thomasgr - Tumblr blog

[thomasgr]

#machdeinkreuz #waehlengehenistwichtig #mitmir90prozent #waehlengehen #btw #bundestagswahlen #demokratie #nichtwaehlenistauchkeineloesung #liebedeinestadt #liebedeineheimat

[thomasgr]

#NewOfficeView - start the day with sunshine & fresh air !

[thomasgr]

Sustainability will eat the World

I always get asked as many other investors: “what’s the next big thing to invest in…?” The standard answer to this is: AI, Voice platforms, Insurtech, Aviation to some extend, diagnostics in health, any alternative than Ads to monetize and some other fields. Standard advise is: Avoid topics like advertising, B2C business based on reach, digital verticals and tools, backward looking technologies, etc.

Sustainability eats the World

What I am interested in since beginning of last year is anything pushing sustainability. The times of “making the quick win” are over. Even though Trump’s USA is thinking different by abandoning Paris climate protocol. Norway just set a target by law to only allow electric powered cars to be sold from 2025 onwards. 50% of all new registered cars in Norway in 2017 are electric or hybrid. Norway’s wealth is coming from oil in the North Sea. So cutting on your financial lifeline is the way to go for innovation and entrepreneurship.

Interesting enough there are three other countries investing heavily in this field which don’t come to your mind: UAE, Saudi Arabia and Germany. UAE is setting up a lot of initiatives to focus on sustainability: from accelerators to government funded investment funds. Attracting companies to set up businesses in this field is one strategic move. Saudi Arabia just invested heavily in the New Vision Fund of Softbank founder Masatoshi Son, who is all about innovations in economic adjacent fields. Germany was the first G20 country abandoning nuclear energy from its future and invested heavily in wind, solar and other environmental focused energy sources. The land of Mercedes, BMW and Porsche is able during summertime to produce more energy from those sources than it consumes. Extending the number of days in a year even to spring and fall is one goal for the future. Imagine the country is able to produce enough energy to support electric and hybrid cars with those energy sources: Germany would be less depending from oil and gas, which it needs to import today. The trade deficit will sky rocket even more — a nightmare for Mr. Trump.

Start small and love your city

Not every Startup is a Tesla and will not struggle with the part of scaling as Elan Musk will do in the coming years. But a lot of young companies will push innovation and set new trends. They will be rewarded by trade sales and a good share for their founders. Because it will start small, I was looking in those trends more closely in recent months and discovered some hidden champions.

If you look on our daily consumption and the waste we produce, mostly unrecognized by its scale, first thing comes to your mind are bottles. Simple as that, even returning models and more sophisticated plastic materials are still not overcoming the basic problem of drinking from bottles. Less even talking on profits and economics of this business. It’s all about driving costs low in producing, selling and maintenance. But there is one company who rose by revenue from $10mn to $100mn in year on year by 2016 and it looks for more growth this year: Swellbottle. The ultralight metal bottles are made for reuse and will keep liquids cold for 24h and warm for 12h. The trick of this company seams to be, using brand and collections as a driver for sales along side influencer marketing. Offering only limited editions combined with environmental project support is the basis of their strategy. Having the right sense for colors, e.g. offering rosegold months before Apple introduced this color on it’s iPhone shows their talent. Looks like they found a profitable business through marketing and partner offerings, as you can see with a special edition for Starbucks last year. Those fashionistas interested in a cooling companion will be happy to know it will keep your white wine cool while heading out to the picknique with friends in the park.

It isn’t a long way from water to coffee. As a friend of this brown gold I watched the baristas growing fast in my hometown over the last years even pushing Starbucks back in any part (or Veedel) in Cologne. Healthy fresh food with coffee combined is offered everywhere and with that the problem of paper cups used for coffee-to-go. While the small town of Freiburg started the “reusable and bring back to any coffee shop” model there is still a long way to go. In Germany 320.000 coffee-to-go cups are wasted per hour which results in a year for over 3bn pieces. This is a huge market to tackle considering Germany has 82mn citizens. Europe has 750mn people — so you do the math behind that. First approach was to introduce less plastic in a cup, but this will obviously not solve the problem. Next phase is to give a price reduction if you bring your own cup. Currently most baristas offering cups to purchase and to bring with you in the future. But most of those are either made from plastic (just postponing the environmental problem) or porcelain (too heavy for everyday carry and having rubber made tops again increasing plastic usage). On top those cups are priced at $15, which is way to expensive while standing in front of the counter. The ultimate solution on this is a coffee-to-go cup made from Bamboo. Next to its sustainable material the price is as low as $5 per cup and its ultralight. Making now the other baristas accepting those cups in a return model for a fee of $1 like in Freiburg, this would cut a big chunk off the 3bn problem Germany has today. Making it into a mandatory model by law would be a solution lawmakers have to think about. Currently those models are investigated by city halls in most mayor cities in Germany like Cologne, Hamburg, Munich, Berlin.

The next thing in this line on the daily usage are bags. From Rucksack (backpack) to Weekender and smaller bags. Another big market for sustainability products to take over. From kids in Kindergarde to school and adults in university and office jobs. Avoiding back pain and looking cool through personalization. There is a company in Cologne named ‘Fond of Bags’, which is focusing on the whole field of bags: from kids to hipsters, Instagram fashionistas and office workers. They combined seven bag companies so far and are still growing. Their brand pinqpong is leading the sustainability part of the business, hopefully it will outgrow the others and have a positive influence on the other brands as well. So pinqpong is offering those kind of bags, people should be using in the future from an environmental perspective.

When Services will catch up on environment

Discovering those trends and products while taking a walk in my neighborhood the Belgium Quarter in Cologne I realized that this town has much more focus on this topics than other German cities. Found of Bags is located in Cologne as some others as well. However this is not just about products but it is also about services and shopping. While you need the products to be available, there is another big step to be achieved: Putting it into a plastic bag would actually damage all the good will, you had in the first place. So lets introduce you to the concept of “Tante Olga” and others: a plastic free supermarket. Overcoming the little plastic bags for your fruits and vegetables, having pasta and cereal bagged in foil and all other items sealed in plastic is a huge challenge. Some shops like “Tante Olga” started to sell products without that package in either more friendly natural bags or offering to bring your own glasses and containers to take in those groceries right in the shop.

Reaching the shops is part of the game

Cologne stands out in terms of mobility for a couple of reasons: There is an airport outside the city which is a hub for Eurowings, Easyjet and Ryanair bringing in and out a lot of people on business and for leisure. Jobs will make people commuting in and out of city center as well between Dusseldorf and Bonn. Hence public transport is on the edge of its capacity most of the time and people tend to use individual options for transportation. To make things worse the city was marked as one of the worse areas for bike riding — too dangerous and narrow while cars seams to be getting the advantage if city planing in the last decades. But this has changed in recent months with more infrastructure projects being started to favor bike riding and preventing cars from entering the city center. Streets are getting more narrow from two lanes to one. Parking lots are converted into outside seating for cafes, restaurants and even cocktail bars. This trend of parklets was born in San Francisco in 2012 and spread around the world since then.

Limiting parking lots is driving business in summer times, hence people want to enjoy sun as long as there is some and it serves the purpose of keeping cars away. This among other obvious reasons will lead to an increase usage of car-sharing offerings like car2go, drivenow, cambio and scooter-sharing like scoo.me. Interesting enough cambio was the first car sharing offering in Germany and it started in year 2000 in Cologne, Aachen and Bremen. The next obvious movement will be to prefer bike riding in the future within urban planing even more.

Why Cologne will be part of the Sustainability movement

Looking on the history of all those trends and products I recognized Cologne being an early adopter and early mover of various parts of this development. From small startups to larger corporations adopting the trends and finally urban planing and city hall pushing towards this direction. Building a startup around this ecosystem and supporting the overall trend looks obvious from an investors perspective. Products and service in this area will need time to prove itself and gain their trusted communities. This will be much easier to build and test in an experienced and supportive city. It doesn’t need to overcome the general hurdles of a new beginning and it will benefit from an experienced ecosystem giving feedback during the long hard times of the early days of a startup. However Cologne seams to be the perfect testbed for such ventures — much more than Hamburg, Berlin or Munich.

The most common hashtag used for Cologne is #LiebeDeineStadt(meaning: love Your city). The obvious double meaning of a campaign with focus on sustainability would serve any startup company setting its base in this city.

[thomasgr]

Winning in Fintech & Insurtech Ecosystem — Big Win for Technology Innovators & Crunch-time for “Reach Focused” Players

As promised I deliver an update to my post from last year on Fintech & Insurtech Ecosystem (post can be found here).

A year after I made my assumptions it looks like the world is turning into the predicted direction. Storage players with its platforms are winning the market from niche players big time. Microsoft with Office 365 (including OneDrive, Teams, Outlook) has taken over the productivity market only challenged by Google (with Gmail/Apps, Chromebooks and winning the education space). Sorry to say Apple and others: You are out. (Box is still around for good reasons while Dropbox is on the way to drop out). With Microsoft entering the Chromebook space and Windows S the main leaders are going head on head to dived the market while the rest is watching the show.

Despite everybody predicting the end of the old economy players in banking and insurance — those old guys are resisting and fighting back. As predicted it took time to sort out and revamp in-house development and shifting to agile structures in a legacy environment those companies are coming back. Deutsche Bank with its Digital Factory is leading the pack and gets the attention of the U.S. based VCs like A16Z to present their portfolio companies, hoping they will get an inroad to the European market and its challenges of regulations and currencies. Thanks to Brexit the continent will experience a mayor shift in personnel, geographies and market dynamics. All to the bad of London based fintecs and insuretech startups and benefit of Paris, Dublin, Frankfurt and Amsterdam. (Thanks to #Leave campaign).

Technology Innovators are outpacing the reach junkies among the startups in fintech and insuretech. Mobile banking and mobile payment is a very competitive space and we saw the first drop outs. More there to see in the near future. A concentration has already started and a decline in user signups has been seen in insuretech B2C focused companies. While copycat scenarios are known from certain startups in the past — today the incumbents are entering the markets with copies of startup models everywhere. With existing customer reach and analytics of success rates of new technologies and models, the investments and roll out of new features as part of their existing products and offerings is challenging cheap. The environment is the hardest for new beginners since a very long time. Check24 is the latest to entering the markets with pure copies of successful startup ideas. As predicted the acquisition of those startups would take longer and will cost much more than just creating and rolling out the services back on their existing platforms. We are still at the beginning of those incumbents getting into the markets by their own.

The call for rescue is to be heard in financial markets especially in fintechs focusing on lending products. While the risk profile of certain customers groups is still to high for incumbents to serve them those banks and insurance players are happy to support startups in those areas. Risks are still on the side of new players while the old financial economy revenues are reside on the banks these days.

So what’s the most promising playing field for Startups?

In a world where Voice Assistants like Echo, Google Assistant and Siri are becoming the default front end to consumers and AI is the default middleware of platforms innovative b2b technologies are the place to be those days. While user acquisition becomes more and more expensive and back-end services are still the foundation, the increased usability is key driver for platform owners. Enriching their functionality is a profitable place for new beginners.

The future of b2b is in SMB and medium sized companies. While enterprises will focus on one-stop-shopping at a platform provider. They expect Microsoft, Google, Amazon, Salesforce, facebook and others to deliver to their needs. Integrating various verticals for their needs will become more and more an obstacle in an overall cost evaluation based on SaaS and cloud optimized approaches. Keeping several clouds synced is expensive and hard to manage in an efficient way. Rather stick with the features of your cloud provider.

The biggest opportunity is in industries, where no dominant cloud platform provider is to be found. Small companies is one of those market opportunities. A provider like enfore will enable those 200mn small business to be seen as one platform and serve this markets as an integrated SaaS provider. Connecting the dots between storage and financial transactions transparent to the b2b customers at a very attractive price point will offer one of the biggest opportunity in the current markets.

[thomasgr]

Sunday break - time will tell on @rotarywatches timepieces. #walkout and keep the sunshine with you. Never stop without a #reason. #preciousTime #rotarywatch #rotarydial #bestcoffeintheworld at @hommage_koeln

[thomasgr]

Predictions #2017 — Return of the Empire striking back

It’s the time of the year to make some predictions for the techworld in 2017. But first: look back on 2016 predictions just make it quick:

The end of the unicorn era > Got this right.  Companies will still grow to a unicorn valuation, but not driven by investors to increase book values and collect billions of capital. Trivago, Snap and Skyscanner grow to that valuation due to their business models over time not by investors money. Gambling on high stakes is not the focus of hedge funds, PEs and corporations anymore.

Corporate investments will change > Got this right. Looking at VW (300m in gettaxi), GM (500m in Lyft), Softbank (1bn in OneWeb) or Panasonic (256m in Tesla) show the way how corporations are investing today. No seed or A-round investments to be seen lately.

Internet giants take over the commodity > Got it right as well. Amazon takes on Video, Apple takes Music inkl. Hardware (Beats), Microsoft takes Productivity. There are still exceptions like Netflix, Spotify, Slack but 2017 will show if those will survive or been taken over when losing the battle is near.

Technology will overtake common expectations > not obviously right. Looking at Siri, Alexa/Echo, Cortana and Windows 10 shows mainstream for voice operations. Tesla showed the way for autonomous driving in practice. A lot of AI is in the background of most service from facebook to banking. Most of their users were not expecting how fast technology is taking over — even in generating fake news and twitter bots during US elections.

Law makers will need to handle the mess > right but not on time. Technology forces law makers to look deeper into technology services. From autonomous driving to banking APIs to Internet spectrums out of the sky and net neutrality — regulators are getting a lot of work to come up with solutions while the technology is pushing on high speed into consumer spaces. We haven’t seen the results but law makers did not have a long holiday season for sure.

So it looks like 5 out of 5 — done for 2016. Now let’s head over to 2017

1. Everybody gets a “Jeanie in a Box”

In 2016 we have seen the raise of Echo/Alexa in living rooms. Google home is the first to follow but not the last. Wait for Siri, Cortana and others to be put into a small box to live on your counter. Maybe Apple will use Apple TV and Microsoft Xbox One as a first way into your homes but sooner or later those smaller or larger cylinders will enter your house. Some companies will offer white labeled solutions so the likes of Sony, Samsung and LG will also enter the crowed market. Without an always on assistant in a smart home an Internet platform will have problems to compete. So Tencent, Alibaba and Baidu will enter the space as well. Amazons numbers rose by 9x year on year for holiday season in selling Alexa devices — still nothing compared to the numbers it will sell in 2017. It will be massive and as well discounted by bundles with Music, Video, Prime and other services. A huge user based attractive for all mobile first companies. So the next big thing is “assistant first” for developers. Next to the “messenger app stores” we will see around facebook, WhatsApp and WeChat.

Source: https://netzoekonom.de/2016/08/06/der-plattform-index/

2. Retails products must be bots enabled

There is no difference between a messenger bot and a Assistant skill. Its an API enebaled connection to a user service without a UX/UI in an App or Browser. Many services already joined this new world: Uber, myTaxi, Spotify, Philips Hue, Sonos and many more. Those services provided by the Internet giants are enabled for those boxes by default although mostly for their own boxes. Which will make life even harder for those services. When streaming music is not differentiate by catalog and price and curated playlists it will by not be integrated with the most dominant boxes. It could be the return for Spotify if Amazon would block Apple Music from their Echo and Alexa. Same is true for Google Music and Google Home. Apple being late to this game could harm Siri Adoption, Apple Music, iTunes Video and ultimately AppleTV and iPhones. Imagine the Apple stock sinking because Tim Cook did not act fast enough on this part of hardware development. Software eats the world? — yeah not so much.

Service integration of Alexa devices in Germany

3. TV viewing is an App

Same as we seen a phone became an app and texting and music or video this will be the next victim of digitization. People will watch TV through various apps and mega apps. With a smart TV and services like Zattoo I have a live TV out of the box as soon as my Internet connection at home is setup. Every major broadcaster has an app for their content to be watched later on in a mediathek. But we are not using live TV so much anyhow. News is on Twitter, Gaming is on consoles and apps. Movies/Soups are on Netflix, iTunes, Amazon, Hulu, Showtime and Music is on Spotify, Amazon, Apple. The only missing piece is major sports which will move to apps as well. Currently most of the apps by ESPN, Sky, Canal+, etc. are banned from SmartTVs and FireTV because cable providers would be out of business instantly. They actually live off from sport subscriptions as part of their offerings. With ending the currents contracts by national leagues this world will end. The next round of bidding will see Amazon, Apple and Google enter the rounds and will out-cash the traditional bidders. In certain countries this will have an impact on the adoption of the boxes by certain vendors but it will clearly harm the cable companies.

NHL on Apple TV

4. IPO Race in 2017

So the discussion of tech bubble or not will come to an end and with that the race to IPOs will bring closure. There will be two types of companies in 2017: the ones who make it to the IPO like Snap, Appnexus and others. A significant part of successful IPOs will be from Europe such as Karma and Spotify. The other type of well funded companies will not be able to raise money in unicorn rounds and therefore seek the future in acquisition or just sliding out of business and their assets will be picked up like the ones of Jabowne. Will be interesting to see which group Uber will be in.

5. The unknown Future

There are three mayor events which are hardly to predict but which will have an important impact: Trump, Brexit and Germany.

a) Trump: We don’t know his stand on immigration, netneutrality and regulators. With a tied immigration politic he will have an impact how Silicon Valley will develop. It could cause a mayor downturn on the talent war in California and will slow down innovation and new products being developed. His stand on netneutratlty could cause an increase power to telcos, media and dominate Internet companies. If those could offer free services within their walled gardens there is a whole new game in the US. His guidance for regulators could impact on short term a push in megadeals like T-Mobile/Sprint merger or similar deals. Creating such mega companies combined with netneutrality models could severly harm the ecosystem for new startups in the US and therefore midterm for the rest of the world.

b) Brexit: If the UK will push the plan for leaving the EU it will be the end for the London startup system as we know it. It will be a hard Brexit and it will be done in a short time frame with focus on areas of business more related to traditional businesses than on startup companies. At the end the brain dead for the UK to Ireland, France, Germany and Nordics will increase until there are no more important UK startups left with a London based HQ.

c) Germany: There will be elections in Germany in September. When the current political coalition will discontinue the overall German position in immigration, EU financial rescue and corporate tax strategy will change one way or the other. With Germany changing its course the impact on the rest of Europe will be seen in the rest of Europe. This will lead to more disintegration of the EU and changing of trade deals for the future. Startups will have more challenges to setup their services across borders and financial systems in midterm. This will drive investors to become more careful and more funds will be needed for counsels rather then tech development.

Voting polls in Germany in 2016

6. The war in Syria

Recent developments in Syria will mark a turning point for the region and Europe. The refugee crisis will change from an European wide to a more regional spread crisis. It will also encourage people who left Syria in 2015/16 to return to their homes in 2017/18. With the shifts of political power in the region it will push the ecosystem in Iran to a more prominent level. Iran could become the next India with accelerators and IT business parks growing in a significant rate over recent years. In a world with weakening UK and Europe in terms of Startup supporting environment Iran and Israel are the remaining tech hotspots around. Those will attract the most significant parts of global VC funding to be invested abroad. Again this will drive acquisitions in those areas which will fuel the ecosystems even more increasing the distance ahead of Europe. Increase the limits for immigration across Europe by new elected or existing governments in France, Hungary, Poland and others will even more harm the open minded startup spirit in those countries.

GDP compared of US and EU Zone

7. The end of Corporate Venture Capital as we know it

All those changes will lead to decisions by most corporations to stop their venture capital activities. There are still some coming late to the party but the dominant trend will be the shutdown of corporate VCs in a broader perspective. Corporates will still be active in the investment scene to support startups but not by traditional VC investments in early rounds. Most of them will hand over the seed and early stage investments to external funds. They will use the dealflow for innovation screening but not as an active investor. In growth stage they will evaluate investment rounds but rather as a dominant shareholder outside VC terms. The leading VCs will line up to enter internal demo day events to present their companies for partnering. Founders will learn that they can not expect fair terms for direct investments and will abandoning pitching to corporate manager at all. Traditional VCs need to make much bigger bets on their portfolio and hope for larger VC funds from abroad. They don’t need to compete with unreasonable valuations offered by inexperienced CVCs but the they will need to provide bigger pockets to reach a profitable exit of their investments.

[thomasgr]

#bestofnine2016 a year in review - #2016 a lot we learned. Many thoughts we had. #morethingstocome #collage #year #lookingback #memories #gettingpersonal

[thomasgr]

Next phase of #Fintech and #Insurtech is coming in 2017

Beginning of the year I blogged about the Outlook on #Fintech and #Insurtech in Europe here. I predicted a shift in this space for the first generation of fintech companies:

A slim, focused B2C model needs to pivot or to be extended towards higher value products

Customer gain via feature driven USP’s will become unsustainable because traditional players will catch up quickly and keep their incumbent advantage in the pure banking and insurance play.

B2B tech players will be the winner in the first phase with highly profitable earnings. They will attract funding from VCs due to the scalability of their business models.

B2C investments will have a hard time to convince financial industry experts of their success but will blend the public opinion with good PR and customer numbers. Many VC investors will try to save their initial investments with follow on bridging to win the survival game for now.

Watch out for the Trend

The investments in the Fintech space is still ongoing and keeping pace from the many seed investments in 2015/16. But as in all VC investments currently and in the first quarter of 2017 we see the drop in follow on investments for A-rounds and B-series. We are on a good track to reach the same level as last year which is in comparison a rather weak signal for now.

Investors across all stages have learned to select the better companies. So expect well educated VC partners when talking to them in fundraising. The first phase was the hot new thing as usual and everybody went for it. Now the first fingers are burned and rational thinking is back in the partners room when making investment decisions. Focus will shift to the more challenging topics and more industry driven. A horizontal approach is nice — but not winning the game if you are not the next Albert Einstein in tech. Platforms already taking over the horizontal spaces like mobile payment (Apple, Google, Alipay) and peer-to-peer payment (facebook, WeChat). Merchants will follow the customer’s money (Alipay, WeChat building on Chinese tourists abroad) and mass markets (Android and iOS devices). A simple P2P app will never reach critical mass to become significant nor will the business behind that become profitable anytime. Merchants also follow cost optimization so there is only one way to enter those product segments: do it for free! If a merchant doesn’t need to pay for an additional payment method he will eagerly try it out. No additional costs means: no fees and no additional hardware. So if you can do it with standard NFC terminals you can win a new merchant. Some banks already started their whitelabled apps being compatible with the NFC chips of Android handsets either smartphones or wearables/watches/fitness tracker.

Focus on industry segments but Mobile wins.

Deloitte published their view earlier this year and draw a picture of potential business models. There are more like this outside.

What all of those are missing is the impact of Mobile. Mobile will eat everything — because there is no difference between online and mobile. You get the same processor power, storage, speed and networks but all of this instantly and everywhere. Still the biggest game changer in this world and for all industries is Mobile.

T-Mobile US launched SynchUp with Mojio in November. First batch of products were sold out within days because customers liked the bundle of connectivity, pricing plan and feature set. There are a lot of those products and services out there in various regions. However only a few companies have the reach and customer base to build on to drive down customer acquisition costs and marketing spending. Partnering is always a good option for those B2C models — so becoming a B2B supplier wins markets which drive to commodity very fast. Without mobility in the core of the product it is hard to win a space. Connecting traditional services like car insurance with mobility and fast networks will allow to keep your margin and attack the competitors customer base on the move.

It’s all about Changing the Workflow

When disrupting an industry it is about changing the way we use a service. MyTaxi gained the market when it changed the way how people ordered a cab/taxi and paid for the ride all on the mobile phone visualizing every single step. A whole new experience of a service we know for over a hundred years.

“If you want to win in disruption change the way a customer uses your service and make it easier as well as more transparent. Technology in the background will create the new customer experience.”

This is true for Insurtech as well as Fintech:

Digg deep into the old traditional products and rethink the way a user in a mobile world will use it. Big Data analysis of every step and data, AI for all the steps and data a user will provide and Automation to create a higher flexibility will lead the way in successful products which new market leaders will grow from.

McKinsey's view on the overall space gives some guidelines where to look for chances:

But be aware: Don’t underestimate the incumbents — They can buy technologies from B2B fintech and insurtech startups and build a piece by piece a much faster and stronger service platforms. There is no time for a shiny UI/UX if those can be build easily by others as well. As in every industry it comes down to price and value of a service from a customer’s perspective.

It needs to be a long term advantage — short term can easily be bought with deep pockets.

[thomasgr]

We are losing – Stand Up and Fight!

Just a reminder: Saying people are stupid because they voted for Brexit or Trump is achieving only one thing: electing populists in France, Italy and Austria – and giving AfD a significant amount of seats in German parliament. You want to prevent that from happen?

This is what you must do starting today:

A) Motivate people to vote! (U.S. had 49% of people not voting.).

B) Tell young people to vote is the only thing that matters for their future (UK got Brexit from votes of people age >40y)

C) Discuss solutions with those who support populist (you need to turn their votes ! People sharing you values don’t need to be convinced)

D) Understand the lost part of our society (those not in startups, driving uber, being an influencer on instagram). People who fear to lose their jobs due to digitalization, being on minimal wages, living in rural areas not being attached to „modern live“.

E) Start today – election day will come sooner than you think. Making lies obvious needs to start now. Not a day before casting votes. Avoid the post Brexit/Trump experience.

We are behind in achieving a majority.

If we don’t start today we have lost the election already. This is an up-hill battle for the so called elite. It’s not a „save thing“ and „we will win it at a close number“.

We are losing it already. Stand up and change. Now!

[thomasgr]

Moon Shots — the new trend in corporate venturing

While the world is discussing the impact of Unicorns and Internet giants on this century and which of those will prevail into the next decade the most interesting trend is happing in the back rooms of corporations. Still unicorns and Internet giants have, due to the size of funding available to them, could take part in this trend and most likely are doing it.

While most of funding in mature startups are invested in customer acquisition via marketing, promotions and margin cuts from an economic perspective there is no winner in this game. As we learned in the Didi / Uber deal last months this price war will be end in a draw with no winner and a ceasefire is declared from the government arm called regulator. If it was for the CEOs this war would have went on and on and fueled by more funding rounds and even higher valuations. But having a look at Uber it is known that the company is pushing more funds in their engineering to build real USPs to fight competition in the future. Uber acquired the IP assets of a mapping company Decarta some years ago.

With those assets Uber will become technology independent from Apple and Google for mapping services which is essential for them. On the other side it leave Didi, Lyft and other similar service stuck with those players or — in the future — will turn them into clients of their own mapping services. In the meantime Uber is focusing on autonomous driving and has to certain extend a head start even with the carmakers in their own field of expertise.

On the other side of the table the traditional corporations are taking the ridesharing business serious as well. Alphabet started its own carpooling services via their matured Waze application based on a large and healthy grown community with low customer acquisition costs. Daimler as the owner of European market leader in taxi apps myTaxi made a big bed on opening the shareholder structure to bringing in outside investors to their own business with the acquisition of Hailo in London in an all share deal. As part of this deal the founder of myTaxi Nic Mewes will become managing director of Daimler Mobility Services unit and chairman of the myTaxi board. This was the beginning of a process which was announced by Daimler CEO Zetsche this week to change the company into digitalization across all units. While carmarkers are busy in transforming into a world of e-mobility and car sharing from their historical roots in other industries are even more adventurous.

Deutsche Telekom enters market for charging infrastructure of e-cars in Germany and announced their activities at IFA in Berlin last week. A carrier using its legacy infrastructure to become a service provider of a different industry and competing with players which claim energy as their core business this shows a trend again. However we should not forget that Telco’s core business connectivity is challenged by Google (Google Fiber, Loom project, GoogleFI), facebook (Facebook satellite, Aquilla) and even Airbus. The world is changing and historic borderlines are blurring in-between industries.

All those initiatives have one focal point in common: Large investments in long term and risky innovation projects. Those so called “Moon Shots” becoming more and more common in the industries. Fortune 500 corporations understood that smaller investments in minority stakes are not sustainable for their innovation strategies. While it makes sense to learn from fast and innovative startups the investments in those companies have less synergies to offer today. Google Ventures investment of $450m in uber four years ago did not give them an advantage for their initiatives at Google and uber was dropping Google services more and more over time. At the end Google ended up to be a financial investor helping Uber’s valuation to rise up to $69bn making it unable to be acquired. While this might be fun for a lot of people inside Uber it doesn’t make sense for a corporate investor. So with no surprise Google’s board member quit the board of Uber and it parts way with its posterchild. Google maps integrated the biggest competitors of Uber into Google Maps long time before it started its own carpooling service.

With all this innovation driven projects inside larger corporations the money for those initiatives will be spend in-house for the coming years. Less funds are available for startups through corporate venture capital or fund in fund investments in independent VC funds. While this is rather early in the global funding cycle the impact of those missing founding sources will have an impact in five years and later. However, the impact is more serious then, when the startups of today will mature in late stage companies in need of growth investment rounds. Therefore we will see some good companies starving for growth funding in five years and they will be picked up in mergers and acquisitions by corporations for a reasonable price related to EBIT and revenue multiples.

There will be a lot of Yahoo / Microsoft offers which will be declined by the startups and a lot of the LinkedIn / Microsoft deals which are still very interesting for all involved parties but rather half of the price the investors were looking for in the beginning. But those financial transactions will not run in the news headlines. The successful moon shots of the traditional dinosaurs will be dominating the tech world over the next ten years.

[thomasgr]

Missing Quantative Easing for unicorns will change private investment markets

Some months ago I was arguing the end of the unicorn era — meaning startup companies driven to +1bn valuations by a funding strategy to benefit private investors and fund at least 10 years of unprofitable business cases. There is nothing bad in this strategy as we have seen in Amazon which turned very profitable in recent months and even Rocket Internet did this with Zalando this year. However, this strategy is coming to an end when the only exit path for this model — public markets — are drying out and only a few good companies like Twilio are reaching its planed goal. The risk for private investors following this strategy over a long period of time is becoming to risk and the ratio for reward turns into a not preferred asset class for the deep pocket capital owners recently. This makes it harder for unicorns to close additional funding round at higher valuations leading to apre-IPO Dip in their valuations before even trying to go public. What we see next is growth debt investments to bridge the time to a potential IPO with strong terms from those debt providers has been reported in Spotify or even Uber during this year.

Now with the IPO window closing for most of this unicorns and a usual time frame of a debt financing of 12–18 months the pressure to seek exits via trade sale is rising in the group of unicorns. Obviously the dip in valuations need to be done similar to the Pre-IPO Dip let most of the unicorns shy away from those exits for the moment. If a corporation is considering to acquire an asset at +1bn valuation, the board needs to be convinced of a return of investment for this project. Unlike in private market investments, the key metric is not revenue multiples and growth rate but synergy effects and EBIT costs. To put it in simple words: “Money spend on an acquisition paid in cash or stocks need to be earned back in past and future.”

In Venture Capital there is a saying “do not grab a falling knife” — or literally speaking: Don’t in a devaluating asset. That means investors and buyers are very careful to invest in a company which valuation has decreased in the past and even more careful when the valuation has been decreased several times. There are buyers but those buyers will wait for the purchase price is coming down even further. It is the Angst which drives the ECB in Euro Zone to Quantative Easing to raise inflation to 2% in average while currently the inflation is 0%. Transferring this view to private markets, it means valuations of startup companies is an inflation ratio: if it increases over time it will triggers demand from investors — if it increases fast in a given timeframe it drives demand even further. Investors fear to missing out and need to buy at a even higher share price. So a declining valuation puts investors on hold waiting for a better bargain.

The catch 22 in private markets is the missing ECB and Quantative Easing for startups to fight deflation. Until end of 2015 private markets considered pension funds, investment banks, private equity funds and corporations as their FED. Convincing those capital providers, markets are save for investments drove unicorn rounds in Silicon Valley and other regions. Unfortunately, those cash sources are now focused and learned their lesson. They are drying out day by day with each unicorn not being acquired or going public. As those funds are driven by returns the current investment mood cannot be changed by a few, successful IPOs and get even harmed by acquisitions of new unicorns, which are not fed over time by some billions. Investors realize that they bed on the wrong unicorns — not the old ones return profits but the young ones. The young unicorns which are seeking exits while their valuations are still rising as CBInsights shows very good in their recent analysis.

Like a reverse domino effect the funding stops from the back of the valuation chain. The bigger, older unicorns stop receive funding first, investors will shy away from the mid aged ones and continues to harm even younger ones.

As I blogged earlier here this will drive M&A activities in the unicorn space. We will see these activities in both segments of unicorn ages. The older ones are looking to prepare for an IPO (e.g. Spotify) and the younger ones, not able to go public, will push for trade sales (e.g. Soundcloud). Get prepared for more Yahoo / Verizon like deals. Take a big check rather than life a long death of decreasing valuation with no Quantative Easing to rescue your company. With a run rate of 12 months’ companies will start those processes and some will realize it is not enough time. This will trigger other unicorns to start earlier those exit processes or seeking more debt financing to prolong the run rate. Another interesting view on what happens on a timeline can be found at CBInsights blogpost based on their data:

Now, when this outlook is known by all parties in the private and public markets there is no room for hiding anywhere. The process of devaluating, restrain of cash sources, push in M&A activities will accelerate the markets momentum. Nobody wants to be the last man standing in this kind of an environment. But as we know from public markets you can make money in bull and bear markets. Bear markets seem to be more difficult to spot the opportunities. Though markets will find a way to get to profitable exits and most of the companies will exist in the future in a partnership with corporates or being acquired by them. Some models and deal structures may look new to the investors and founders but those are still good deals. Daimler and Mytaxi did a very good move in taking over London based Hailo in an all share deal leaving private investors as shareholder in a corporate dominated company. It has built the opportunity for even further consolidation in the taxi e-hailing market to create a strong European leader — a leader the likes of Didi and Uber cannot ignore in the future.

While stock markets show the global leaders today are pure tech players — it is not a surprise hence we are living in a digital world. Like oil and gas was dominating the industrial era today the owners of big data, the fuel providers of today’s world, are leading the markets.

What is new in today’s markets it’s the ability of those corporations to own the investment and innovation space for the coming decades. Those companies are starting to create their own startup ecosystems in which it will be hard to invest for private investors. Cash loaded digital market leaders have no need for outside money. Those market leaders own their closed private markets and investors will have a hard time to compete or enter those markets. Maybe we will see grey markets for outside investors in this deals or we see certain stock classed traded publicly with higher risk/return rewards when indirectly investing in the projects of facebook, Amazon, Apple and Google.

[thomasgr]

What is wrong between VCs and Corporates?

Lately I encountered the historic discussion about the „dark side“ (venture capital) and the „darker side“ (corporate venture capital) with fellow VCs several times. I wish this discussion would come to an end for the benefit of founders, startup companies and innovation. But I guess this is wishful thinking for some time being.

When do VCs do like corporates?

In the first place VCs tend to like corporates for revenues in their portfolio companies. While VCs are all out and about to tell the world startups are disrupting the corporate world –  at the end of the day they like corporates being customers of their portfolios and bringing in sustainable revenues. The rise of B2B startups has shown this trend lately. In a world of dominating Internet platforms, the B2C space is becoming more expensive in terms of customer acquisition costs and unreliable when those big companies will copy a successful startup business model and compete with their investments (music streaming, messaging, communication, e-commerce, etc.) In B2C investments those private investors also like corporates in a partnering approach. It puts them in a struggle how to value partnering deals e.g. music streaming + Telco’s, e-commerce + TV broad caster, fintechs + banks because there is a lot of good support but still it is like a deal with a devil from their V VC perspective. Especially the net neutrality discussion raised those contradicting views of several VC investors. While it supports some of their portfolios some partnering deals might harm others from their perspective. While defending the majority of their companies it will harm a few companies, who would benefit from certain deals. In any case private VCs will love corporations as an exit channel – because those are the only ones who can pay a high amount for their investments to return their funds.

When do VCs don’t like corporates?

Several VCs openly declined to make deals with corporates as part of a funding round. Exits are OK – minority investments are not. I do understand this perspective when corporate investment arms would demand special rights, which would influence the exit terms negatively for a portfolio company and its shareholders. Also as a minority shareholder, as a potential buyer this corporate would have insider information on the business, which will not help to initiate a price acceleration during negotiations. However, there are terms in shareholder agreements to make sure all parties are playing by the book in a correct way. I would accept a consistent behavior of VCs in declining corporate minority investments. But VCs as any other shareholders cannot control their portfolio companies and need to serve fiducially duties to protect the company as a shareholder.

Following exceptions can be seen by VCs, who officially don’t like corporates in their deals:

A partnering deal is linked to an investment: The advantage of the partnering deal with a corporate for sales, reach or branding is that important, that the investment has to be accepted.

The valuation/investment is that high: Corporates will invest from a different perspective and calculate the overall impact on their business. In some cases, the terms and conditions from a corporate investment arm are just too good to be true. Founders most likely and investors to a certain extend just take the deal while it has the advantage on their own economical metrics (book value, equity stake, etc.). Mainly we have seen this behavior in unicorns in 2014/15. Corporates were invited to invest in those 1bn companies giving a nice book value and secondary chances for private investors or founders.

There is no other investor: There are just those times where private investors don’t accept a valuation (or an investment at all) based on the figures and business case presented by the portfolio company. While private VCs are always pushing their interests in risk for founders and innovation – there is a limit they are accepting. I could be the stage or size of the investment or even too risky for them. They just don’t want to bet more money on that founder or company.

In all fairness this could be acceptable as long as all players in the market will be honest about this metrics. Otherwise there is a misunderstanding between the involved parties, which is never good in a close partnership as in shareholding in a company and siting together on a board.

In Europe there is another issue why VCs don’t like corporates investing in startups: They need corporates as limited partners in their own funds. So instead of raising VC funds from those corporations, the VCs will meet them in a competitive bidding for a stake in a promising startup and founder. VCs will approach CEOs of corporations to convince them to become a limited partner in their fund instead of running their own corporate investment arm. While this is a bias discussion by nature, it still has the challenge of proving to be a better investor than their corporate arms. Especially in Europe with low exits proceeds and rather small fund returns over recent years the numbers are not supporting those arguments of being a better investment fund.

We see more corporates focusing on direct investments linked to their own business rather than using VCs to nurture many startups and picking up later the best plants in the industry. As we see in facebook, Alphabet and Apple the trend is already shown clearly in those investments.

The VC world is changing — even being disrupted from several edges. But the traditional VCs with their opposing view on corporates are contributing to support this trend. In Europe this negative perception of corporate investors will lead to a downturn of the general VC market and it will harm innovation, founders and entrepreneurship.

It is obvious but not seen by those who could change it.

[thomasgr]

VC Fund raising in Germany — A Status Quo

Earlier this year I was giving my view on the development of Corporate Venture Capital markets with a focus on Europe. Since then I was receiving feedback in various discussions from fellow investment managers in Fortune500’s, public funds and private VCs. From those discussions I draw my conclusions on what we will see in the European Venture market in the coming years.

Everybody wants to invest in Startups

We are still in a positive investment market because of Quantitative Easing by FED and ECB and will be for the next 5–10 years without doubt. It’s a defensive move by all those parties allocating capital because there is no other way to earn interests on capital. Germany currently is making money out of the old debts so there is no opportunity to gain advantage from allocating capital into rather save investments. But even corporations facing the issue of losing money on patronizing their global profits back into their home countries so they rather make risky investments to avoid additional tax payments. So the markets are flooded with capital rich parties:

VC Funds: Smaller (Accelerators, Seed Funds) and bigger funds (deep pockets VCs and stellar VCs) are out and about to raise new capital. They offer their investment capabilities to corporates, public funds and family offices. Their main argument is the experienced investment professionals who have the network to founders and co-investors to create the best deal flow in startup investments.

Corporations: Like Alphabet, facebook and Intel Fortune 500 companies want to get into the startup ecosystems. Those activities are driven by interests to connect with the founders and new business models. While investment is part of the game it is not the focus on this activities. While most of those companies are public listed and very few have a fund structure set up those players leak the experience of fund setups and therefore focusing on investments from the balance sheet. Considering their ticket sizes in financing rounds it is smart to invest from corporate pockets and avoid the financial bureaucracy of fund management.

Family Offices: Facing a low interest rate markets and high cash from longterm business activities the capital management for those cash loaded organizations need to find new ways. Equity investments in smaller companies is an attractive opportunity while they need to adapt into the higher amount of investments compared to good old days.

Public Funds: Governments are feeling pressure from politics to fuel their ecosystems with funding. Public funds — either direct or indirect funding- are pushing public money into the investment markets. While participating in corporate funds is not allowed by Brussels there are still many opportunities to inject public money into the startup companies over time.

Germany is different in fundraising for VCs

Unlike in UK and U.S. there is a challenge for VC funds to raise money from those deep pocket capitalists. The challenge is due to regulatory framework and limited interests from traditional fund resources compared to Anglo-Saxon regions.

In most other regions in the world VC funds raise their investment sources from: Pension funds, corporations and wealth management funds. Recently in London various funds were purely raised from public sources to drive the tech city ecosystem. VCs in Germany face various challenges to get commitments from their targeted limited partners.

Pension funds: contrary to their U.S. and UK based competitors it is uncommon to get contributions from pensions in to the venture capital asset class. Mostly based on risks, those institutions are not common LPs in venture funds. There is no indication that this will change in the near future.

Public funds: There are various sources to gain access to public money for VC funds in Europe. Germany itself with its stateowned bank KFW provides fund in fund investment as well as direct investments in startups in a pari pasu model. High Tech Gründerfonds HTGF is leading Seed investments in young companies on standard VC terms. Additionally most of German counties have public investment arms to support startups with direct investments and loans to support their local ecosystems. Most notably IBB in Berlin, BayCapital in Bavaria and NRW Bank from Düsseldorf. Several of them also provide funds in fund investments which can be received from Luxemburg EIF as well. Still some private (non-public) funds need to be provided by VC funds first to gain access to those sources.

Corporations (DAX30 companies) & Family offices: Known for fund in fund investments are some German brands like SAP (in Earlybird), several publishers like DuMont Schaumberg (in Capnamics) and many more. However with activities of those DAX30 heavy weights entering the investment scene those source could dry up for VC funds faster than anticipated. Recent direct investments by Volkswagen, Porsche, Daimler in automotive show the Uber effect. But also Lufthansa, Metro, RWE, Commerzbank and Merck indicate this trend will increase through the main index of German economy.

The times of dump money are over

From my discussions across the German investors scene the trend is foreseeable: Private funds with focus on German based Limited Partners — from small to large- will face hard times in fundraising. The targeted fund sizes are, compared to UK and U.S. funds, small at best. Small funds will have limited potential in financing startups — either many small bets or a few bets- which will lead to small returns on invested capital with higher risks for its fund investors. Looking at the exit history for German based startups will overall lower the attractiveness for potential fund investors.

When talking to German based Fortune 500 companies I learned that many private VC fund partners are pitching their new fund to those DAX30 CEOs to become limited partners. While still there are some committed capital from DAX30 members will be announced soon, the success rate for VCs are very low. While the pitch is hard based on recent exits for German VCs the alternative of strategic corporate investments from their own balance sheets is much more compelling recently. Those boards rather drive their own investments via their M&A units than handing funds to a private VC and hope for some financial return which is not in the focus of a public company anyhow. (20% return in 10 years on a $10m–20m fund contribution will not move the annual results for any of those corporations). Getting access to startups and disruptive business models does not need fund investments. Some corporate innovation hub initiatives gaining and active board members in the founders scene will result in even better achievements than regular access to deal flow of VCs. Founders love to have a chat with Fortune 500 CEO and it will not require equity given to the corporate venture arm of that company.

The investor’s landscape will change dramatically

Following the current trends and developments in board rooms and politicians driving governments strategies this will have a significant impact on the German Venture Capital scene.

a) Expect more Fortune 500, mainly DAX30 and Family Offices, taking active roles in financing rounds in mid-stage and late-stage investments. Seed deals are for angel funds (<$50m) and traditional fonds (fund sizes of $50m-$120m). German corporations will increase their investment activities in their specific industries with an eye on disruptive and innovation. It will be more common for startups to deal with investment professionals from a corporate background driven by M&A metrics. Founders should start to adapt their pitches to their way of understanding business investments. Expect smart money out of deep pockets. It will be a significant change on the other side of the table and there will be a lot of discussions regarding how serious this approaches will be — obviously from the private VC side. But just keep in mind investments such as $1bn by Apple into Didi Taxi or Twitters $70m contribution in Soundcloud. Sillicon Valley is leading a trend again. Those who were always pointing to west coast driven innovation will not be happy to be called on their marketing slides from the past.

b) Public money will drive the mid-stage investments too in the future. Seed investments in Germany were driven mainly by HTGF during the last years. While HTGF is aiming to a larger private share in their new 3rd fund they will be fueled by Germans Ministry of Economics as well as KFW Bank. A good mix of corporate and governments funds will be the source for the next rounds of early stage financing in Germany. IBB in Berlin will continue to support the Berlin ecosystems bound to local investments and Bavaria as well as NRW will follow the Berlin example. Initiatives by local governments are in place to use their regional banks to copycat the Berlin role model in the near future.

c) Private German VC funds will have a challenging time ahead. They will struggle to raise their funds and will announce first closings in the ranges of $50 — $80m while targeting a max $120m for its final closing. The number of VCs will decline in Germany compared to the glory days of 2004’s but the quality of investment professionals has risen. We have seen very profound VCs emerging over the last ten years in Germany with Point Nine Capital and Project A leading the market supported by several Super Angels gaining traction over recent years creating some significant companies to be the poster children for the German startup scene.

d) UK and U.S. based Venture Funds will find their way into Germany again after some rather less successful attempts in the 2010’s years. It will be part of a broader entry for those funds into continental Europe. They were used to the convenient approach to invest in London based companies. After Brexit they need to find new targets and accept the challenge of new legal and regulatory frameworks. Entering a market with a stable economic environment and an undercapitalized funding system will be a very attractive investment territory. While competition will be rather low and stellar funds from the UK and U.S. will always have a competitive advantage over local VC funds they will easily dominate the investment markets for the most attractive deals in Germany.

Overall the investment market for Startups will change significantly over the next 24 months and a lot of new names will become common in the ecosystem. But change is always pushing an industry and the venture capital market will be disrupted as every other industry as well — however maybe not in a way the current incumbents were hoping for.

[thomasgr]

The end of the Brexit as we know it

In April I predicted here on my blog the United Kingdom would vote for “Leave” in the EU Referendum. As to many people I was right on this analysis and the reasons were confirmed by a lot of experts. Not much here to celebrate because the outcome of the Brexit process will be an economical disaster on all levels for a lot of people involved inside and outside the UK. But everybody realized that in the meantime.

The Pound Sterling was falling like the cliffs in Dover:

The UK is facing some of its members to seek independence:

But what is coming next if Brexit happens?

Most of my fellow VCs in London were tweeting “Calm down + Carry on coding” to encourage their portfolio companies to work through uncertain times by focus on their business. It is the best advise for days like this, but it needs to be clear that a strategic roadmap needs to be developed in the evening and nights as founders usually do to grow and expand their business. ‘Nothing will change’ is rather wishful thinking in that regard.

That markets came back rather quickly could be seen at the end of the week following the EU referendum:

So changes to the London ecosystem are to look at for the future becomes important for everybody in the industry:

With UK leaving EU legal framework (regulations, data privacy, financial transactions, etc.) and access to single market it is limiting companies to grow beyond their local markets.

Freedom of movement for work will drive Non-UK talents to seek employment elsewhere inside EU rather than UK and make talents think twice to move a business and themselves to London in general.

Fortune500 companies as well as startups will evaluate to move their headquarters to locations inside EU and select from various options: Dublin, Paris, Frankfurt, Berlin, Amsterdam, Lisbon, Barcelona, etc.

VC funds depend on investment restrictions of their LPs, who could demand them to invest in EU countries only based on origin (e.g. EU supported EIF) or for limiting risks due to economical uncertainties of a location outside the EU in general.

Economical Prediction for European Startups

Based on the assumption above we will see the following impact as an eroding process over the next five years. Nothing will have an impact the next coming days even if some prominent decisions will be announced over time. We need to look at midterm statistics for the next 36 months to see the consequences and trends.

There will be not one ecosystem gaining major uptake from companies leaving London. All EU ecosystems will have advantages to be evaluated: Dublin is close by culture, Paris by distance, Berlin by its international community, Frankfurt as a financial hub, Amsterdam holds tax advantages, Lisbon and Barcelona has a fresh community and sunny weather. Founders and corporations will pick individually by their needs.

Entering UK markets for a startup will need a profound analysis from companies: Due to currency rates it will be cheap to enter but due to missing legal framework (trade deals) it will be expensive to maintained. So expansion into UK of new businesses will slow down and some local heroes will trigger M&A activities from outside UK.

Public listed companies will face decreasing market caps over time. This will limit their abilities to acquire startups (limited exit channels) and at the same time will trigger potential take over activities from EU based competitors as well as U.S. and Asian based gorillas.

Not only VCs will limit investments in UK companies but als EU itself will stop investing in UK research, science and infrastructure. This will limit growing new companies and founders in the long term. Less data science and hardware related projects at UK universities will produce less bright minds who would have started their companies in the decades to come.

While short term impacts can easily reversed over time if conditions will change, the long term consequences are more sever for the future of remaining UK.

Potential hope 2017: Brexit will never happen

While all analysis and predictions over the coming weeks will take the past into account there is the future: the undiscovered land.

The UK constitution needs a parliament to invoke Article 50 in Lisbon contracts of the EU and support will be hard to find for a step the majority of the MPs in all involved parliaments are most likely not willing to take.

With more details and reports emerging and the consequences being more visible for ordinary people the majority of a vote in 2017 could insist on a #Remain in EU. Important for such a decision would be larger time gap in-between those two election events. It looks like the UK politicians of all parties are betting on time for now at least into 2017. However damage has been done to the UK ecosystem and that can not be reversed. It will take additional time to come back from this days and weeks.

Most critical about the Brexit experience will be that the rest of the world understood there are alternatives to London and the UK for many businesses, from small to large. For the future every CEO will have the option to #Leave London and the UK to seek growth and success anywhere else. Opening that opportunity is the most critical outcome from last weeks result.

[thomasgr]

Fintech & Insurtech Ecosystem: Why winning is hard and Changing is part of the game

Find my update to this post from May 2017 here. http://thomasgr.tumblr.com/post/161101958885/winning-in-fintech-insurtech-ecosystem-big-win 

I know that there are so many experts out there in #Fintech and #Insurtech right now. I respect them all: founders, investors, analysts and journalist. All of them bet on new players, new models, new ways of banking and new ways on providing insurances. But I have a different view and we all can only see so far into the future.

So here is my simple view on the ecosystem and I will update the picture over time. I start today to share my view just to have a discussion moving on in this interesting space.

While a lot of experts coming from a technology and disruptive perspective I take the view of a consumer of the financial services industry. This might be new and surprising for a lot of the readers, but I still believe user's demand will drive the way forward.

Main Areas of this ecosystems

Users will start from documents in my model. It could be contracts, invoices, recipes, offers, etc. Those documents in their digital format will reside in a cloud storage which is either a pure storage provider (Dropbox, onedrive, google drive, etc.) or, for most of the users, the unlimited email inbox (gmail, outlook.com, in Germany gmx/web.de, Telekom Email, etc.). From my perspective there will be no other location where users will store their documents outside their homes. That is why vertical storage providers (Evernote, doo, organize.me, others) have or will fail in the midterm. Online Storage is already free of charge, is part of a larger offering and its included with general consumer services. Similar to premium email services, which became free of charge with gmail in 2004.

The main partners for users regarding financial transactions today are banks and insurance companies. Currently a lot of interactions are triggered by transactions (money transfers, damage claims, etc.) and comparing offers (Check24, Aboalarm, etc.). So there is a ‘love & hate’ - relationship between banks/insurances and those comparing sites. They need them to get new customers in an overall saturated market while those websites are the main reasons for churn on the other hand. This is the same in other industries like telecommunication, travel and others. For sure those comparing sites will stay in the ecosystem for good.

Since 2014 supporting players have entered the ecosystem supplying services to all players based on APIs and technology platforms (Gini, Stripes, figo, etc.). They offer their platform services to all players, making no difference if they are a traditional institution or a startup company in this ecosystem.

At the receiving end we will see the regulated institutions of banks and insurances. While a lot of new fintech and insurtech startups aiming to enter this markets most of them will not reach this area due to high costs and regulatory demands. But please try hard to do so just don’t tell afterwards nobody told you it is a huge challenge — including raising tons of money during the period of setting up such an institution.

Outlook and prediction

I don’t believe in vertical players in storage. No niche player with a focus on productivity, security or finance etc. will prevail. Users love their storage provider and will stick with them. There will be one amendment to this when insurances and banks will open up their legacy systems (e.g. Online Banking Portals) to allow users to upload and store their documents in there. Most likely this is an option for users to either get online access to existing documents from the legacy systems of those institutions or saving their documents during the transaction process.

Banks and Insurances as institutions ruled by regulators will stay for the long run. Governments want to control money flow, fight money laundering and criminal activities. Everybody needs to play by the rules however we will see a broader space when wholesale models in the financial industry will become available — think about telecommunication and retailers without a network ownership.

Comparison of contracts, offers, terms and living off from commission fees will be a valid business for longer. It works for all areas in the financial industry and it will be supported by scale. Entering the space against the established player will be a good way to find an exit to one of them later on.

I don’t believe feature-focused players in ‘banking’ or ‘insurancing’ will win either. Scaling the user base is key. In those areas it will be very hard to scale and acquire users. If one player achieved this goal it is a matter of a bigger fish to eat up the next smaller one. Unfortunately the biggest fish will have the highest demand on funding — an Uber and a Didi in both segments will lead the way however from an investors perspective it is uncertain if their investments will pay out in an IPO later.

Most of the feature-focused players will face lower exit valuations in a sale to peers, another bunch will fail. On this way to avoid running out of cash some of those will move into the “API / Supporting” - segment (down) or into the “Comparison” segment (up). Currently I would suspect players like Transferwise moving into the API segment (see the latest announcement with Number26) and Apps like Outbank into the Comparison segment.

Less Funding — more Pivots — a bunch of small exits

In case my assumptions are correct we will see:

Less funding going into the space in 2016 for new deals. Some late comers will fund Seed deals but will recognize the trend rather sooner than later.

More deals will happen to focus on pushing the existing ones but carefully selecting winners — those who are ahead of the rest and already show good traction although this traction might not be in the important areas for KPIs.

When fundraising in B rounds will be tough we will see a lot of pivots by those companies. Investors and founders have learned not to wait for this funding to happen after they got too many declines from investors. They will react in due time to adapt their models. Number of user profiles and strong technology will be a good base for a successful pivot.

Before losing their investments and without enough resources for a promising pivot most of them will decide on a small exit to seek a save harbor for their personal and financial investments.

[thomasgr]

I got my @therooststand today from my @kickstarter campaign last year. Very happy! great job! #rooster #laptop #kickstarterproject #kickstarterproject #working

[thomasgr]

2016 Predictions for VCs and Startups

It’s the time of the year to blog about predictions for the new year.

1. The end of the unicorn era

The new year will mark the end of the unicorn era investment strategy. Private Investors will stop believing in ever increasing valuations until an IPO in the far future. Private equity and late stage VCs will become more careful investing in those 130+ companies valued above $1B. While fueling the late stage high valuation rounds will come to a slow down the high fundings in early stages will too. Unsurprisingly corporations, who invested in those companies in recent years, will stop doing so. They are slow in learning but they will do eventually.

2. Corporate investments will change

Following the education of corporations as investors in late stage companies, the corporate investment activities will change. Corporations will still be active in startup companies but they will rethink how they do it. Some corporate VCs have lowered their number of deals already. The end of corporate accelerators and incubators have been discussed lengthy in other publications. Instead of equity investments corporations will do what they can do best: partner with young, agile companies. Finding beneficial cooperation models by reselling and/or bundling their own product portfolio with those of startups will get more into focus in 2016. Fintech is a good example already where startups are looking for partnering with traditional banks to increase their customer access. Transferwise, Funding Circle and Gini are just the tip of the iceberg but this strategy will lead the development for 2016. Same is true for mobility sector and insure-tech.

3. Internet giants take over the commodity

Banks in Germany listed Internet giants like Apple and Google most likely as their competition in digital payment and banking services for 2016 rather than fintech startups. The success of Apple Pay is proving this thread. However the ownership of eyeballs and distribution platforms is having an impact in several industries as we see in publishing where facebook is taking over the distribution of news content. In entertaining they also lead with the success of Amazon Video versus Netflix and Apple Music versus Spotify. Even in logistics Amazon is challenging Fedex as well as Uber. Everything what can be commoditized will be commoditized which leads to the dominance of horizontally built Internet companies over vertical focused startups. Another reason why unicorns will see the end of their era coming.

4. Technology will overtake common expectations

In 2015 we have seen a lot of engineering development which is making us doubtful about our common expectations in technology. Those are small hints but in 2016 those hints will be more obvious and disturbing at least. Intel is admitting that it might not keep up with Moore’s Law. Private companies will take more and more business and scientific research off from governments. NASA is giving its business to Project X and in health research we see private companies leading the work against cancer and Alzheimer. We see the implementation of autonomous driving by a remote software update in a car. Law makers need to keep up with those developments to think about the usage of this new technologies. Robotics and Artificial Intelligence will further more challenge the philosophical and ethical use of technology. What used to be topics of novels and science magazines in the past will become a daily discussion for the coming years. 2016 will mark the year when all this became mainstream. New ventures will need to think about a society, which needs to be prepared and govern how to use the products of this new generation.

5. Law makers will need to handle the mess

The good and evil in technology will be discussed most prominently on the topics of encryption. If governments and ruling tech companies can not agree on the use of encryption it will be interesting to see how they will discuss AI, robotics and mobility in the future. It has become obvious, that like guns, new technologies will be used by bad guys as well. Preventing the abuse of technology and control access to capacities of technologies will be a challenge for future generations. The fundamental discussions and rules will happen starting with the new year. It looks like encryption is the first example for these discussions and it has become a mess already. I am a believer of privacy and availability of encryption with no backdoors. This is not easy to achieve but a necessity in a free world. But it is just one of the ethical discussions we need to have based on the technology cycle we are in. Dependencies of investments on the results of those discussions will become part of any due diligence in the future for investors.

It won’t be easier to invest in startups based on those conclusions. There are still risks from new influencers. Technology has become more reliable and a lot cheaper. The value of investments is becoming more difficult to be calculated because of more variables being in the game. Investors will need more knowledge outside their core field of expertise as of today.