x.ai and the emergence of the AI-powered application

AI is experiencing an astounding resurrection.  After so many broken promises, the term “artificial intelligence” had become almost a dirty word in technology circles.  The field is now rising from the ashes.  Researchers who had been toiling away in semi-obscurity over the last few decades have suddenly become superstars and have been aggressively recruited by the largest Internet companies:  Yann LeCun (see his recent talk at our Data Driven NYC event here) by Facebook; Geoff Hinton by Google; Andrew Ng by Baidu.  Google spent over $400 million to acquire DeepMind, a 2 year old secretive UK AI startup. The press and social media are awash with thoughts on AI.  Elon Musk cautions us against its perils.
What’s different this time? As Irving Wladawsky-Berger pointed out in a Wall Street Journal article, “a different AI paradigm emerged. Instead of trying to program computers to act intelligently–an approach that hadn’t worked because we don’t really know what intelligence is– AI now embraced a statistical, brute force approach based on analyzing vast amounts of information with powerful computers and sophisticated algorithms.”  In other words, the resurgence of AI is partly a child of Big Data, as better algorithms (in particular, what’s known as “deep learning”, pioneered by LeCun and others) have been enabled by larger than ever datasets and the ability to process those datasets at scale at reasonable cost.

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Lending Club IPO: Nice Guys Don’t Finish Last, and Other Lessons

The superb Lending Club success story is what the startup world is all about: a software-based reinvention of massive and inefficient industry; a product that puts consumers first and delivers undeniable benefits ; and an entrepreneurial mega-hit that brings incredible riches and returns to its founder and investors.

In some ways, Lending Club is a classic Silicon Valley story; in some other ways, it is pretty atypical. As a friend of Renaud Laplanche’s for over 20 years, I have had a chance to witness from up close some parts of his journey with Lending Club. It is full of interesting lessons for entrepreneurs and the tech industry in general:

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The Internet of Things: Reaching Escape Velocity

An edited version of this post appeared on TechCrunch here.  A downloadable version of the chart is available on SlideShare here.

It’s been about 18 months since my original attempt at charting the Internet of Things (IoT) space. To say the least, it’s been a period of extraordinary activity in the ecosystem.

While the Internet of Things will inevitably ride the ups and downs of inflated hype and unmet expectations, at this stage there’s no putting the genie back in the bottle. The Internet of Things is propelled by an exceptional convergence of trends (mobile phone ubiquity, open hardware, Big Data, the resurrection of AI, cloud computing, 3D printing, crowdfunding). In addition, there’s an element of self-fulfilling prophecy at play with enterprises, consumers, retailers and the press all equally excited about the possibilities. As a result, the IoT space is now reaching escape velocity. Whether we’re ready for it or not, we’re rapidly evolving towards a world where just about everything will be connected. This has profound implications for society and how we collectively interact with the world around us. Key concerns around privacy and security will need to be addressed.

For entrepreneurs, the opportunity is massive. Where Web 1.0 connected computers to the Internet and Web 2.0 connected people, Web 3.0 is shaping up to be connecting just about everything else – things, plants, livestock, babies… Each new wave has spun out giant companies (Google and Amazon for Web 1.0, Facebook and Twitter for Web 2.0). Will Web 3.0 create a comparable group of behemoths?

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A Few Non-Obvious Things I Learned as a New VC

I joined FirstMark as a partner a little over 18 months ago now, and it’s been a thrilling ride.  It’s also felt like a steep learning curve: lots of nuances, and lots of institutional memory to absorb.  Below is a glimpse into what I’ve seen happening “behind the scenes” on the VC’s side to the table – stuff that was not obvious to me in my former roles as entrepreneur, angel investor or corporate incubator/strategic.

1.  A real commitment.  Like for many new VCs operating at the Series A level,  the biggest shock to the system was the realization that one gets to make very, very few investments – basically two or three a year.  You quickly find yourself having to choose between a number of opportunities you really like. Making a new investment is a big deal, and a decision that one has to live with for years to come. You also get to work with an entrepreneur very closely, and live up to their level of trust and expectations.  In a way, it feels like a marriage, except one where divorce is not really an option.  There’s an occasionally brutal asymmetry between the fundraising process (which can be quick and intense, especially if it is competitive) and what happens afterwards, which is a lot of hard work over a long period of time.  Both the entrepreneur and the VC would be well advised to get to know who they’re about to work with for the next few years of their lives.  You don’t need to be friends with your VC (although friendships develop over years of working together), but you do need a core of mutual respect and commitment to hard work and excellence, as well as a shared vision of the future.

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NYC: A Natural Home for European Entrepreneurs

Last night I was invited to speak at the inaugural NYC European Tech Meetup.  There are tons of obvious reasons why the NYC and European tech ecosystems should work closely with one another, so a meetup on the topic was long overdue.  Congrats to Alban Denoyel and Anthony Marnell for starting it, and thanks for inviting me to speak, was a lot of fun.  Below are the slides I used – the presentation was meant to be a “State of the Union” of European tech in NYC, a high level overview fit for an inaugural meetup and get the conversation started.

 

Many thanks to David Rogg, our newest associate at FirstMark, for helping me with this.  I’m sure we missed some companies and people – if so, let us know in the comments, and we’ll update the presentation.

The French Startup Ecosystem: At a Tipping Point

I know, when thinking about hotbeds of startup innovation, France doesn’t exactly jump to mind. Sure, there are interesting things happening in European tech – in London, or Berlin (which I covered here). Or Finland. But France? Ask U.S investors and entrepreneurs, and you’ll hear more or less the same thing: high taxes. Impossible to fire people. Government intervention. Language barrier. Fear of failure. Strikes. The country of the the 35 hour law, where people are prohibited by law to answer email past 6pm.

Yet things have started to accelerate meaningfully in French early stage tech, particularly in the last two or three years. I was fortunate to be recently invited as part of a delegation of US VCs and media guests to spend a few days in Paris to meet with local entrepreneurs and VCs, as well as President Hollande and other senior members of the French government. As a Frenchman who has spent his entire professional career in the US, I’m perhaps more cynical than most about those matters, but I came back from my trip genuinely intrigued by the potential of the French tech scene.

For anyone who cares to look, the fairly obvious conclusion is that there’s a huge gap between perception and reality, when it comes to the French startup ecosystem. Very significant progress has been made on all fronts – more interesting startups, more funding, lots more talent rushing into the sector, improved legistation, etc. – yet the word has not caught on.

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The State Of Big Data in 2014: a Chart

Note: This post appeared on VentureBeat, here.

It’s been almost two years since I took a first stab at charting the booming Big Data ecosystem, and it’s been a period of incredible activity in the space. An updated chart was long overdue, and here it is:

(click on the arrows at the bottom right of the screen to expand)

A few thoughts on this revised chart, and the Big Data market in general, largely from a VC perspective:

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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.

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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:

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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.

 

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

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.