SumAll’s strength is offering a solid value proposition for their customers – data analytics to drive the conversion of leads into paying customers. The company is also well capitalized with more than $13 million raised from premier VCs, including Battery Ventures and General Catalyst, and it began to consolidate the market with its acquisition of TwentyFeet, a social tracking tool.
What worries me is that the barriers to entry are not particularly strong in this sector. I could see social media data analytics become a crowded and commoditized sector, thus putting downward pressure of revenues. I wonder if there is anything beyond the amount of data gathered that gives SumAll a competitive edge. One opportunity for differentiation would be to invest in a strong technical team to develop more advanced analytical algorithms or to expand a suite of products.
It is exciting to see a technology-based business model proving successful in the education space. You raise a number of interesting questions and also show that there are many options for products extensions. As for the value creation aspect, I wonder whether other sources of revenue would be feasible, e.g., partnering with other companies to upsell related products in a targeted way or potentially to sell the data to a third party?
I agree that the barriers to entry are not very strong. Though, this case clearly shows the advantages that come from being the first mover and the value of data gathered over a long period of time. I see a parallel here to the blog post I wrote on data analytics in the insurance sector, where early start on data gathering is a source of competitive advantage.
Overall, I am quite optimistic regarding prospects for Panorama Education. With $12 million in Series A financing from Spark Capital, a leading VC firm, and Owl Ventures, who specializes in edtech investments, the company is well position to take advantage of the edtech opportunity.
Data security is currently on top of minds of many executives and you provide a great example of how data analytics can enhance cloud security solutions! What is particularly fascinating is the increased capability to analyze colossal amount of data and spot emerging patterns in just a short period of time. In my opinion, one area where there still is a strong need for further innovation is the security of mobile devices.
I find the data security sector to be one of the most promising and fastest growing right now. As an example, Palantir, a data security company that performs link analysis to uncover fraud, grew to be the fourth largest privately held company in the world. Netskope has solid venture capital backing, including Accel Partners and Lightspeed Venture Partners and it recently raised $75 million in Series D financing. It will be interesting to watch if it will grow into the billion dollar club.
The online blogging / publishing space appears crowded and competitive. I would be curious to know how the readership market share of some of the most popular online news aggregators compares to that of traditional newspapers. Is this a winner takes all sector? How important is to maintain a distinct “blog DNA” and would size kill authenticity and specialization?
There seem to be an opportunity to consolidate this space, eliminate less popular online news sites and finally create a revenue model that makes sense. If any online platform could be the consolidator, The Medium certainly has the right characteristics. I dig deeper and looked at who is associated with the company: boasting two former Twitter co-founders on its team and an $82M investment from A-class venture firms, including Andreessen Horowitz and Greylock Partners, The Medium has a valuable VC brand association, ample funding, top notch resources and a good shot at success.
It is intriguing to see a successful application of crowdsourcing to mobilize community involvement. Your post is an interesting complement to my post titled “Let’s Crowdsource the Constitution!” that deals with the question whether it is possible to crowdsource more complex decisions at the national level. As an example, I analyze a failed attempt to crowdsourced constitution in Iceland.
The success of Spacehive vis-a-vie the failure in Iceland allows to identify some key lessons for community crowdsourcing campaigns:
• Crowdsourcing is not best suited for complex, multi-step processes. Focus your campaign on a clear target with a defined timeline.
• Tackle projects on a local/regional scale rather than large national issues; do not underestimate the volume and complexity of data that would need to be processed.
• Limit the number and/or format of possible inputs.
• It is a partnership: crowdsourcing local projects in cooperation with local governments could be a win-win deal (think public-private partnerships, or PPP). If local governments are the gatekeepers, get them involved.
I question, however, the speed of the platform’s expansion and its scale. Despite being live for the last five years, at £3.8 million of total funded value the scale of Spacehive is still rather insignificant. I wonder whether greater involvement from governments or a different fee structure could help the platform to scale. One idea could be for governments to use Spacehive to communicate with local communities on regular basis, something like a local virtual bulletin board. That would potentially increase the number of users and could create positive network effects.
KMY, you touched upon a number of important pros and cons of AngelList. Without doubt, venture capitalists whose business has been all about disrupting the status quo see their own industry being reshaped. As the crowdfunded venture capital matures, I expect several trends to emerge:
• It will be fascinating to track returns of AngelList investors over time and compare their returns to that of the traditional VC industry. I believe that there might be a higher loss ratio on AngelList than in the traditional VC. On the investor side of the platform, the pool of inexperienced players will likely grow (especially given the recent changes regarding unaccredited investors), on the startup side of the platform, ideas that might not have received funding in the traditional model due to competition for capital from a limited group of VC, will be kept alive, but perhaps they should not.
• In the environment where SEC has been investigating fee structures of funds (e.g., making money on transaction fees rather than from carry), AL syndicate model charging only carry is certainly attractive. AL might pose challenge to micro VCs who have higher operating costs, yet some of whom might not be all that different from AL syndicates.
• The repeatability of success should still hold. Therefore, over time we might see that certain syndicates will be hard to access. I wouldn’t be surprised if some talented new investors use AL to build track record and eventually graduate to establishing an institutionalized fund. A larger, well-organized fund with appropriate resources offers a promise for meaningful value add, thus being able to attract better deal flow.
• I think the traditional VC model will still hold, as at the end of the day it is still people’s business and face-to-face interaction is important.
Crowdsourced VC is certainly a trend worth following!
Emilie, thanks for your comment. All are valid questions. I believe that the main playground for BzzAgent would still be one-to-one conversations about the product. They bet on the value of a deeper engagement with a consumer, whether to introduce them to a new product, and ideally make them love it, or just to get a thoughtful feedback in return. I do agree though that scaling this platform is likely to pose challenges.
Thanks for your comment. Great point, I agree that signing up new clients might pose a challenge, as adding more Agents creates congestion and potentially limits the opportunities for existing Agents. The way BzzAgent mitigates this problem is by creating a deep sense of community among its Agents. They noticed that agents’ joining spurred new ones to join at even faster rates. The word of mouth marketing works well for their own platform. As for the issue of giving honest feedback: they provide a BzzKit to each Agent with instructions on how to lead a conversation. They also encourage disclosing Agents’ affiliation. There is a threat of a negative feedback, yet this information will likely be reported back to the client, which still serves as a good source of data.
Interesting, thanks for sharing this example! I have used other language learning sites before (e.g., Busuu), but I have not tired Duolingo yet. What is fascinating to me is how certain companies found clever ways to monetize on their platforms by understanding the motivations and needs of their community of users. Duolingo’s users are effectively working for the company without realizing that and are recommending the product to others, brilliant!
It would be interesting to know if language learners tend to multi-home, i.e., whether they use other sites in parallel, thus decreasing overall time spend on any one site. Are there any ways to decrease multi-homing? Also, is it possible to create stronger direct network effects among language learners to create a more sticky service?
Good old Craigslist! Great choice of a subject. I agree with some of the above comments, including the opportunity for specialized sites with modern UI to gain market share. Yet, I don’t think it is the end of the road for Craigslist at all. In fact, I am amazed by the site’s resilience! It is truly incredible that they were able to maintain a massive market share and remain relevant over the years, despite doing a lot of things that should seemingly prevent them from succeeding. Just to mention a few: a simple UI that remained largely unchanged since its early days, low threshold for posts’ quality, absence of prestigious VCs (the only major investor appears to be eBay and that round was completed more than a decade ago), among other.
What if Craigslist’s scrappiness and simplicity is exactly what attracts users and creates strong network effects? Do you really need all the bells and whistles of a specialized site to sell an old IKEA table? In my opinion, this organic feel and authenticity is what makes Craigslist attractive. After all, its founder never wanted to build another billion dollar company; he was just looking to create something useful for its users. This is a good lesson for future founders: first and foremost, create something that is truly relevant for users; bells and whistles will be the creme on your cake.
Angela, this is a valuable post! Thanks for bringing up this important subject. It is great to see that investors’ money is also being channeled into ventures with such positive mission. I hope SmackHigh succeeds and gains more traction among teenagers but I do have some observations and questions about their business model.
First of all, they are a late entrant into a social networking space dominated by a few powerful players. That is a pretty heroic move. However, what I believe might work in their favor is that they are addressing an important problem for many users of other online social networks – the need for a safe environment for teenagers to socialize. The question is though whether these are the parents, the schools, etc. who see the real value in this network (and would prefer to see their children use SmackHigh rather than FB) or whether there will be enough interest from students themselves. Do you have any ideas for how the company could increase network effects?
Another problem might be user attrition, while we tend to maintain FB beyond high school, this would not necessarily be the case for SmackHigh. Additionally, due to its curated model, scalability might be limited.
Finally, there is the question of monetization. What works in their favor is that one side of the platform (e.g., advertisers, TV stations, etc.) are paying clients, yet those who curate the content do it for free just because they are passionate about the mission. This model is somewhat similar to the model I describe in my post on BzzAgent, i.e., a company achieves high margins by leveraging a low-cost network of devoted users.
Interesting post highlighting the fact that a business model that functions extremely well in one geography, might be facing serious hurdles in another one. This post brings me back to my recent visit to Salzburg and my unsuccessful attempt to find Uber. I learned that Uber was banned there. AirBnB’s effective approach to Parisian administration could make for a good case study for Uber who has been fighting against various European governments and recently filed a formal complaint with the EU over national bans.
A key lesson from this post is that no matter how exciting a new technology might be, legal and cultural context in which a business operates, could make it or break it.
Great post! I find FinTech to be one of the most dynamic sectors these days. It is fascinating to watch how digital innovations make cracks in the walls of an industry that for centuries has been guarded by powerful established players. I see some similarities here with the legal industry, the subject of my post, which until recently had also been remarkably immune from major digital disruptions.
Another question that came to my mind while reading your post: can we indeed accurately put a framework and quantify certain dimensions of decision making process. I wonder whether there is an extension of Betterment’s model to other asset classes such as building portfolios of say private equity funds based on algorithms.
Great post! A rather dull company can make for an interesting subject. USPS is an excellent example of how an ownership structure, in this case a federal agency, affects a company’s performance. This opens up a broader issue of innovation, or lack thereof, at government-controlled companies. While applying private company benchmarks to evaluate USPS’ performance would not be appropriate due to serious limitations that stem from operating in a regulated industry, this should not be an excuse for underperformance.
So is there any salvation for USPS? I believe the solution is PPP, which stands for Public Private Partnership. This term relates to the concept of cooperation between government and private entities in their work to deliver a public project or service. PPPs are typically medium to long term arrangements whereby some of the service obligations of the public sector are provided by the private sector, with clear agreement on shared objectives for delivery of public infrastructure and/ or public services. In the post office context, USPs could easily turn to Europe for successful examples. Italian and Dutch postal operators have used PPP to make their vehicle fleets more modern and flexible. Some postal operators in Europe have also established their retail post office business as separate business units with private investors. These solutions allow postal service operators to turn their fixed costs into variable costs, and become more agile. Perhaps PPPs could give USPS a shot at innovation.