Can the Bloomberg Terminal be “Toppled”?

In the eye of some entrepreneurs and venture capitalists, the Bloomberg terminal is a bit of an anomaly, perhaps even an anachronism.  In the era of free information on the Internet and open source Big Data tools, here’s a business that makes billions every year charging its users to access data that it generally obtains from third parties, as well as the tools to analyze it.  You’ll hear the occasional jab at its interface as reminiscent of the 1980s.  And at a time of accelerating “unbundling” across many industries, including financial services, the Bloomberg terminal is the ultimate “bundling” play: one product, one price, which means that that the average user uses only a small percentage of the terminal’s 30,000+ functions.  Yet, 320,000 people around the world pay about $20,000 a year to use it.

If you think that this sounds like a perfect opportunity for disruption or “unbundling” at the hand of nimble, aggressive startups, you’re not alone.  I spent four years at Bloomberg Ventures, and this was a topic that I heard debated countless times before, during and after my tenure there. Most recent example: a well written article in Institutional Investor a few weeks ago declared the start of “The Race to Topple Bloomberg“, with a separate article highlighting my friends at Estimize and Kensho as startups that “Take Aim at Bloomberg“.

Yet, over the years, the terminal has seen its fair share of would be disruptors come and go. Every now and then, a new wave of financial data startups seems to be appearing, attempting to build businesses that, overtly or not, compete with some parts of the Bloomberg terminal.  Soon enough, however, those companies seem to disappear, through failure, pivot or acquisition.

What gives? And where are the opportunities for financial data startups?

Frontal assault: good luck

To start, Bloomberg is not exactly your run-of-the-mill, lazy incumbent. Perhaps I drank too much of the Kool-Aid while I was there, but I left the company very impressed.  Bloomberg, which was itself a startup not that long ago, comes armed with a powerful brand, deep pockets, a fiercely competitive culture, a product that results from billions of dollars of R&D investment over the years, and a technology platform that basically never goes down or even slows down, supported by generally excellent customer service.

But great incumbents have been disrupted before.  So there is perhaps another set of less immediately apparent reasons why the terminal has so far been very resilient to disruption by startups:

1.  It is protected by strong network effects.  One surprisingly misunderstood reason to the long term success of the Bloomberg terminal is that, beyond the data and analytics, it is fundamentally a network.  In fact, it was probably the first ever social network, long before the term was coined. Although some believe that its cachet as a status symbol is starting to erode, “the Bloomberg” (as it is often called) has been for decades the way you communicate with other finance professionals (for legitimate or not so legitimate reasons).  In its relevant target market, everyone is on it and uses it all day to communicate with colleagues, clients and partners. Web based services (Facebook, Dropbox, Gmail), often banned in financial services companies, haven’t made much of a dent in that, at least for desktop communication.

2.  It is an aggregation of niche products.  In the world of financial data, there is enough specificity to each asset class (and subsegment thereof) that you need to build a substantially different product for each, which requires deep expertise, as well as a huge amount of effort and money, to address a comparatively small user base (sometimes just a few tens of thousands of people around the world).  Bloomberg started with fixed income data and over many years, used its considerable cash flow to gradually conquer other classes (still a work in progress, to this day).  So disrupting the Bloomberg is not as “easy” as coming up with a great one-size-fits-all product.  It would take immense amounts of venture capital money to build a direct competitor across all those niches.

3.  It’s not “just” a technology play.  Providing financial data at scale is not a pure technology play, so it is not a matter of coming up with radically better technology to aggregate and display data, either.  At this stage at least, there is a whole web of human processes, relationships and contracts with underlying data providers that has been put on place over many years.

4.  It’s a mission critical product. This is a key point.  In the financial world, data is used to make gigantic bets, so total accuracy and reliability is an absolute must – which makes people cautious when experimenting with new products, particularly built by a startup.

The Bloomberg terminal business may face macro headwinds, as described in the Institutional Investor piece (dwindling of the number of relevant jobs on Wall Street and a global shift from desktop data to data feeds).  However, as a result of the above, I don’t see the Bloomberg terminal being entirely “toppled” by any one given startup anytime soon, and I think even competing directly with any of its key functionalities (unbundling) is a tall order for startups, even with access to large amount of VC money.  Not that it can’t be done – I just think there are lower hanging fruits out there and some real benefit to position away from the Bloomberg.

Where are the opportunities in financial data?

While I don’t see much opportunity for startups to build a Bloomberg terminal replacement (or a a replacement to Thomson Reuters or Factset, to be clear), I think there are fertile grounds “around” and “below” the terminal – meaning in areas where the company is unlikely to want to go.

Specifically, I believe there are going to be ongoing opportunities to apply some of the quintessential internet concepts and processes (networks, crowdsourcing, etc) as well as new-ish technology (Big Data)  to the world of financial data, including:

1.  Finance networks/communities.  Like the Bloomberg terminal did, some of the more interesting “adjacent” plays opportunities will marry data, tools and community.  Historically, capital markets haven’t seen much of a sharing culture (lots of nuances here, I know), which is in part due to the nature of finance investing itself – however, it’s going to be interesting to see how, at least in certain areas, that culture will evolve as digital natives rise in the ranks of their organizations.  Beyond early entrants Stocktwits and Covestor (which generally target a more casual audience), examples of such professional communities include SumZero, initially for Buy Side analysts but now wider, and more recently Quantopian, an algorithmic trading community where scientifically educated people and other quant types share strategies and algorithms.  Early stage startup ThinkNum thinks financial models should be shared and wants to the “Github” for financial models.  What else can be shared?

2.  App stores. The app store model is an interesting way of leveraging the expertise of a “crowd” of specialized third party developers (Bloomberg launched its own a couple of years ago). OpenFin, for example, provides infrastructure to enable the deployment of in-house app stores, addressing the necessary compliance, security and inter-operability requirements (having data flow from one tool to the other). A combination of an in-house app store infrastructure with some best of breed applications (say, a ChartIQ, which provides HTML5 financial charts, including technical analysis tools) is an interesting approach to target the portion of the market “below” the terminal, as  companies that cannot afford a full on terminal infrastructure could pick and choose the apps they need and have them work in their environment.

3.  Crowdsourced data.  From Estimize (which crowdsources analyst estimates) to Premise (which crowdsources macroeconomic data through an army of people around the world equipped with mobile phones), a whole new way of capturing financial data has emerged. Quandl, a financial data search engine, has aggregated over 8 million financial and economic datasets through both web crawling and crowdsourced, community contributions.  Once such a data platform has been built, could third party developers add analytic and visualization tools on top, essentially resulting in a crowdsourced “terminal” of sorts that would be reliable enough, at least for non mission critical, non real time use cases?

4.  Big Data “insights”: Extracting signal from data is obviously the end game here, and interesting startups are heavily focused on those opportunities, from Dataminr (social data analytics for Wall Street) to Kensho (which is working on “bringing the intelligent assistant revolution to finance”). In terms of market positioning, it is unclear to which extent those technologies compete with the Bloomberg terminal (which, for example, has been very active on the social data front), or potentially complete it.

The big question facing entrepreneurs and VCs alike is how to scale those businesses and turn them into billion dollar companies in a context where solidly entrenched platforms have a stronghold on arguably the juiciest part of the market. But overall I believe that we’re only going to see more startups going after financial data opportunities, with potential for some serious wins – I’m excited to see how it all evolves.

Recombine

The field of bioinformatics is having its “big bang” moment.   Of course, bioinformatics is not a new discipline and it has seen various waves of innovations since the 1970s and 1980s, with its fair share of both exciting moments and disappointments (particularly in terms of linking DNA analysis to clinical outcomes).  But there is something special happening to the industry right now, accelerated by several factors:

•      The cost of full genome sequencing has been dropping precipitously, in fact a lot faster than Moore’s law would have suggested.  Illumina just released brand new machines that make the $1,000 full genome sequencing a realistic possibility.  As a result, an extraordinary amount of data is going to become available at reasonable cost (5.5TB or 6.3 Billion bases… per patient).

•      Big Data technology has had its own, separate evolution, and there is now an arsenal of tools to process and analyze massive amounts of data, at a comparatively cheap cost.

•      Wet lab work has become a more standardized and increasingly automated process, considerably reducing the “friction” involved in collecting and processing physical samples. The cost of setting up biology labs, while still high, is starting to decrease, and molecular techniques are no longer the limiting step in genomic analysis.

As a result of the above, biology is rapidly evolving from being predominantly driven by traditional life sciences research to being largely driven by software and Big Data.  This evolution considerably reduces the capital required to build a successful venture in the space.  It also opens up the field to a new generation of startups run by inter-disciplinarian teams that have at least as much of a software and data science background as a biology background.  A whole new world of bio-hackers is also emerging, from synthetic biology to personalized medicine, the possibilities are immense and the impact on our lives potentially unparalleled.  It is entirely possible that the next generation of great entrepreneurs will be building “biology 2.0″ companies, rather than mobile apps.

This opportunity has not been lost on entrepreneurs and the last 3 years or so have seen a rapid acceleration of startup creation, in a wide range of area from diagnostics (Counsyl) to cloud platforms (DNANexus) to lab automation (Benchling, Transcriptic).  Interestingly but not surprisingly considering the above, most of those startups are funded by technology, rather than life sciences, venture capital firms.

Today I’m excited to announce that FirstMark is partnering with Recombine, a New York based startup that very much operates at this intersection between software, Big Data and biology, as its lead Series A investor. Recombine’s CEO, Alex Bisignano, symbolizes this new generation of entrepreneurs who have deep knowledge in multiple technical fields.  He has built around him a great, multi-disciplinarian team, and benefits from the deep industry knowledge and expertise of co-founder Dr. Santiago Munne, the owner of Reprogenetics and pioneer in pre-implantation genetic diagnosis.

Recombine’s core focus is the field of fertility and reproductive genetics, and it has had a spectacular early start with CarrierMap, its first product, generating a profitable multi-million dollar business with a comparatively small seed investment. The CarrierMap test is the most comprehensive, cost-effective, carrier screen on the market, and has already helped thousands of couples to identify and mitigate the risk of passing on serious illnesses to their children.  CarrierMap is sold exclusively through doctors and clinics, it is not a Direct to Consumer product (and therefore falls in a different category than 23andMe).

Beyond this initial focus, Recombine has ambitious plans to fully leverage Big Data technology to help decode the myriad aspects of our genome that are still not well understood. They have already obtained Institutional Review Board (IRB) approval for their first large-scale study, and the company is currently assembling a crack team of data scientists in New York City.  If you have deep expertise in data science field, this is an opportunity to help bring about a revolution in personalized medicine. Come join us!

 

Introduction to the Internet of Things (Video)

Here’s the video from SIIA’s “IIS: Breakthrough” conference that corresponds to the slides in the previous post.  Not necessarily the crispest delivery on this one, but here you go.

Introduction to the Internet of Things (Slides)

I’m doing a talk on the Internet of Things tomorrow at the SIIA’s “IIS: Breakthrough” conference tomorrow, and here are the slides I’ll use.  It’s meant to be a high level introduction to the topic, for a broad audience of “information industry” professionals.  Also used an earlier version of those slides at the WIN Global Innovator last week, which was fun. Feedback welcome.

10 Quick Takeaways from CES 2014

1.  Big brand curved TVs and mega booths are cool, but to me this year’s show was all about the rise of the crowdfunded hardware startup.

 

 2.  It’s official, there are now more wearable wristband vendors than there are human wrists on the planet.

 

3.  The wearables category is still waiting for its disruptive “iPhone moment”.  New releases show nice progress, but mostly incremental.  Smart watches have a long way to go.

 

4.  Accelerating trends on display, still early: family tech and senior tech.

 

5.  The lines between the tech and non-tech worlds keep blurring.  Pizza Hut and Ford both had a very noticeable presence and were pitching their tech innovation.

 

6.  Hardware innovation is truly global.  Some of the most interesting startups I met were from Manchester (UK), Ukraine and Lebanon.  France continues to be very active in the space (Parrot, Withings, Netatmo, Sen.se, etc.). [UPDATE: See below some great 3D visualizations of the latest Withings and Sen.se products, produced by SketchFab]

 

7.  China was left, front and center.  Not just as the “workshop of the world” but, more strikingly, as as a producer/innovator in their own right. The rise of the juggernaut only seems to be accelerating.

 

8.  In home automation, entrepreneurs were talking a lot about AllJoyn, Qualcomm’s open source platform and language, and the AllSeen alliance that is going to promote an open standard for the Internet of Things.

 

9.  In 3D printing, Makerbot is killing it, with its three gorgeous new printers.  Toys still seem to be the killer app for consumer 3D printing, although the new Chefjet chocolate 3D printer by 3D systems was pretty awesome. Consolidation in the consumer 3D printer space seems likely, in the not-too-distant future.

 

10.  Yves Behar and Bre Pettis are incredible creative and entrepreneurial minds, who deserve all the hype they get.  I got to witness this firsthand as a judge on the finals of the first TechCrunch Hardware Battlefield (with Jen McCabe, also very sharp), as they turned the judging into a real time mentoring session, providing  insights that were worth way more than the top $50,000 prize.  Exciting and inspiring.

Mother (click to view in 3D)

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Mother

Withings Aura (click to view in 3D)

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Withings Aura

The Rise of the Female Hardware Entrepreneur

As the fundamentally important debate over women in technology and entrepreneurship rages on (most recently sparked by what Paul Graham said, or perhaps didn’t say), I’ve been intrigued by the comparatively higher proportion of women who seem to be starting companies in one of my areas of predilection: hardware (broadly defined: open hardware, Internet of Things, wearable computing, 3D printing, etc.).

I don’t have much data here, other than my anecdotal personal experience, both as a VC and as the organizer of Hardwired NYC. But, without having to rack my brain for more than a minute or two, a bunch of names of great female founders and/or CEOs in the general hardware space comes up, including, in no particular order:

  • Limor Fried, founder, Adafruit
  • Ayah Bdeir, founder and CEO, littlebits (who spoke at Hardwired NYC last November)
  • Amanda Peyton, co-founder and CEO, Grand St (see her talk at Hardwired NYC here)
  • Jenny Lawton, President, Makerbot (see her talk at Hardwired NYC here)
  • Kegan Schowenburg, co-founder and CEO, Sols (speaking at Hardwired NYC next week)
  • Helen Zelman, co-founder, Lemnos Labs
  • Cheryl Kellond, co-founder and CEO, Bia
  • Monisha Perkash, co-founder and CEO, Lumo BodyTech
  • Daniela Perdomo, co-founder and CEO, GoTenna
  • Mary Huang, co-founder, Continuum Fashion
  • Meredith Perry, founder and CEO, uBeam
  • Julia Hu, founder and CEO, Lark
  • Debra Sterling, founder and CEO, GoldieBlox

And there are many more (both in the U.S and globally), which is exciting.

The question, of course, is why hardware would be an area of particular focus for female entrepreneurs. As a category, hardware is broad, lends itself to all sorts of products, and as a result feels pretty gender-neutral.

Could it be that there are more female role models in hardware, since it is often said that role models are particularly important to female entrepreneurs ? It doesn’t appear that way. Sure, women have run some of the biggest hardware companies in the world (Carly Fiorina and Meg Whitman at HP; Ursual Burns at Xerox) but it’s unclear how much of an inspiration they would be to early stage tech entrepreneurs, and more importantly, a number of software or internet companies have been run by women as well. Perhaps more relevant are female entrepreneurs like Limor Fried, who under her “Lady Ada” moniker has become the closest equivalent to a celebrity in the hardware alpha geek world (and beyond, through her appearance on the cover of Wired in 2011).

What’s interesting is that hardware lends itself particularly well to new entrants – there’s been a big gap in innovation in hardware in the last 10 or 15 years (with some notable exceptions like Apple), and as a result there’s a “missing generation”, and plenty of opportunities for new entrepreneurs to become leaders in what, in some ways, feels like a brand new field.

Curious if anyone can think of an explanation?

Regardless, and to the extent this is indeed a trend, it is particularly exciting and promising, and we should collectively think about how to accelerate it and extend it to other areas of tech entrepreneurship.

*****

UPDATE:

Got some great feedback on Twitter, and while my initial goal was not to be comprehensive here, thought it could actually be helpful to start a running list of female hardware founders  - perhaps it can become a good resource.   Here are the people that were recommended to me, who else should I add? (please add in comments)

First Name Last Name Company Location
Jeri Ellsworth Technical Illusions Bellevue, WA
Kati Bicknell Kindara Boulder, CO
Mary Turner AlertMe Cambridge, UK
Liz Salcedo Everpurse Chicago, IL
Anastasia Leng Hatch New York, NY
Christina Mercando Ringly New York, NY
Ezster Ozsvald Notch New York, NY
Gauri Nanda Toymail New York, NY
Lisa Fetterman Nomiku San Francisco, CA
Laura Berman Melon Santa Monica, CA
Amanda Williams Fabule Fabrications Montreal, Canada
Alexandra Deschamps-Sonsino Good Night Lamp London, UK
Alice Taylor MakieLab London, UK
Natasha Carolan MakieLab London, UK
Becky Pilditch Bare Conductive London, UK
Becky Stewart Codasign London, UK
Bethany Koby TechnologyWillSaveUs London, UK
Emily Brooke Blaze London, UK
Jane ni Dhulchaoinfi Sugru London, UK
Jessi Baker Provenance London, UK
Ana Burica Teddy The Guardian Zagreb, Croatia
Mila Burger Loccie Zagreb, Croatia
Alicia Asin Libelium Zaragoza, Spain

Street Fight Summit 2013: The Billion-Dollar Opportunities in Hyperlocal

I recently got a chance to participate in a panel focused on opportunities in hyperlocal at the 2013 StreetFight Summit, along with Ben Siscovick.  Since they recorded it, here it is, along with a couple of pics.

The Battle For The Connected Home Is Heating Up

Note: This post first appeared in TechCrunch, here.

Almost 15 years ago, a friend of mine at McKinsey spent a few nights writing a document called “The Battle for the Home”. The thesis at the time was that with broadband, the home PC was gradually going to challenge the TV as the core home digital system. Over the following few years, that battle gradually grew more complex, as the home saw the adoption of a new generation of HDTV sets, game consoles, set-top boxes and DVR options. But fundamentally, the discussion was about who was going to control the home entertainment system.

Now, the battle has expanded to the rest of the home. With the emergence of connected devices, the entire home is being reinvented as a data product, opening great opportunities to entrepreneurs.  A whole new generation of startups is rushing in. Nest, with its beautifully-designed home products, has become the poster child for this phenomenon, but many others are producing exciting new connected devices and platforms, at an outstanding pace.

The irony of this market, not always acknowledged, is that a number of large companies with big brands and existing “pipes” in our homes, have been unusually innovative. From connected locks to mobile-controlled home automation platforms, large companies such as GE, Comcast or Philips have been offering connected home products for a while now, sometimes at the risk of cannibalizing their own analog products. As a result, the new wave of connected home startups finds itself in the fairly unusual position of having to not only execute and build consumer brands, but also out innovate dynamic incumbents. The home is once again at the crossroads of a major battle between startups, cable companies, telcos, industrial conglomerates, and large technology companies.

As VC money is starting to pour into the space (SmartThings, August and Arrayent all announced significant rounds just in the last two weeks, as did Quirky, as part of an increased focus on the Internet of Things), a new battle for the home is heating up between startups, cable companies, telcos, industrial conglomerates, and large technology companies.

The first battle for the home was not always kind to startups. Many found that, once past the sheer difficulties of building a hardware product, consumers often preferred the convenience of package deals offered by cable companies to best-of-breed point solutions, resulting in many failures or tepid exits.

While this new generation of startups has an exciting opportunity in front of it, the path to success will also be narrow. To succeed long term, startups will need to maneuver shrewdly among the giants in the space, and do what startups do best: deliver truly ground breaking products, build developer networks, bet on openness and interoperability, and leverage data in innovative ways.

The new household brands

There are plenty of reasons to be excited about the emergence of new connected home startups. For reasons I discussed in an earlier post, there’s been an explosion of activity in the space, initially financed by crowdfunding and now increasingly by institutional money –  SmartThings and August, for example, both just announced large Series A rounds. Each category is seeing rapid innovation: thermostats (Nest), locks (August, Lockitron), security (Canary, Doorbot), lights (LIFX), home automation (SmartThings, Zonoff, Ninja Blocks, Ube, Berg, Twine, Xively, etc.), garden products (Bitponics, Click & Grow), bathroom appliances (Withings), nursery products (Sproutling, in which I’m an investor), and many others.

This is a big opportunity. Beyond the fact that it’s already a significant market ($13 billion, say some estimates), connected home entrepreneurs have an opportunity to create, quite literally, new household brands. The emergence of connected devices is one of those disruptive waves that define entire new product categories. Consumption habits change and reform around a handful of brands that become leaders in the space. Some wonder why smart and ambitious entrepreneurs are scrambling to build products in those seemingly mundane home categories; in fact, those entrepreneurs are attracted like heat-seeking missiles by the opportunity to build category-defining brands. At the current pace, this window of opportunity may not last more than a couple of years, and successful first movers will have a strong brand advantage.

Clearly, the adoption of those connected home products is still largely the province of hobbyists and tech enthusiasts. Interestingly however, large retailers seem to be excited about distributing those products to their mainstream audiences.  Many entrepreneurs I speak with report engaging with some of the biggest players, such as Home Depot, Lowe’s, Staples, Apple stores and AT&T.

While this is not a recipe for long-term success, there’s an element of self-fulfilling prophecy here, where the combination of entrepreneurial energy, investor money and retailer interest could lead to rapid growth for the connected home startups.

Not so fast

However, for all the enthusiasm on crowdfunding platforms and in the press, this is already a crowded space. Many of the existing players are large companies that come equipped with deep distribution networks and a whole ecosystem of service providers that make a living installing and maintaining their products.

First, there are all the incumbents, both in home and energy automation (Crestron, Lutron, Control4, etc) and home security (ADT, Protection 1, Vivint, etc.). Not the most exciting brands? Perhaps.

Second, many large industrial companies have already launched their own connected home products – think, for example, Yale’s Z-Wave deadbolt or the Philips Hue, a smartphone-controlled LED bulb. There are many other examples.

Third, the cable providers and telcos increasingly view home automation as a strategic priority. Comcast (Xfinity), Time Warner Cable, Cox, AT&T and Verizon (FiOS) all have solutions for anything from thermostat and light control to security, accessible through mobile apps.

Last but not least, the large technology companies Apple and Google are already de facto active in the space, as the mobile phone has become the remote control for the connected home. They may want to go deeper. Google’s “Android @Home” effort seems to have faltered so far, but Chromecast is intriguing. Apple is rumored to be interested in the space at the highest level of the organization, and actively meeting with startups. It has been suggested that they should acquire Nest to enter the space and re-acquire the Apple-bred talent there. Microsoft (Kinect), Samsung and HTC all have existing or emerging efforts.

Dancing with the giants

So what’s a startup to do? For those ambitious startups that are gunning for a central position in the connected home, the question is what strategy gets you there faster

One key choice is whether to go “product first” (build a consumer product, like Nest) or “platform first” (build a platform that connects all products, like Revolv). The former involves more hardware, but arguably offers a better chance of gaining rapid sales traction if the product delivers. It is also less of an immediate challenge to most of the large companies in the space. The path to control of the home involves releasing multiple products that connect to one another (which Nest is starting to do with its Protect smoke alarm), and eventually become a platform.

The “Platform First” strategy is more of a software play, and its core value proposition is home automation.  It offers strong long term defensibility if you get there, but the journey is fraught with difficulties.  First, as Lowe’s has learned with Iris and Schlage with Nexia, it is difficult to get consumers to buy and install a “hub”.  In addition, among the early adopters that are likely to do so, a non-trivial portion are Arduino and Raspberry Pi aficionados that prefer to hack their own system.   For mainstream adoption, one avenue for platform players could be to work with home developers and gradually get their systems included in new construction, obviously a long process.   Second, the Platform strategy places startups in direct competition with Comcast, Verizon FiOS and many other large companies that are also vying to become the hub for the automated home, and already have millions of customers.  The bet here for “Platform First” players is that, by promoting openness and interoperability in a way that is harder for large companies to do, they can build a strong network of developers that write to the platform – perhaps starting with hobbyists and the smaller “Product first” companies that need help competing with the “Product first” leaders – the benefit for the customer being that they will be able to connect all their best-of-breed point solutions.

Another key choice, particularly for “Platform First” players, is whether to go consumer (develop your own brand) or enterprise (be an enabling technology for other brands).  Some solid companies have chosen the latter, such as iControl Networks (which powers Comcast’s Xfinity and others) or Zonoff (which powers Staples Connect). Others like SmartThings have been building a recognizable brand in the space, which some large companies could perceive as a threat. My sense is that eventually most startups will need to work with the large companies in some capacity to be successful, so perhaps the question is what strategy puts you in the best negotiating position for a partnership (or an acquisition).

Seven Key Characteristics

Beyond positioning, connected home startups will need to combine several characteristics to build long term value and defensibility. Here is my list of seven.

  1. Design quality is hugely important in transforming those trivial products into objects of desire, and to succeed connected home startups will need to be true “design natives”: Nest, August and Canary are great examples of design done right.
  2. Simplicity of installation and usage will be essential: little effort in, maximum return out.
  3. Mission criticality and strong ROI are key in a space where some products could easily be mistaken for nice to have “gadgets”:  security, health and energy are great categories from that perspective.
  4. In the same vein, startups will need to deliver real innovation.  Simply adding connectivity to a home product doesn’t make it great.  Is the connected product 10X better than its analog equivalent? Or, even better, does it simply not have an analog equivalent?
  5. A multi-product vision and the ability to release successful products back to back will be crucial in building self-standing, long-term successes in the space – obviously, easier said than done.
  6. Software openness and interoperability will be necessary to successfully build developer networks and partnerships.
  7. Perhaps most importantly, startups will need to be true “data natives”.  Many connected devices offer exciting opportunities to build “data network effects”:  each device captures data that, aggregated and analyzed at the cloud level, enables the extraction of insights that in turn make each individual device smarter, through machine learning and predictive analytics.  This is one of the main reasons why the Internet of Things goes much beyond a simple hardware play, and will be a key aspect of the defensibility of the winners in the space: you pay for the hardware, but the software (and data) is what keeps you using the product.

This new battle for the home is just getting started.  It will have many twists and turns, and I’m very excited to see how it all unfolds.

Thomson Reuters CTO Series (Podcast)

Thomson Reuters CTO James Powell runs a great series of podcasts where he interviews people in the technology world about topics of relevance to his organization.  I was fortunate to be invited to speak with James about the Internet of Things and Big Data, and it was a lot of fun.   Below is the podcast, uploaded on SoundCloud.  Thanks to James Powell and Dan Cost for the opportunity.

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