Month: June 2017

A Personal Note

This has been a particularly hectic month for my schedule. As I’m in a rush to get this out, apologies up front for any glaring grammar mistakes.

Themes in this post include:

1. AR/VR/MR
2. A.I. and Robotics
3. Cryptocurrency
4. Stocks
5. Transportation
6. Startups
7. Products
8. Industry Reports
9. Government and World News
10. Video Games and E3
11. Self-Improvement
12. Noteworthy Findings

1) AR/VR/MR

• 2.3M AR/VR headsets have shipped globally with Sony and Samsung as clear leaders each having ~20% market share.
• Microsoft’s Mixed Reality platform will operate across new 3rd party VR headsets announced at Computex.
• Apple made a number of significant VR announcements at WWDC. (For more on WWDC, see the “Stocks” section below.) On a competitive front, ARKit effectively undercut Facebook in the AR platform war and initial impressions suggest Apple’s ARKit is more enticing for serious developers than Google’s Tango. There’s still plenty of time for the competitive landscape to shift as this market grows. At the end of the day, I’d imagine that developers will ultimately migrate wherever the best tools and largest install base or profit pool reside.
• Recent AR/VR sentiment has turned South as some believe that the industry won’t live up to the hype. The case of CastAR, which recently shut its doors, certainly doesn’t help dispel any concerns. Against public opinion, game industry luminaries Michael Howse and Greg Ballard see opportunity and have launched Eleven Ventures.
• AAA titles including Fallout 4 are coming to the HTC Vive in October. While the headline sounds promising, the Vive’s core demographic has probably already played these games and only the most hardcore VR fans will want to play through them again. I don’t expect to see the adoption needle move much until AAA publishers start developing new content for HMDs. Mario Kart Arcade GP VR looks awesome but it’s an arcade exclusive.
• Samsung’s new VR display has nearly 3.5x more pixels than Rift & Vive. This comes as Varjo, a competing VR headset startup, promises “human eye-resolution”.
• Samsung’s Gear VR gets Chromecast, letting users stream VR gameplay to their TVs.
• Google releases 360-degree video heat map to determine what viewers are paying attention to, allowing developers to make better content.
• Microsoft launches Google Cardboard for AR.
• AR startup Meta sues its former head of optics and his company DreamWorld for allegedly stealing trade secrets.
• The Venture Reality Fund partners with Yahoo! Japan to support emerging AR and VR companies.
• Walking between worlds in VR.
• VC investment in AR/VR and AI:

 

2) A.I. and Robotics

• Eric Schmidt suggests that automation will mean more jobs but a change in desired labor force skill set. Exactly what I’d expect to hear from Alphabet’s Executive Chairman. I agree that robots won’t be running factories in 5 years, but expand that time horizon, and I imagine that repetitive assembly line responsibilities will eventually all be replaced. At Boeing, dozens of complex robots are already replacing humans for mundane tasks such as drilling and riveting. More importantly, robots are taking over the sushi industry!
• Element AI, featuring heavyweight talent including Yoshua Bengio, has raised $102 million. This underscores the continued rise of Montreal as a hub for AI tech. Microsoft bought Montreal-based AI startup Maluuba in January.
• Kai-Fu Lee on A.I., inequality, and the future of China and the U.S. as super powers. My views align closely with Mr. Lee’s. On that note, expect more scrutiny around China AI investments in Silicon Valley.
• IBM Research and Samsung develop transistors for a 5-nanometer semiconductor chip which could enable fingernail-sized chips with 30B transistors and perform ~40% faster than current chips.
• A machine will be diagnosing your sickness before you know it.
• Boston Dynamics and Schaft will be added to Softbank’s AI portfolio. Alphabet has had Boston Dynamics up for sell for almost a year.
• MMC Ventures A.I. investment framework.
• A.I. security companies from CBInsights:

3) Cryptocurrency

• As the cryptocurrency market finally starts cooling off, perhaps in part due to recent attacks on cryptocurrency exchanges, GDAX experienced a flash crash in its USD – Ethereum market because someone thought it was a good idea to place a multi-million-dollar sell order at market price. Bravo.
• Chris Dixon’s roundup of crypto token news.
• Bancor raises largest ICO ever at $153M.
• Former Mozilla CEO raises $35M in under 30 seconds for his browser startup Brave.
• The blockchain enters the classroom.
• 10 fastest-growing bitcoin and alternative currency companies based on the Mattermark Growth Score.
• Brad Feld on why initial coin offerings will not be the end of venture capital.
• IBM is building a blockchain-based transaction platform for seven big European banks including HSBC and Deutsche Bank. IBM is also partnering with AIG to develop an insurance policy that uses smart contracts to manage international coverage.
• The Ethereum landscape:

• Most importantly though, Blockchain-related job postings on LinkedIn have more than “trebles” in the past year!:

4) Stocks

• Market
  • Fortune 500 companies represent two-thirds of U.S. GDP with $12T in revenues, $890B in profits, $19T in market value, and employ 28.2M people worldwide.
  • Google, Apple, Microsoft, Amazon and Facebook take top five spots in BrandZ’s ranking.
  • Tech stocks account for ~23% of the S&P 500 market cap.
  • Here are the top 100 companies by revenue vs. profit:

• Amazon has dominated the news this month with the company’s $13.7B acquisition of Whole Foods. A few perspectives on the story:
  • Winners and losers in Amazon’s $13.7B purchase of Whole Foods.
  • Whole Foods will enable Amazon to scale its grocery efforts.
  • Walmart tells some tech companies to abandon AWS if they want its business. Since Amazon claims a leading 44% share of the cloud market, this could pose a serious opportunity for competitors to capitalize on.
  • Expect Amazon to make cashiers irrelevant.
  • Amazon may reduce Whole Foods prices.
  • Compared to Blue Apron, Delivery Hero isn’t threatened by Amazon… Until Amazon decides to focus on the European market. Blue Apron has already cut it’s IPO price range and rumor has it that Delivery Hero will price in the upper half of its price range.
  • Instacart, whom Whole Foods had a 5-year contract with, will be a victim in this deal.
  • Amazon’s key acquisitions and the 15 largest retail M&A deals ever:

• Amazon has made several other business venture announcements that should amplify the value proposition of its existing portfolio:
  • Amazon wants to build a giant beehive for drones. It’s seeking a patent for “multi-level fulfillment centers for unmanned aerial vehicles” that could serve urban areas.
  • Amazon announced Prime Wardrobe, a service that gives Prime members seven days to try on clothing orders at home before deciding what to buy.
  • Twitch gains exclusive broadcasting rights to 20 Blizzard tournaments including Heroes of the Storm Global Championship and the World of Warcraft Arena Championship.
  • Amazon’s “My Mix” is a new feature offering shoppers personalized suggestions of products they might like to buy.
  • The new $5.99/month Prime membership program is Amazon’s latest attempt at attracting more people in the lower-income bracket.
  • Amazon is expanding its lending to small businesses in the US, the UK, and Japan.
  • Amazon and Apple have finally come to an agreement to bring Amazon’s video app to the Apple TV streaming box.
  • Amazon is building a new smartphone that targets emerging markets like India.
  • Amazon Channels allows users to use credentials to access standalone app content for TechCrunch, Showtime, and HBO NOW. No billion dollar purchase price to pay on this deal. Well done.
  • Amazon to make its internal language translation service available to third-party developers as an Amazon Web Services product.
  • After rumors about an Amazon-Slack tie-up, Slack decides to leave Amazon’s $9B on the table and instead raise $500M at a $5B valuation.
• Apple and WWDC
  • Everything Apple announced at WWDC keynote.
  • Steven Sinofsky on Apple’s WWDC.
  • Apple launches HomePod to take on Google and Amazon. Apple is emphasizing its role as a music speaker that could “reinvent home music.”
  • Leaked Apple AR glasses.
  • Apple has paid +$70B to developers since the App Store launched in 2008. Downloads have grown +70% in the last 12 months.
  • Apple has begun manufacturing its Siri-powered smart speaker. The latest home speaker market share snapshot:
•  Facebook
  • Facebook hits the 2 billion user mark.
  • Facebook will be moving its 1.2B WhatsApp users off of IBM’s cloud to its own in-house data centers later this year. Facebook may have plans to expand its cloud presence.
  • Facebook, Twitter, YouTube and Microsoft form a partnership to tackle online terrorist activity.
  • Facebook is talking to Hollywood studios and agencies about producing TV-quality shows by Summer.
  • You will soon be able to subscribe to the news through Facebook.
  • Facebook plans a youth-oriented messaging app that gives guardians control over contacts. Let’s be honest though, kids are smart enough to figure out how to get around parental controls. The game component better be really addicting.
•  Snap
  • Snap Map allows users to view where their friends are in real-time.
  • Snap signed a $100M deal with Time Warner to bring original content and ads to the social media app over the next two years.
  • Regarding market share, Instagram Stories DAU continues to outpace Snapchat DAU:

• You may have heard that Snap Spectacles pop-up vending machines launched in Europe to improve brand awareness. I ran into one in Venice but it didn’t seem to be getting too much attention:

• Google
  • Google hit with a record €2.4B fine after EU antitrust regulators ruled the company had abused its power by promoting its own shopping comparison service at the top of search results.
  • Google adds job listings to search results.
  • Google is launching an educational program designed to teach kids about phishing, internet harassment, passwords, and other internet safety issues. Also see the Silicon Valley billionaires remaking America’s schools.
  • YouTube launches its social video watching app, Uptime (iOS), which features shared viewing sessions. Video consumption is expected to represent 82 percent of internet traffic by 2021 and has been on the rise across nearly all demographics including the 65+ segment:

•  Netflix
  • Netflix plans to spend $6B on original content in 2017, with that number substantially increasing in coming years. Keep in mind that this is a company that already has 50M U.S. subscribers- more than all major U.S. cable providers combined. Netflix realizes that content is king and plans to maintain its lead by creating quality hits across every genre while keeping in mind the preferences of its growing international markets.
  • “Why don’t Spotify and Netflix merge? Both are going to have a tough time competing with Apple & Amazon alone, which will both be a one-stop shop for music, movies, programming, etc, and have leverage to negotiate higher-margin deals with labels and content producers. Don’t think a Spotify ‘media platform’ is going to prevent that from happening.” — Jonathan Kriner, Director, TVision
• Baidu, Alibaba, Tencent, and Asia tech
  • The BAT companies are investing in themes including e-commerce and lifestyle trends.
  • The failure of Alibaba’s mobile OS isn’t surprising as Tencent’s ability to occupy a large part of smartphone users’ time and attention–thanks mainly to WeChat–is a major problem for Alibaba.
  • Alibaba invests another $1B in Lazada and acquires ZTE’s cloud division.
  • Asian companies have doubled investment in Europe’s tech sector since 2014.
  • Chinese smartphone makers are increasingly targeting overseas markets because their home market is already saturated. Onlookers will be curious to see whether any evolve into brands that are capable of competing against the likes of Samsung and Apple in the premium segment.
• Other tech news
  • Toshiba and Western Digital are still at one another’s throats over the sale of Toshiba’s flash memory unit. In the latest move, Toshiba has decided to sue Western Digital for $1.1B for interference with the sale. You can be sure that legal disputes between the two will escalate, thus delaying or even disrupting the $19B sale to the Development Bank of Japan + Bain consortium.
  • Verizon has officially closed its $4.5B acquisition of Yahoo.
  • More than 30 banks are rolling out Zelle, a fee-free peer-to-peer payments system that provides instant withdrawals. It sounds similar to other peer-to-peer payment services like Venmo but without the fee structure.
  • Samsung is set to launch the Galaxy Note 8 in August and files a patent for a smartphone case that wirelessly charges a smartwatch.

• Non-tech news
  • Jeff Immelt, GE’s chief executive, is stepping down after 16 years. “Every job looks easy when you’re not the one doing it.” GE has begun testing autonomous drones and robotic “crawlers” to inspect refineries, factories, railroads and other industrial equipment.
  • Dan Loeb’s Third Point takes a $3.5B stake in Nestlé urging the company to improve margins and spin off L’Oréal. Néstle recently took a stake in US meal-delivery startup Freshly which will compliment Néstle’s healthy foods portfolio while providing Freshly an opportunity to expand its distribution network. Using the Sony Entertainment spin-off campaign as an example, Third Point’s activist efforts abroad haven’t always worked out but Néstle seems to be more receptive towards collaborating with the firm as Dan Loeb’s pitch seemed, dare I say, management friendly. Given that Third Point’s stake is <2% of Néstle’s market cap, the firm will be viewed as a partner vs. activist investor.

5) Transportation

• Uber
  • If we’re keeping score, Uber is now missing its CEO, COO, CFO, CMO, VP of Engineering, and general counsel. Lyft has done a great job taking advantage of Uber’s current positioning including improved app features, the release of its diversity report, and the company’s Round Up & Donate campaign. Lyft’s differentiation through ethical marketing shines a spotlight on Uber’s recent failures. Time will tell how much of Uber’s install base cares enough to transition over to Lyft.
• SpaceX
  • Elon Musk shares his plans for the colonization of Mars and thinks we could be there by 2023… Which means 2028 may be a more realistic estimate given his timely track record.
  • SpaceX’s Dragon cargo capsule reaches the ISS, and more recently, successfully executes a back-to-back launch within 48 hours.
• Tesla
  • Tesla to manufacture cars in China to avoid 25% import duty as the country accounts for ~15% of sales. Additionally, the company plans to invest $32.7B in electric vehicles over the next five years. That’s 40 percent more than Daimler and Volkswagen combined.
  • The company’s model Y crossover SUV is set to launch in 2019.
• Connected cars
  • IBM is pairing with BMW to market connected car services. Last year, IBM announced a similar deal with General Motors.
  • Looking forward to testing BMW’s car-sharing service when I move back to Seattle.
  • Avis to manage Waymo’s autonomous car fleet while Apple is leasing vehicles from Hertz to test self-driving tech.
  • Operating under the Zenuity brand, Nvidia partners with Volvo and car safety firm Autoliv to develop self-driving systems. Nvidia also announces an expanded partnership with VW which expands beyond autonomous cars and into areas like robotic enterprise applications.
  • Apple is interested in an autonomous driving “system,” suggesting the company may want to power lots of cars versus build one.
  • Ride-hailing and electric cars will kill Big Oil. The cost to hail an autonomous, electric car will make gasoline obsolete.
  • Chicago taxi revenues have fallen 40% in the last 3 years.
  • >750k electric vehicles were sold last year with 40% of sales coming from China.
• Leaders and laggards in self-driving cars:

6) Startups

• Sam Altman and Reid Hoffman on scaling a startup.
• Top accelerators ranked and what’s on their mind including virtual assistants and smart buildings.
• Kauffman Fellows announces its newest class.
• Which VCs are actually succeeding in making money?
• KRFT provides musicians with a modular, digital instrument; allows users to build their own interfaces. As someone who enjoys dabbling in music production, I’m looking forward to checking this out. It plugs directly into Ableton Live, which is a plus.
• China-based bike-rental service Mobike raised $600M and is set to launch in the UK, its first overseas market. The company is aiming to launch in 200 new cities around the world by the end of the year. Bike sharing is growing so fast in China that it is hindering Didi’s growth.
• Hyperloop startup Hardt Global Mobilityhopes to launch a commercial hyperloop between Amsterdam and Paris in 2021.
• Real estate as a service companies like AirBnB and WeWork add value by decoupling the service from asset ownership. This has me wondering what other business models are ripe for disruption in a similar manner… Airlines? Shipping?
• Palmer Luckey and Peter Thiel have teamed up for “a company that is developing surveillance technology that could be deployed on borders between countries and around military bases”.
• Blue Apron hoped to raise $480M in an IPO but that number will drop drastically given the recent adjustment to the IPO’s pricing range. I’m interested in seeing how this company goes after the 45+ demographic– a segment I would argue will be much more difficult to grow provided 1) a lack of awareness awareness, 2) relative adversity to technology, and 3) many of them have families and have probably already developed a kitchen routine that works for their lifestyle.

• Vice Media has raised $450M at a $5.7B valuation.
• Houzz raises $400M round at a $4B valuation.
• Coursera raised $64M at a $800M valuation.
• Dynamic smart glass company View raises $200M and sells electrochromic windows that automatically adjust transparency level based on weather conditions.
• Drone Racing League as seen on ESPN raises $20M.

7) Products

• With wireless charging, never again will your wireless mouse run out of power. How many gamers out there actually use a wireless (vs. wired) mouse though?
• GoSmart nears the close of its Kickstarter campaign for an adjustable pillow.
• U-tec launches Ultraloq which can be unlocked using a biometric imprint, contactless key fob, or smartphone.
• QR codes are driving the end of cash in China. When I lived in China, QR codes were used for everything from exchanging cash to buying food at a vending machine. QR codes are super easy to use but the U.S. market needs a catalyst to accelerate adoption. Perhaps a banking standard or new Facebook feature could popularize this technology?

8) Industry Reports

• Mary Meeker’s 2017 internet trends report and the full video presentation.
• Goldman report temporarily spooks tech investors.
• Intel says the passenger economy, or the reinvention of transportation, will be a $7 trillion opportunity.
• China releases a report on the state of the internet.
• The US ranks 28th globally for average mobile internet speeds.
• An interactive chart for rent prices in the U.S. Rent is effectively the modern day tenant system in the mind’s of young professionals. As home ownership becomes an increasingly unlikely option for us provided the rapid escalation in real estate prices within desirable cities, many young professionals have given up on the prospect of ever actually being a homeowner. I wouldn’t be surprised if the acceptance of this social norm has played an important role in the rise of the subscription model and the gig economy. Provided this mindset shift, buying into BMW’s new car-sharing service, getting your shows through Netflix, or even purchasing clothes through StitchFix seems completely natural. Without a home to call your own, one has no roots and is freely available to move around and live where he/she prefers. Furthermore, since traditional concepts of value (like owning a home or car) are no longer realistic near-term goals, it shouldn’t come as a surprise that my generation puts an increased emphasis on travel and experiencing life.

9) Government and World News

• U.S.
  • The Fed raises interest rates for the 2nd time this year.
  • Following President Trump’s withdrawal from the Paris climate accord, Elon Musk announces his departure from presidential councils and other tech leaders expressed their disappointment. With new energy expected to make up 75% of global investment (vs. fossil fuels at 25%) in power generation between now and 2040, there is concern that withdrawal from the Paris climate accord will cripple American business.
  • President Trump hopes to invest $1T in infrastructure.
  • The White House doesn’t believe that China will put pressure on North Korea which may directly impact U.S.-China trade relations- starting with steel.
  • Tech CEOs had a great time developing a “sweeping transformation” of government tech with President Trump…

• • 
  • The U.S. is stealing customers from Russia and Saudi Arabia even with prices as low as $50 per barrel.
  • 

• China
  • China was added to MSCI positively impacting domestic stocks. This is a big win for China as it further legitimizes the country’s influence in the international community.
  • China is set to spend $411B to roll out a super-fast 5G mobile phone network by 2030 with nearly 600 million predicted 5G users by 2022.
  • China’s new cyber-security laws require “important business” data to be stored within the countries border.
  • China and the U.S. account for over half of global growth:

• • 
• Canada
  • Launch Academy’s startup visa program gives entrepreneurs permanent residency in Canada. This program kicks off as the U.S. tightens its visa restrictions on immigrants.
• Greece
  • Greece negotiates another bailout. Many financial services professionals, including Byron Wien, believe that Greece bankruptcy is no longer a serious risk to the EU and that the economy has made progress towards normalizing.
• Finland
  • Finland has shaken off its label as the sick man of Europe and recorded six quarters of consecutive growth for the first time since the financial crisis.
• U.K.
  • Theresa May’s Conservative Party fails to gain a majority after calling for a snap election severely limiting her power and momentum behind Brexit. She also calls for greater regulation of internet companies following a terrorist attack in London and believes internet firms are providing a “safe space” for extremist view.
• France
  • After the Parliament win, Emmanuel Macron has redrawn France’s political landscape. The country’s consumer confidence is at a 10-year high in anticipation of Macron’s labor-market reform program.
• Russia
  • Anti-corruption rallies at the Kremlin put pressure on Russian president Vladimir Putin. The Russian leader recently proposed the privatization of the oil industry.

10) Video Games and E3

• Being in Germany, I didn’t have the opportunity to stop by E3 this year. Almost everyone I’ve spoken with, however, claimed that this year’s E3 was a step backwards with long lines, fewer hits on the show floor, and smaller VR presence than last year’s expo. Consensus among my circles of friends is that Nintendo and Ubisoft won E3. When Mario and the Rabbids makes a top-ten list though, I’m skeptical… If you hold any contrarian thoughts on the matter, feel free to share in the comments section at the bottom of this post. E3 coverage:
  • Trusted Reviews
  • IGN
  • Gamespot
  • Xbox One X will be $500 and supports Xbox One, Xbox 360 and Xbox games. Available 11/7.
  • EA announces new games including Star Wars Battlefront II.
  • Sony has sold 60+ million PS4 consoles.
• Sony gets into mobile gaming.
• Nintendo’s Switch Online service will cost $20 per year and launch in 2018.
• Pokémon Go gets co-op and new gyms.
• SNESClassic launches 9/29.
• The “valve” to (quality?) indie games has been opened… Valve launched Steam Direct which allows anyone to publish for a fee of $100 per game (recouped when earnings pass $100).
• Cloud gaming platform Shadow (aka Blade) raises $57M. The idea of outsourcing GPUs to gamers is one that really clicks with me- especially since a high-end gaming rig can cost $1,500+. Could Shadow be an acquisition target for the likes of a larger player like Sony or Nvidia?
• Tencent is considering a $3B purchase of Angry Birds developer Rovio who is contemplating an IPO.
• It’s no secret that the F2P revenue model has become increasingly popular in the mobile gaming industry. Free-to-play mobile games publisher, Scopely, raises $60M and claims +125M players across titles including “The Walking Dead: Road to Survival”.
• Discord, a gamer chat platform, raised ~$50M. As a user, I’ve been very impressed with Discord’s text and voice chat functionality- will be keeping my eye on the company’s development.
• The Esports market will evolve to include a larger audience interested in casually watching streamers or events. Not necessarily new news, but an important point to reiterate nonetheless.
• Just for the record, gaming is already a $100B market:

11) Self-Improvement

• As individuals, we are prone to overvaluing complexity because we think we are smarter and that we understand certain complex things that other people don’t. In reality, simplicity makes all the difference. Napoleon used simplicity when he was giving orders. That was one of the reasons he was so dominant on the battlefield. He was giving his troops very simple orders because he knew that they will be filtered through people and they would still be simple when they came out. Complex orders filtered through a chain of command almost never work.

12) Noteworthy Findings

• Since 1993, the percent of people living in poverty shrunk everywhere but in Africa.
• The mall of the future will have no stores.
• Youth tobacco use in the U.S. fell to historic lows in 2016. Great news on the surface, but is tobacco being replaced by a substitute?
• The sites which emerged after the Silk Road was taken down in 2013 now do more business than the original. Clearly, today’s youth simply prefer the harder stuff to tobacco.
• Need a new pair of shoes?
• Researchers in Morocco found evidence that Homo sapiens were around 100,000 years earlier than previously thought.
• How to rob a bank.
• How to explain anything to anyone, according to Neil deGrasse Tyson.
• Ancient Rome in 20 minutes and Ancient Greece in 20 minutes.
• Is the universe conscious?