Some Predictions for 2019

With the end of the year 2018 it’s time for some 2019 predictions.

  • Crypto Goes into Hibernation - Crypto and blockchain technology more widely will undergo a winter with most investors and the mainstream forgetting about the technology. Developers will continue working on it and with the hype gone we will finally start seeing some very useful applications emerge. Ethereum is my bet for the big winner long term here since it seems to have the biggest traction with developers who will be free to experiment outside the public eye.

  • Amazon’s march to world domination continues - I’m still betting on Amazon wherever they go. Even if there is a stock market crash Amazon will emerge stronger than ever and will climb its way back to $1T+ market cap in the coming years. The prescient move to open a 2nd/3rd HQ right outside DC is Bezos playing the long game and looking to neutralize the only real threat he had, government regulation and an Amazon break up.

  • Augmented Reality (AR) - I think this year is when Apple will begin revealing more of its vision and what is been working on around AR. A setup year but one that will herald interesting things to come with AR. My guess is Apple will actually be leading the way into AR and mainstream adoption, not startups unfortunately.

  • Softbank and the Vision Fund - I doubt the recent Saudi Arabia issues will even really slow the Vision Fund down and we will continue to see large investments at jaw dropping valuations.

  • Self Driving Vehicles Rolling out to Consumers - Finally, consumers will have access to on demand self-driving vehicles with Waymo and others beginning live roll outs in select locations. This is the most exciting thing happening in 2019!

  • Tesla - As I write this things seem to be going extremely well with the company having reported a profit in the most recent quarter. However, I don’t think it will be smooth sailing in 2019 for the company, with large financial issues they’ve temporarily swept under the rug hitting them. If the stock market crashes, the cheap capital that has kept Tesla going will vanish leaving them in hot water again.

  • Facebook - Scandal after scandal has hit the company. My bold prediction is we see a large senior leadership exodus, with potentially Sheryl Sandberg moving on to become CEO of another company (Disney?).

Onward to 2019!

Trim

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Overview

Trim is a fintech startup that offers an AI personal assistant that improves the financial health of its users. Services include saving automation, spending analysis and automatic budgeting. Its hottest offering is an automated service that negotiates and lowers a user’s bills. Trim does this with subscriptions such as Comcast cable by using AI to look at billing and pricing trends regionally. It’s customers tend to be younger and more tech savvy individuals, mostly in the millennial demographic. Their next set of offerings will be focused on helping solve debt challenges people have, especially around student loans and credit card debt.

Trim has an interesting business model that takes a percentage of what they save their users by negotiating their cable and internet bills.

The team is currently less than 20 people and is based in San Francisco, CA.

Why I like Them

Automation - the team is hyper focused on automating the personal finances of its users. A long term thesis of mine is the growth of more automatic personal finance since the vast majority of people don’t understand and hate dealing with their finances. Trim recognizes this and is investing heavily in R&D to ultimately become a platform that improves user’s financial health.

The team is also laser focused on their users’ needs and their mission of solving people’s financial problems. In finance and fintech in general to often firm’s are offering a service, but not helping the end user actually improve their financial well being. Trim talks to their user’s weekly to target the next products to build that directly helps them solve an issue they need. As expected with this focus, they have strong traction and growth. Even more interesting, they find that their service is very sticky as they deliver a newsfeed of transactions and information via SMS to their users that is very engaging, so much so that most users stop using their banks app.

Disclosure:  I have spoken to members of the team.

Investor Discussion Series: Ben Narasin of NEA

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Ben Narasin is a Venture Partner at NEA where he focuses on investing in early stage emerging markets and technologies.  His overarching focus in seeking new investments is in his words, “to find founders who make me say wow”.  

Author’s note, Ben is one of the most engaging VC’s I’ve ever been fortunate enough to speak with. If you get a chance to see him speak I highly recommend making it a priority. 

What trends are you currently investing in, especially any that are more under the radar?

There isn’t much overlooked today with so much money and people in the space.  For example, Artificial Intelligence and Machine Learning is popular but every startup claims they have that so you have to figure out who has that for real.

Industrial IoT is a big, interesting category including robotics.  The way I think about the world is different.  Some investors look at one category of things.  I’m more centered around the entrepreneur and finding a vision that makes me say wow.  They show me a new vision of the future.  Its not a category investing method but one based around human beings.

Areas I don’t focus on are crypto, security, cannabis, and medtech.  You need a very specialized expertise to get really good at investing in these spaces.

Blockchain will create a ton of value, but at this point there is so much hype.  Its currently speculation, not investing.  Right now you are over paying because something is on the blockchain.

Right now you want to look at enormous industries that are antiquated and need to be disrupted.  For example, one of my investments, Transfix is disrupting trucker brokerage which is an enormous but antiquated industry.

If something is hot now it’s to late.  You need to be in the business of what’s hot tomorrow.  What’s next is where venture makes its money.   

Where and how do you source your investments?

You find these entrepreneurs everywhere but as an investor we have to see a stunning number of pitches to get there.  Active investors will see over 1,000 pitches a year.  From that you will make 1 or 2 investments.

The best opportunities come from referrals from entrepreneurs you already invested in.  I also make sure I speak at every opportunity I get and stick around afterward for entrepreneurs to talk to me.  

I actually found LendingClub while driving to work listening to the local NPR.  Spent time tracking the founder down.  Pushed until I got to the founder. 

What do you look for when Investing?

I look for 5 things: People, People, People, Great Ideas, Enormous market

When I was a seed investor I funded roughly 80 companies over a decade, half of which raised Series A from tier 1 firms.  The company is proving a thesis off a seed round - Series A is what allows you to build a business

What’s Overhyped today from an investment standpoint?

ICOs and coin based things.   

What’s the key signal or two you look at when thinking you want to invest in an early startup, what ultimately convinces you?

The decision making process is the most important part in venture investing - the outcome is less important than that you had a good process. Luck matters and influences this. 

What are some resources you use to stay up to date on a space?

Go to a lot of conferences and trade shows.  Learn from every meeting.  Even in a horrific pitch there may be some nugget you take away such as a trend or competitor they are up against. I read from books in the library across sci fi, fiction, non-fiction. Read the newspapers.  You do everything.

Any advice to young venture capitalists and angel investors out there in sourcing deals?

I was an institutional seed investor, never an angel investor.  You need to take it very seriously.  Never lose your fear when making an investment.  You do all the work you can to get to a point of comfort.

People obsess excessively over valuation (what you pay and what you sell for are all that matter).   Exercise tremendous discipline.  Its ok to go with your gut but your gut needs to be some level of training, knowledge and experience. 

Any predictions for the next year or two?

Deflation is much more likely than a pop.  No idea how long this will continue.  I don’t invest for something short term.  We invest in companies that can be world class so assume a 7-10 year journey.  Can’t imagine in the next 7-10 years we don’t see at least one correction.

Your job is to wait for the right ball to swing at, wait for the right pitch.  As an investor you aren’t penalized for when you don’t swing but what you strike out at. 

Anything else you think investors or entrepreneurs should know?

It comes down to trusting your gut as long as your gut is based on experience. It’s both science and art.  Early stage is more art than science. Later stage is science. 

Emerging Trends: EMG, the Upcoming Human-Machine Interface

One of the coolest areas of frontier tech that is starting to emerge is Electromyography (EMG).  It’s part of what some firms are coining neurotechnology which is a set of technologies designed to digitize nerve and brain activity. 

EMG is hardware that uses sensors to record electrical activity from muscles.  A more thorough explanation of the science can be found here.  The technology was initially invented for medical applications but lately has been used in computer technologies by using nerve signals from muscle and hand gestures to interact with computers.  On the consumer side this type of technology is being coined intention capture because it interprets electrical impulses from nerves in a user’s muscles. The user doesn’t even need to make the motion but simply think it for their intention to be captured. Seeing is believing as the videos show. 

Two startups that are leading in this space are Thalmic Labs and CTRL-Labs.  The Myo armband from Canadian startup Thalmic labs was on the market for $130 per unit before the startup pivoted and discontinued the product. Reports from users were a lack of use cases and accuracy.  CTRL-Labs technology is still in R&D mode but seems to be able to interpret finer muscle impulses allowing users to type by capturing their intention rather than an actual movement.  They are releasing an SDK and hardware soon. So far the interface is via some sort of control armband, like a big watch band.  However, as the technology evolves its easy to see this shrinking in size and locations available to place it.

Challenges of course remain here, with one of the big ones being humans who have more body fat don’t give accurate reading to the sensors. Another is picking up signals precisely among the muscles in your body.

Most neurotech is to early for any sort of commercial application, but EMG is much closer to mainstream commercialization than the others such as direct brain-computer interfaces. This is because there is no need to break the skin-barrier or insert any sort of chip to create the interface.  I expect to see it talked about in the press and by average people in the next ~5 years.  The market and number of applications for this type of application will also be huge.

I will be watching this area develop closely and am extremely curious as to the applications that are created. 

Emerging Trends: The Future of Food

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With the world population projected to reach 8.5B people in 2030 by the UN from today's population of 7.3B, a crop of foodtech startups and technologies are under development to tackle this immense challenge of feeding such a huge population.  This challenge is further exasperated by the decline of clean accessible water and depletion of nutrients in crop soils global.  Several technology trends are arising to tackle this challenge in different ways.

Indoor Farming

This set of technologies is based on increasing crop density and yield by having perfect control of growing conditions (humidity, lighting, air composition) as well as making use of vertical farming.  The idea, which has yet to be proven economically viable, is to reduce waste of the inputs (i.e. fertilizer, water, energy, etc) while dramatically increasing the speed of crop growth and completely eliminating plant diseases and rot.  More crops more quickly for less cost then current methods is the goal.  The poster child for this set of technologies is startup Plenty which is backed by a number of big name and deep-pocketed investors.  They advertise yields up to 350 times conventional farming techniques with only 1% of the water.

New Methods of Producing Meat

It is well documented that cattle rearing for the world's ever growing hunger for meat products is horribly inefficient and damaging to the environment releasing high amounts of greenhouse gases.  A number of startups have arisen over the last few years seeking to grow artificial meat from cells in a lab environment.  Of these the one that has received the most press and funding is San Francisco based Memphis Meats.  The technology here is basically to use animal stem cells and bioreactors to grow meats in a lab setting that is indistinguishable from the traditionally raised and processed meat we eat daily.  It's a much more complex scientific challenge than it initially sounds.  The advantage is it likely will be much faster, cheaper and efficient pound for pound to produce any type of meat once the technology is developed and scaled.

Farm 2.0 - The Digital Farm

There are a ton of startups focused on improving traditional farming with everything from using drones and software to analyze crops in the field (i.e. Farmers Edge), robotics to replace human workers, software to better manage farm operations (AgCode), and many other areas.  While not as likely as the above two categories to dramatically increase food yields, this is a much faster to implement and less difficult set of technologies to bring to market.  In a word the Digital Farm is a sustaining set of technologies rather than a revolutionary set of technologies.