer as a start-up trying to change the World is why now? What’s changed? What’s different? Because changing behavior is the single hardest thing in any B2C or B2B2C play. And in that context we think mobile still has a long way to run. That probably doesn’t mean another generic matching marketplace – an“Uber for xxx” – business model, it’s likely too late for that. However, the always-on device will continue to alter expectations and add new features – better sensors, better connectivity, more power and most importantly more context. Welcome to a whole new world of data effluence.
“Changing behavior is the single hardest thing in any B2C or B2B2C play…”
We hear a lot about IoT, artificial intelligence, big data and so on – but less about the applications they will enable. One idea we like to think about is “Aware Computing”, the idea that your mobile device is both really powerful in terms of what it can deliver, and really smart and capable in terms of finding highly personalized solutions. The advances to this computing platform enable all sorts of applications to continue to chip away at the consumer wallet, the monthly bills and concerns of consumers, as they increasingly want to do everything from their phones.
“Aware Computing”, the idea that your mobile device is both really powerful in terms of what it can deliver, and really smart and capable in terms of finding highly personalized solutions.”
Whether it’s finding a place to live, ordering something to eat, replenishing supplies at home or having your phone do your banking for you, there is still a long way to go before our lives truly move online. And with the context and capability that are being made available with the handheld computing platform there are still plenty of answers to the “why now?” question available.
There are a couple of different ways we’ve seen this play out – one is the extension of the over-the-top strategy that transformed telecommunications and media, but applied much more broadly. This idea has offline service providers or products filtered through a context-aware software layer that directs a lot of the decision-making process and empowers its user. You are inverting the relationship and dis-intermediating the provider by mobilizing (if you’ll forgive the pun) everything the app knows about your actual behaviors, real preferences and potential spending power to find the best deals.
In financial services for example, knowledge of spending patterns and upcoming expenses combined with extensive market research allows the consumer to make smarter decisions. Knowledge of discretionary spend, preferred cuisines and social patterns, as well as reviewing promotional opportunities makes suggesting restaurants and organizing nights out better value and more varied. And you can make similar cases for many other items in the monthly wallet – the same kinds of discovery we take for granted through Amazon or Spotify might start to happen in many more aspects of our lives.
There are all sorts of intermediary business models that could be interesting – the next generation of understanding consumer data, linking all that raw profiling data into behavioral psychological predictive models. And then there may well finally be the long anticipated services that help consumers manage and leverage their own data assets – my profile as micro-payment, sharing what I want you to know, protecting what I don’t – as well as ensuring its veracity. Amid all the information effluent, virtual personal data hygiene becomes paramount.
“For these businesses to take off you typically need viral adoption…the target market needs to be large…and it is certainly helpful to be able to demonstrate how what you are doing is differentiated and defensible with returns that accrete with scale.”
So what do we look for in companies targeting these kinds of applications? We know for these businesses to take off you typically need viral adoption – so super-compelling UI and terrific engagement with the consumer, clarity of value proposition and ease-of-use. In general, customer acquisition and likely economics need to be well thought through. Businesses like this are often capital intensive, so the target market needs to be large. Your team needs to demonstrate its readiness to run, pivot and scale very fast and will typically include someone with several years insight into the behavioral opportunity you are addressing. And it is certainly helpful to be able to demonstrate how what you are doing is differentiated and defensible with returns that accrete with scale.
Oh and of course you have to be able to tell us very clearly the answer to that question at the beginning – so why now?
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