Up and to the right…
The buzz words in technology are ever changing as investors flock from one space to another; one model to another. Just as investors couldn’t get enough of business models like social gaming and daily deals a few years ago, today they are just as equally fascinated by big data, enterprise software and mobile payments.
Given the volume of deals we are fortunate to see at Lightbank, I have a bird’s-eye view of these evolving trends. These days it seems as if there is an infinite number of hungry entrepreneurs and talented engineers chasing the American dream. And while I certainly believe that a rising tide raises all boats, I think there is a real danger in being too focused on short-term opportunities within the technology ecosystem.
For the very nature of technology is that the pace of change itself is so swift and so volatile that it’s easy to get displaced if you’re not building something that is sustainable.
Ok, so now that I’ve spent three paragraphs rambling on about what not to focus on, here are a few trends that I think are worth keeping a close eye on. I’ll toss out two.
The first is ecommerce and the second is mobile. If you can invest in something that’s at the intersection of the two, I think you’re home free.
Let’s start with ecommerce. I spent some time recently with a well known New York investor who told me that their firm as a rule doesn’t invest in ecommerce. I was caught off guard and so it took me a few days to truly process the statement. At the time, I remember feeling as if ecommerce was somehow dirty or bad and for a nanosecond, and I actually questioned our own firm’s strategy, which is heavily focused on ecommerce. But that was only for a nanosecond.
I have no idea if search is going to be relevant in twenty years. I can’t tell you if we’re all going to download our music on iTunes. I’m not sure if Siri is going to be around, or the Kindle, or Windows for that matter. But the one thing I am sure about is that e-commerce will do nothing but grow; up and to the right. It’s just too easy, too quick, and too seductive. You have an impulse to buy something and within seconds, with just the touch of a finger, you can search millions of items and buy almost anything. And then poof, like magic, it arrives at your doorstep in a few days (or these days, in a few hours . . .).
As a result, ecommerce has become a massive sector of the global economy with worldwide sales expect to approach $1 trillion in 2013. Equally impressive is the growth rate. While the worldwide economy struggles to gain a few points a year, ecommerce continues to grow at nearly 20% a year, adding $200 billion in new sales in the past year alone!
Maybe the only other trend that I feel equally passionate about is mobile. There are one billion smartphones in the world today. There are five billion cell phones. That means five out of every seven people on the planet has a cell phone. Given the unparalleled growth of smartphones, it’s conceivable that within five years the vast majority of those cell phones are going to be smart.
Imagine the implications of a world where nearly everyone is connected to the internet at all times via their smartphone; a world where every desire and demand can instantly be fulfilled with the push of a button or the tap of a screen.
Companies that have positioned themselves in the middle of these historic trends are going to be presented with unique opportunities in the future. These opportunities will dramatically alter some of our most fundamental habits and rituals: buying products, exploring local communities, managing subscriptions, planning events, buying music and movies, planning vacations, finding local entertainment, and so on.
One of the things that I’m proudest of when it comes to Groupon is that the management team saw these trends emerging and positioned Groupon right in the middle of them. For example, about one third of Groupon’s transactions in October alone were through mobile devices, which makes it one of the largest mobile commerce companies in the world. When you add to that the number of categories that Groupon has entered in the past few years (product, travel, entertainment…), and the new PULL experience where thousands of deals are available on the site anytime of day, the mobile experience of buying something is truly awesome – digitally rich, highly curated, super fast, and most important – relevant based on where you are and what you want at that moment.
Lightbank has made a number of investments in other companies that are positioning themselves at the intersection of emerging trends, just as Groupon had done before them. For example, we recently invested in a company called walk.by that gives boutiques the ability to upload inventory on the fly using their mobile phone and post it for sale on walk.by.
Imagine a storeowner being able to walk the floor and decide which items to promote throughout the web for sale. With the push of a button, using walk.by, he or she can snap a photo, add a description, decide how much of a discount to give, if any, and sell the item. Mobile devices are actually enabling merchants to create rich commerce experiences in just a couple of clicks.
The value proposition for customers is equally compelling. Using walk.by’s mobile app, you can follow a merchant, a brand, or a particular item. Every time something goes on sale that you are following, you get an instant push notification so you can buy it before others.
So now merchants can reward their most loyal customers by giving them the first chance to buy items when they go on sale. And customers, using the power of mobile, can connect with the stores, products, and brands they love in new ways. Truly a win-win.
The possibilities for companies that reside within the intersection of ecommerce and mobile are virtually endless. Long-term growth trends for both are just too powerful to be stopped, making ecommerce that only thing I can think of that will continue to grow.
Up and to the right…