Searching for the Moon

Shannon Clark's rambles and conversations on food, geeks, San Francisco and occasionally economics

Posts Tagged ‘venture capital’

The business opportunities I see for 2012 and beyond

Posted by shannonclark on June 26, 2012

I see 1000’s of opportunities all around me for new businesses. A few are being pursued by my friends (and even family in a few cases) but most are not being pursued or well funded. Before I list a few of the opportunities which I see let me start with a few disclaimers.

I am not (currently at least) an investor – I don’t work for a Venture Fund or other investors and my personal net worth, such as it is, is tied up in my own company and family. I will mention here many companies and ideas being pursued by friends, invested in by friends and in some cases have family involvement – I’m completely not an unbiased observer of the tech world and do not claim to be one. That said I try to offer constructive criticism to my friends (and family) when asked.

Many of the opportunities I see and the ones I’m most passionate about are likely not the ones that you “should” focus on if you want to have the easiest path to getting funding in the current environment. I will be focusing on sustainable businesses (sustainable in the sense that they can keep going based on pulling in more resources than they expend on a regular basis – in a few cases also sustainable from an environmental perspective) I’m not focusing on what is “hot” or “trendy” or “sought after by investors at the moment”.

I can offer few guarantees other than that a) I will miss at least one billion+ opportunity and b) many of the opportunities I propose will upon being pursued lead to failed companies in many cases.

So disclaimers done here are some of the 1000’s of opportunities I see all around me. I think that many of these ideas could be pursued anywhere in the world – many of them are not limited to a specific geography or a culture (but some are) and these are not just for the “1%” though again a few of them are at least initially targeted at a luxury market. My goal is not to suggest the “best” businesses for the world – or to solve every problem across the globe.

That said I do also fundamentally believe that the best businesses are based on strong values and consistency (and honesty with all stakeholders). Businesses built upon fooling someone (regulators, investors, customers, suppliers, bloggers or other partners) will inevitably come crashing down – leaving destruction in their wake. Absolutely these can be businesses that give the impression of success (and in fact often generate outsized returns for someone – see many firms on Wall Street in recent decades or the stories behind many past booms and busts) but in the long run if your business is built upon fooling someone once that deception is revealed your business (and personal reputation) will likely suffer.

Businesses which are built upon a basis of offering great value to every party involved in the business (including the communities where the business operates) are businesses which are designed for long term success.

So where do I see opportunity?

  1. Streamlined and carefully curated local businesses.
    Far too many small businesses try to please every potential customer – they try to stock something for everyone, try to have a dish on their menu (if a restaurant) for every taste and occasion. In their efforts to please everyone more often than not small businesses (and for that matter big businesses) all too often please no one and furthermore invest too much in aspects of their business which will not pay them back (i.e. in inventory which will go unsold). Instead the successful new retail businesses which I see are most often those businesses which have very carefully curated what they sell – and thus who they sell to. Businesses that may offer only a very small selection of items – but which know those items exceptionally well, offer very high degrees of service and high quality products and experiences. Frequently as well these are businesses that do not try to be the lowest priced offering in their market, instead they have the confidence in their products to offer them at a fair but often high price.

    These opportunities are both for restaurants, cafes and retail businesses of all types. Look around your community and see what is missing. Most of these businesses are unlikely to be venture capital investments – but a few could be – see The Melt for example. Consider as well that most fast food businesses were very streamlined when they started (at least) offering just a handful of items and a consistant quality. While this has changed as many businesses have expanded around the globe it is a lesson worth revisiting.

  2. Curated eccomerce combined with a pre-order and limited edition philosophy.
    Online it is relatively easy to think about businesses that have seemingly infinite inventories – think Ebay,  Zappos, Amazon.com or indeed most of the eccommerce businesses started in the 1990’s. This model is indeed powerful but for long term profits it requires vast numbers of customers (to attract eventually a buyer for everything in your warehouses) and it requires fairly significant investments into warehouses and inventory (or in Ebay’s case a network of sellers that handle these issues).

    But there is an opportunity that I think too many investors are reluctant to invest in but which is a brilliant and long-term game changing model to consider – sell only a handful of items almost all of which you have pre-sold and which you limit the number of to command higher margins and minimize inventory complications. Think the model built upon many Kickstarter projects where 1000’s of customers have paid, in advance, for the products they desire. Now imagine a business that, mostly, only sells things that customers have not just said they are interested in but have taken the bigger commitment of actually ordering and paying for in advance. This business does require a lot of care to get the timing right – you have to know how long it will take you to make the goods you sell and you have to know what your prices will be in the worst case to ensure that you haven’t just sold your entire inventory of something new for less than it will cost you to make. But if you can get that right this model is incredibly powerful (and highly bootstrapable). It also is a model that can be highly sustainable especially if you are selling a product to customers who will likely come back to buy another product from you in the future.

    This model is seen today in a handful of mostly design driven businesses – Threadless, 20×200 but I think the opportunity is actually a lot greater and bigger especially as manufacturing networks shrink and capabilities increase globally for collaboration and production to happen faster and in smaller batches.

  3. Co-operative partnerships to create strong brands and great businesses as well as create compelling content.
    I don’t know of current examples of this idea but here it is.

    Historically great content was supported by a handful of brands that sold goods and services that had a wide market but limited differentiation (think soap companies that started the genre of “soap operas” via their support of early radio dramas). In the modern era however brand advertising on a national scale has become limited to only a handful of mostly very large businesses (still some soap companies, a few banks and insurance firms, car companies, soft drinks and beer companies, drug companies and only a handful of other industries). But at the same time content creation has dropped in cost in many places (other than non-reality show television series) with the proliferation of YouTube channels and other forms of online content across all mediums.

    I think there is an opportunity for a group of new companies to pool their resources and support great content that has a logical association with their businesses, targets a specific niche and which has a long term plan both for content creation and distribution – a plan that will support the business goals of every party involved. This is high risk to be sure as most content sounds better in theory than in practice and building an ongoing audience is never easy – nor is tying that audience back to each of the supporting advertisers/sponsors a trivial issue and this has to happen over a long timeframe and at a level that grows the businesses of every party involved. That said, I think that the opportunity here is massive – something has to replace the 30 second tv spot and the historical model of advertising based content (newspapers, magazines, radio and tv). The costs here also don’t have to be high – this could start with a YouTube channel type of model and indeed we are starting to see this to a degree with some of the current crop of YouTube channels – except that the content and the sponsorship/advertising support for the channels are not tightly connected to each other in the least (and in most cases seem highly random).

  4. Businesses that are not built on offering the lowest price but on offering incredible quality and exceptional experiences. 
    Yes, WalMart will not be failing anytime soon and sure everyone everywhere loves a great deal. But increasingly there is also a recognition that many “great deals” aren’t as good as they at first appear. Cheap clothes that you have to replace every few months quickly cost you more than clothes that will last for years. Food in large bulk containers that end up being tossed away unused and rotting and which contribute to higher health care costs are also not a “good deal” however cheap they appear to be at first. Instead I think there are lots of opportunities in building businesses that charge for the value they provide and use that to grow lasting business. This is a shift back towards quality and craft alongside the customization available at lower volumes. Companies such as San Francisco’s Rickshaw Bagworks illustrate this model.
  5. Businesses that build tools and services that enable other businesses to prosper.
    Okay this is an old fashioned business, it is the modern variation on the don’t be a gold miner be the guy selling shovels and pickaxes. But more fundamentally it is about recognizing that there are in essence only two core types of businesses – those businesses that provide a core element for another business’ success (suppliers broadly speaking) or businesses that sell discretionary purchases that compete to some degree with all other optional purchases (whether optional purchases by corporations or individuals). The first category restricts your pricing to low enough that your customers can still leverage your offerings to in turn make more money from their customers. The second category allows for literally unlimited pricing (or more specifically “as high as the market will bear” but means your customers are likely fickle, more costly to engage with and your competition will continually emerge from new areas you can not anticipate.

    Amazon.com is an example of company that is trying to do both types of business – both be a supplier to 1000’s of other businesses – via both their Amazon Web Services technology offerings and via their Amazon Fulfillment services offering as well as other ecommerce services to 100’s of other businesses and of course as both a large scale consumer eccommerce company and as a publisher and consumer electronics company Amazon sells discretionary purchases directly to consumers.

What other opportunities do you see in the market today (globally or locally)?

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Billion dollar ideas for the next decade

Posted by shannonclark on April 23, 2010

What will be the next set of Billion dollar industries?

In the past week one of the biggest angel investors in technology, Ron Conway, announced that he has closed a new venture fund and he spoke to TechCrunch about what he sees as the opportunities for the next few years, the opportunities he will be investing in with his new fund. He identified three “megatrends” – the real-time data, the social web and flash marketing.

I agree with Ron that these are big trends and that there are many companies already pursuing them but still many opportunities in these areas for new companies to be created and to succeed.

However I think there are a number of other very large opportunities which will be huge in the next decade, opportunities which will transform not just entire industries but how we (and by we I mean people around the globe) live. Some of these opportunities may require massive investments and infrastructure which means that the winners in these spaces will likely be existing large companies that navigate the transition to a new business model though there likely will be opportunities for large, venture backed (and eventually public IPO backed) companies to prosper in these spaces as well.

I’m sure there are other, very large opportunities, but here are a few which I have identified.

  1. Full lifecycle manufacturing – products which are designed to be recycled and reused. Yes, physical goods. As Moore’s Law continues to move forward the pace of technological change is rapidly increasing, manufacturing is increasingly global and nimble yet climate change concerns, the cost of transportation and energy and many other concerns suggests a need to reevaluate many products. My prediction is that across products from cars to toothpaste design for full-lifecycle use will inspire billions of dollars in new products and industry opportunities. Businesses designed to take products after the initial purchaser of the product is done with that good and reusing those products, at scale, to add value and reenter the value chain. This is much much more than just “recycling” it is an underlying shift in design. Done well this is highly “green” but will also be highly profitable with lower costs, multiple revenue streams and ongoing, engaged relationships with customers over the lifetime of the product – whether it is a car or toothpaste or a laptop computer.
  2. Renewal products to extend the usefulness and value of goods. Cars designed just two years ago have technology components which are already massively out of date and limited (20gb disks for the media players in the car). Laptops and desktop computers are typically out of date when you buy them and new models come out from most computer companies multiple times a year. And while the trend for the past few decades has been to replace our electronic devices (and indeed much of our consumer society) on a frequent basis, I think there is a huge opportunity for a new business of retrofitting and updating a wide array of devices. This opportunity is two-fold. The big but complicated part is retrofitting current products – such as cars made in the past decade with modernized electronics. The even bigger opportunity is when the design of products starts to shift to be designed for ongoing upgrades. This has happened in software in the past five years – both desktop and mobile applications (and to a degree server based applications) are almost all now designed to have ongoing and automatically checked for updates which allows these products to upgrade over time. My first generation iPhone is still useful over 3 years later as a result of having been designed to accept significant ongoing updates both for the core software of the device and for the dozens of applications I run upon it (which wasn’t even an option when I purchased the phone initially!)
  3. Many pieces loosely coupled. This is a trend which exists online and offline. In place of monolithic products whether software or hardware the next decade will see many more opportunities to integrate small discrete items together in ways they may have not been designed to be combined or expected to be used. In software the rise of widgets, such as Facebook’s recently announced Social Plugins is an example of this trend. In hardware this trend is a bit slower but there are examples of it in action in the home entertainment center changes of the past few years – the rise of Internet connected devices other than computers within many homes. Most Blue-ray players sold today, for example, come with wired or wireless Internet access and along with the ability to play Blue-Ray disks the ability to connect to Internet delivered services such as Pandora, NetFlix Streaming, Flickr and more. I predict that there are billion dollar opportunities for increasing the types of devices that can connect with each other and for more combinations of hardware and software working together. Specific short term opportunities I see are around Bluetooth devices that are more complex than keyboards, mice or headphones. Eye-fi’s line of wifi enabled SD cards is a great example of how a second part added to an existing device, say a basic digital camera, can transform the functionality of that device.
  4. Hyperlocal but global curated experiences. At first this may sound like a contradiction, how can an experience be both hyperlocal and global? What I mean by this is the emergence of new retail opportunities which combine deep connections and relationships with the local community around the retailer alongside of a global perspective and sourcing. The emergence of Third-wave coffee roasters over the past few years is one great case study. (here’s a list my favorite coffee places  in San Francisco). This trend is not limited to small, nimble entrepreneurs, even large corporations such as Walmart with their recent major switch to sourcing most of the fresh food they sell locally to each store is an example of this trend. But in the next decade I think there will be a major retailing shift & opportunity where hyperlocal smart retailers who deeply know the needs and interests of their local buyers connect to a global network and source parts of what they sell from across the globe, curate these elements carefully and present specific to their community goods and services. In many cases building and finishing these goods locally but sourcing parts and raw goods on a global scale. But increasingly not just sourcing from massive global businesses but buying nearly directly from global producers. Third Wave coffee roasters increasingly buy their green coffee directly from farmers across the globe. These small scale local retailers are able to afford to send buyers around the globe to source their beans and are building highly successful (and highly profitable businesses). Four Barrel Coffee here in San Francisco recently was quoted in a New York Times article on Coffee in San Francisco that their retail business alone is generating over $100,000 a month with a 45% profit margin. Add to that significant margin a large wholesale business and you have a highly successful new business. 45% margins in a retail business can sustain significant growth.
  5. Global brands, local products. New brands and businesses across the globe will with ever increasing frequency in the next decade expand outside of their initial “home” markets into a more competitive global market. The brands which will prosper in this new world will be ones which combine the best of global sourcing with local connections, resources and awareness. In the media space large media brands will emerge that translate media generated in one country & language into another. Viz Media in San Francisco, for example, translates highly successful Japanese media properties (Manga & Anima mostly) into English and has had great success. TOKYOPOP in LA is one of the most successful publishers (in any media) in the US with many of the bestsellers each year from their highly successful English language manga.

There are many other industries which are likely to generate new billion dollar businesses in the next decade but which I know a bit less about – a few of these are Cleantech, Biotechnology especially around drug design,  and Renewable energy.

What other Billion Dollar opportunities have I missed?

Which of these opportunities should I expand upon in future blog posts?

And yes, if you are a venture fund or investor and want to work with me on exploring these ideas in greater detail I’m available…

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