the billion dollar startup club:what technological changes enabled these opportunities to emerge?

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A/Prof Jeffrey Funk Division of Engineering and Technology Management National University of Singapore For information on related issues and specific technologies, see http://www.slideshare.net/Funk98/presentations

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Page 1: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

A/Prof Jeffrey Funk

Division of Engineering and Technology Management

National University of Singapore

For information on related issues and specific technologies, see http://www.slideshare.net/Funk98/presentations

Page 2: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Recent Startups ◦ with valuations over $1 Billion◦ and are still private (no IPO yet)◦ sometimes called Unicorns

97 firms as of June 2015◦ With 19 other firms in list, that exited in recent years due

to IPOs, acquisitions or decreasing value

High valuations mean investors believe these firms are offering something valuable, unique, and hard to copy

Some of them will◦ lead to creative destruction◦ have $100 Billion plus market capitalizations in the future,

like the strongest hi-tech startups: Apple, Google, Amazon, and Microsoft

Page 3: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Some new technologies destroy an existing economic system and create a new one (Schumpeter, 1942)

These technologies ◦ provide significantly higher economic value to users than do

the old ones◦ enable dramatic improvements in economic productivity and

thus living standards (e.g., Solow (1957)◦ create winners and losers at the individual, firm, and

country level◦ have a large impact on our ecological and social

environment (both negative and positive)

Over the last 20 years, Apple, Google, Amazon, and Microsoft have enabled creative destruction

Some members of the Billion Dollar Club will do the same

Page 4: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Understanding the sources of these opportunities can help us understand ◦ sources of creative destruction

◦ where entrepreneurs should search for opportunities

◦ how universities can help students

search for opportunities

and solve problems

These slides focus on technological changes: Which technologies enabled these opportunities to emerge?

What do these technologies tell us about technology change and what might come next?

Page 5: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

The Top 27 Firms as of May, 2015

Company Latest Valuation Total Equity Funding Last Valuation

Xiaomi $46.0 billion $1.4 billion December 2014

Uber $41.2 billion $4.6 billion December 2014

Palantir $15.0 billion $1.0 billion September 2014

Snapchat $15.0 billion $815 million March 2015

Flipkart $15.0 billion $3.0 billion April 2015

SpaceX $12.0 billion $1.1 billion January 2015

Pinterest $11.0 billion $1.3 billion February 2015

Airbnb $10.0 billion $800 million April 2014

Dropbox $10.0 billion $607 million January 2014

Lufax $9.6 billion $488 million March 2015

Theranos $9.0 billion $400 million June 2014

Didi Dache-Kuaidi Dache $8.8 billion $828 million April 2015

Spotify $8.4 billion $921 million May 2015

DJI $8.0 billion $105 million May 2015

Meituan $7.0 billion $1.1 billion January 2015

Square $6.0 billion $495 million August 2014

WeWork $5.0 billion $569 million December 2014

Zenefits $4.5 billion $584 million May 2015

Cloudera $4.1 billion $670 million March 2014

Dianping $4.0 billion $1.4 billion March 2015

Stripe $3.5 billion $190 million December 2014

Jawbone $3.3 billion $531 million February 2014

Page 6: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

http://fortune.com/2015/01/22/the-age-of-unicorns/

Founding Date and Valuation: Many of the Newest Ones are the most Valuable (Jan 2015)

Page 7: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

https://www.cbinsights.com/blog/unicorn-conversion-rate/

It takes a few years to achieve large valuations and do IPO

Thus, larger Percentageof firms foundedin 2009 achieved$1B valuation than more recent firms

Page 8: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

http://qz.com/398090/groupon-still-the-fastest-company-to-reach-a-unicorn-billion-dollar-valuation/

Speed is Good, but not everything (Web Van wentbankrupt in 2001 and Twitter’s star is falling)

Page 9: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

https://hbr.org/2014/04/how-old-are-silicon-valleys-top-founders-heres-the-data/

(August, 2014)

Founders areoften young

Page 10: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Countries with the most $1 Billion Startups (as of February 2015)

http://graphic.valualize.com/v3/full/107/

Page 11: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Source: https://www.cbinsights.com/blog/billion-dollar-startup-venture-capital/

Page 12: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Moving to Technological Change….The Billion Dollar Startup Club by Category

Software, Big Data, Cloud Computing (33)

e-commerce (25)

Consumer internet (22)

Financial services (11)

Hardware: phones, wearable computing (10)

Healthcare (5)

Energy (3)

Entertainment and Games (2)

Aerospace and defense (1)

Real Estate (1), Education (1)

Note: this includesfirms that exitedfor total of 114 firms

Page 13: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Which Technologies Enabled the Opportunities?

Software (33)

e-commerce (25)

Consumer internet (22)

Financial services (11)

Hardware: phones,

wearable computing (10)

Healthcare (5)

Energy (3)

Entertainment and Games (2)

Aerospace and defense (1)

Real Estate (1)

Education (1)

Mostly the Internet (103), with some exceptions

Moore’s Law (and the Internet) (10)

Some science (9)

Page 14: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Only 5 healthcare firms and only 1 firm is bio-tech◦ Theranos – blood test service

◦ Moderna – bio-tech, therapeutics

◦ Intarcia – implanted pump for diabetes

◦ Oscar – health insurance

◦ Proteus Digital Health – smart pill

Only 3 energy firms of which none are solar cell or wind turbine manufacturers◦ Bloom Energy – fuel cell manufacturer

◦ Sunrun – leasing of solar cells to consumers

◦ Fisker Automotive – electric vehicles

Only 1 Aerospace and Defense◦ SpaceX – consumer space service

No nano-technology, display, lighting, integrated circuit, MEMS, human-computer interface startups (types of technologies emphasized by engineering schools)

Page 15: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Growing use of Internet, from desk-top,

laptop, tablet, and smart phone (all over

world)

Increasing speed and bandwidth and falling

cost of Internet (including more free WiFi)

Increasing performance and falling cost of

desk-top, laptop, tablet, and smart phones

Above three drive increases in Internet usage

Above four enable better content and services

including greater diversity of content and

services

Page 16: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Part of this is driven by Moore’s Law

Also driven by cheaper and better displays,

magnetic storage, lasers, photo-sensors,

optical fiber

Most of these technologies are experiencing

>30% annual improvements

These improvements drive

◦ Increasing speed and bandwidth and falling cost of

Internet (including more free WiFi)

◦ Increasing performance and falling cost of desk-top,

laptop, tablet, and smart phones

Page 17: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Software (33)

◦ Cloud computing, big data, online ads, security, database, integration platforms, many types of tools

e-commerce (25)

◦ Mostly mobile sites including specialty sites for fashion, clothing, interior design

Consumer internet (22)

◦ Taxi apps, social networking, food delivery, music, hotels, discount coupons

Financial services (11)

◦ P2P lending, mobile payment, micro-financing

Hardware (10)

◦ Phones, drones, wearable computing, rugged cameras, vision-based driver assistance, thermostats

Other (13)

Page 18: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Cloud Computing: Dropbox, Pure Storage (also hardware),

Nutanix, Jasper Technologies (IoT), AppDynamics, Box

Big Data: Palantir, InsideSales.com, Deem, New Relic

Open Source: Cloudera, Automatic, Hortonworks

Online Ads: InMobi, AppNexus, IronSource

Security: Tanium, Good Technology, Lookout

Database: MongoDB, MarkLogic

Integration Platforms: MuleSoft, SimpliVity

Tools (for individual and enterprise): Zenefits, DocuSign,

Slack, Sprinklr, Actifo, Qualtrics, Shopify, Cloud Flare,

Evernote

Page 19: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Many focus on fashion: better web experience through improvements in Internet and access devices Clothing, accessories: Fanatics, VANACL, Trendy Group, Gilt

Groupe, Mogujie, JustFab, Fab, LaShou, Zalando

Furniture, interior design: Home24, Honest Co, Beibei, FarFetch, Wayfair

Other: Meituan, Warby Parker (eyeglasses)

Many from Asia: growth in Internet in Asia India: Flipkart, Snapdeal, Auiker (mobile classified)

China: Koudai, JD.com

Korea: Coupang,

SE Asia: Lazada Group

Others: Coupons.com, ContextLogic (optimizes adspacefor ecommerce sites)

Page 20: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Greater Specialization: Many E-commerce startups have attacked Portions of Craigs List, one of the first Internet classified ad sites

Page 21: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Taxi apps: Uber, Didi Dache-Kuaidi Dache, Ola Cabs,

Lyft, Grabtaxi

Social Networking: Houzz (interior design), NextDoor

(neighborhoods), Eventbrite (event management),

Yello Mobile (mobile shopping), Lamabang (babies)

Food delivery/restaurants: Delivery Hero, NextDoor,

Zomato

Music, photos, video: Spotify, Shazam, Pinterest,

Snapchat

Other: Tango (video, voice calling), Rocket Internet

(builds online startups), Airbnb (hotels), Dianpping

(discount coupons)

Page 22: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

P2P lending: Lufax, Prosper Marketplace, Social Finance, Funding Circle, Lending Club

Mobile payment: Stripe, One97 Communications, Adven

Micro-financing: Hanhua Financial

Other: Powa (solutions for online commerce), Credit Karma (credit info for consumers)

Page 23: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Wearable computing: Jawbone, Magic Leap

Phones: Xiaomi Drones: DJI Rugged cameras: GoPro Game hardware: Razer Vision-based driver assistance: Mobileye Audio products: Beats Electronics Thermostats: Nest Labs Enterprise storage: Infinidat

Page 24: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

http://techcrunch.com/2014/11/17/lean-hardware-breeding-hardware-unicorns/

Longer List of Hardware Startup (Nov, 2014)

Page 25: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Let’s think about technology change

Which technological changes enabled the opportunities that these firmsexploited?

And what do these changes tell us about the future?

Page 26: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

More than half depend heavily on smart phone (consumer internet, financial services) and other mobile devices such as tablets

Most reflect improvements in Internet and web experience

Many reflect greater specialization in software (open innovation and vertical disintegration*)

Some reflect growth of Internet in new countries: China, India

Some are mostly from Moore’s Law (hardware) and related technological changes

But almost all of these opportunities are indirectly enabled by improvements in electronic components

* Funk, J 2012. The Unrecognized Connection between Vertical Disintegration and Entrepreneurial Opportunities, Long Range Planning 45(1): 41-59, 2012.

Page 27: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Software: cloud computing,

big data, online ads, security,

database, tools

e-commerce: specialty

sites, both product and

location

Consumer internet: Taxi,

social networking, food,

music, hotels, discount

coupons

Financial services: P2P

lending, mobile payment,

micro-financing

Hardware: Phones, drones,

wearable computing

Greater use of smart phones, other mobile devices

Improvements in online experience

Greater specialization in software

Growth of Internet in new countries: China, India

Moore’s Law and related technological changes

Page 28: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Greater use of mobile devices◦ Not just mobile phones

◦ But also wearable computing

◦ New software, e-commerce, consumer Internet, financial services needed for mobile phones, wearable computing

Improvements in online experience◦ Will expand number of product types; fashion will

continue to expand

Greater specialization◦ Cloud computing will grow in importance

◦ Firms and E-commerce sites will outsource software and other activities to specialty sites on cloud

◦ Differential rates of improvement cause some parts of Internet to become a bottleneck and thus drive changes in architecture

Page 29: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Growth of Internet in new countries◦ Growth will continue fueled by falling prices

◦ New e-commerce, consumer Internet, and financial services will be needed in these countries

Moore’s Law◦ These improvements, impacting directly on hardware

and smart phone related services and content

◦ These improvements will enable faster services, more bandwidth and more mobile, wearable, health care, and Internet of Things related devices

More social networking ◦ More e-commerce and financial services will

probably be done on social networking sites

Page 30: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Wearable Computing and Health Care◦ Better and cheaper bio-sensors, ICs, MEMS and

displays are enabling more health care related wearable computing

◦ Big Data services and software will also emerge and will likely provide most of the opportunities

Internet of Things◦ Better and cheaper ICs, MEMS, transceivers (WiFi,

Bluetooth), and energy harvesters are enabling all mechanical products to be connected to Internet

◦ Which products can benefit the most from being attached to Internet?

◦ Big Data services and software will also emerge and they will probably become the biggest opportunities

◦ Who will provide these services and software?

For more info, see: http://www.slideshare.net/Funk98/presentations

Page 31: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

The next step in computing – after smart phones and tablets

One big market for wearables will be health care – monitoring various parts of your bodyFor more info, see: http://www.slideshare.net/Funk98/presentations

Page 32: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Let’s Connect Everything tothe Internet

For more info, see: http://www.slideshare.net/Funk98/presentations

Page 33: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Which forms of wearable computing will succeed?◦ Which parts of the body provide easy to understand

information?

◦ Or yield the most useful health data?

◦ What services can provide useful data?

Which types of Internet of Things will succeed?◦ Which mechanical products or systems will benefit

most from connecting to the Internet?

◦ What services can provide useful data?

How might improvements in electronic technologies change the answers? For more info, see:

http://www.slideshare.net/Funk98/presentations

Page 34: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

What does this analysis of billion dollar startups tell us about opportunities?

Opportunities are emerging in a small number of technologies◦ software, ecommerce, consumer Internet, financial

services, electronic hardware

Entrepreneurs should recognize this fact ◦ and probably focus their efforts in these areas

But they also need to understand ◦ underlying changes that have enabled these

opportunities◦ use knowledge of them to think about the future

and how the opportunities are changing

Page 35: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Help students understand technological change and how they enable opportunities

Although traditional engineering courses cover important aspects of science and math,◦ few opportunities involve new forms of physical science◦ more involve computer than physical sciences◦ but even the computer science involved with the new

opportunities probably doesn’t require a PhD, patents, or qualify as “advance in science”

◦ maybe this is why non-graduates like Steve Jobs and Bill Gates have become leaders

Wearable computing and Internet of Things are big opportunities for engineering schools (and students)◦ Can they help students understand the opportunities? ◦ Or will they teach these subjects just in terms of science and

math?

Page 36: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Example of emphasizing engineering science and math too much can be found in◦ MIT Technology Review’s predictions about

“breakthrough technologies” **◦ All of its predictions involve esoteric science, no

mention of smart phones, Big Data, cloud computing

None of its 40 predicted breakthrough technologies in early 2000s (2001-2005) ◦ Has produced $1Billion valuation

Even market sales in 2013 are small◦ 1 had sales >$10 Billion (smart grid)◦ 2 had sales between $5 and $10 billion◦ 11 had sales between $1 and $5 billion◦ 26 had sales less than $1 billion or were too vague to

analyze ** See “Predicting Breakthrough Technologies”http://www.slideshare.net/Funk98/presentations/2

Page 37: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Business schools probably do an even worse job of helping students understand technological change

The leading entrepreneurship books (and thus courses) provide little insights into technology change

“Opportunities are everywhere,” is widely written and spoken

Moore’s Law and other common knowledge in Silicon Valley is ignored

Instead, books emphasize dominant designs, S-curves, and other general concepts that provide little help

Page 38: The Billion Dollar Startup Club:What Technological Changes Enabled these Opportunities to Emerge?

Understanding technological change is essential for finding opportunities

Universities need to do a better of job of teaching technology change