Wow, fascinating post! As a former hedge fund analyst and math geek, I really enjoyed reading this. It’s a little unsettling for the hedge fund industry if a crowd-sourced quantitative hedge fund can perform better in the long-term without any investment analysts.
I wonder if their 2/20 pricing model is sustainable. Fees are coming down in the asset management industry overall and especially for a crowdfunding quantitative fund (there should be little overhead), I could see institutional investors being wary of whether the 2% management fee is appropriate. Roboadvising firms typically charge less than 0.5% management fee (take a look at Wealthfront for example which charges 0.25%: https://www.wealthfront.com/our-low-fees).
Also, I would think about how they protect themselves from capital outflows in this early stage as they’re proving out this model. They are dependent on crowd-sourced talent so it’s possible that the best engineers are not yet on their platform. I would be selective about how much capital they take from investors and put stringent lockups on this capital so that they have time to prove out this model.
I love this post, Smitha. I have had friends who started equity crowdfunding platforms and worked on something similar myself in microfinance so I appreciate the research that you did on this.
I’m curious to know if Kickstarter has analyzed the reason for failure behind the 9% of projects. I wonder if the failure was due to targets that were set unrealistically.
I also wonder how companies that start out with their platform fare in the future. Since investors do not own equity, the funded companies really have no obligation to these “investors” and I wonder how much fiduciary duty they really have in the long-term. I could see a scenario where creative entrepreneurs which no finance background raise funds on the back of excitement/hype on social media just to fund their first prototype for fun and then abandon the project. This doesn’t seem like a sustainable model for long-term investing, and could quickly dissolve in a downturn when consumers become more tight with savings.
I previously worked on a consulting project for a microfinance crowdfunding platform and our project scope was to figure out how to increase assets under management/amount committed by investors. We found that investors saw microfinance as more of a donation than an investment and were investing very small amounts. In order to grow, we found that the platform needed to sell the “investment” piece and show actual returns in order to position the dollars committed as a true investment. I think Kickstarter should pursue something similar in order to grow this platform.
Thanks for this post. I have a family member who has suffered from arrhythmia in the past and currently has a pacemaker, so this post caught my eye.
While I see the cost benefit of replacing three different devices, I wonder if there is data to support the ability for doctors to better diagnose this condition. I believe in the power of data and but I worry that automated algorithms may allow for doctors to relax their own personal judgement/analysis which may be needed to catch a black swan event. Perhaps MoMe could be a “cyborg” which balances machine intelligence with human judgement (Shivon Zillis from Bloomberg Beta talks more about the potential use cases for cyborgs: https://techcrunch.com/2015/11/26/machine-intelligence-in-the-real-world/).
I also wonder how MoMe can gain traction if the hardware is dependent on integration with the existing three diagnostic tools. While I am not familiar with the existing tools, I would think that those companies may want to integrate and analyze their own data rather than have an external party come in and take that margin.
Thanks for the insightful post, Petey S! Burberry is one of my favorite brands and I am a proud owner of their iconic trench coat.
I’m curious about how much data the store employees actually have on the customers and what the “right” way is to use that data. Personally, I really dislike intrusive sales representatives and would prefer to reach out for help when needed. If a sales representative approached me already knowing my past purchases, I might be a bit scared off! I think Burberry should strike a balance between inbound and outbound marketing when it comes to data usage.
I also wonder from a marketing perspective if Burberry will be able to retain its luxury appeal if focuses on millennials through its digital strategy. I’ve seen their new ads with Cara Delevigne and Kate Moss: Cara is one of the most popular social media queens among the young 20-somethings but I’m afraid that her image is not aligned with the timeless classiness of Burberry. In the future, will Burberry be able to continue to sell their expensive, timeless $1,000+ trench coats or will they be selling athleisure to younger consumers?
Thanks for this post, Josue. Very insightful, especially regarding the behind-the-scenes reorganization of the company that needed to happen to drive innovation. I previously worked on a consulting project for a mobile banking platform so this space is familiar to me.
The biggest challenge I encountered in my previous project was how to change customers’ misperceptions about fraud around mobile banking. While I agree that New Newton seems much easier for the customer, there is still a perception that mobile banking is “risky”, especially in emerging markets. I wonder if the “behind the scenes” checks and systems that are done should actually be more transparent so that customers understand how the system works and can feel more confident in it. Here’s an example of one company’s fraud prevention strategy: https://techcrunch.com/2011/02/17/clairmail-brings-fraud-management-to-mobile-banking-technology/
Deliciously controversial topic, Saskia! I did not know that Ferrero was such a large global consumer of hazelnuts. Any idea what percentage of the global demand they represent? It seems like they are a large enough consumer to be actually materially increase global consumption of hazelnut.
I agree with you that Ferrero seems to be “looking out for itself” rather than truly being environmentally sustainable. It seems incongruent that the company abides by the vigorous principles of the palm oil charter to source from compliant suppliers yet only aims to achieve 100% traceability by 2020. This reminds me of the Ikea case we just did where a company that serves as a major source of demand for a product should take steps to ensure the sustainability of that product. I wonder if there is a hazelnut substitute that consumers can adapt to, such as an artificial flavoring or even another type of nut. There are startups like Gingko Bioworks which are using technology to “engineer” flavors and scents (http://blogs.wsj.com/venturecapital/2015/03/18/ginkgo-bioworks-raises-9m-to-engineer-food-flavors-fragrances/); Gingko engineers microbes in yeasts to imitate tastes and scents could have long-term positive effects for how we sustainably flavor our food. Changing the product may hurt some fans in the short-term but more environmentally-conscious millennial consumers will be more open the social message.
Amanda, thanks for this informative post. I definitely would not like it if my power turned off in the dead winter at Harvard! I agree with you that one of the imminent potential solutions is to create buffers by storing power in batteries. I would point out however that in talking about batteries, there are two types of batteries which will have different use cases and different impacts on Eversource. Tesla makes lithium ion batteries which are ideal for residential renewables and are good for handling surges in demand (ie. peaker replacement). Other companies like Primus Power make flow batteries which is more useful for grid support: there’s actually lots of opportunities for flow batteries to boost support for an existing old grid rather than building a new substation in the grid, especially internationally (https://www.greentechmedia.com/articles/read/primus-power-raises-25m-to-bring-flow-batteries-to-kazakhstan). I think batteries are a really interesting solution, and I would look further into if Eversource might want to invest in flow batteries for the grid or encourage residential usage of lithium ion batteries.
Thank you for this insightful post on PG&E. As a former energy investment analyst, I previously looked at things from the perspective of the energy infrastructure firms and natural gas producers more so than the utilities. Since supply of natural gas today comes primarily from the Northeast while demand is seasonal and much of demand lies along the Gulf Coast and the South, I would disagree with PG&E’s plan of action 1 to reduce demand for energy infrastructure. If anything, because of threat 1 of power outages due to weather, gas pipeline firms are now seeing increased demand for pipeline projects to transport natural gas supply to the necessary demand centers even during times of extreme weather like the polar vortex. For instance, Williams Companies is building the $3bn Atlantic Sunrise pipeline to connect the Northeast with the South, and many other infrastructure firms are seeing the same demand from customers for new infrastructure projects (https://stateimpact.npr.org/pennsylvania/2016/05/05/atlantic-sunrise-pipeline-gets-a-green-light-from-ferc-and-a-lawsuit-from-enviros/).
Regarding PG&E’s plan of action 1, I am a bit skeptical that they are actually taking steps to increase customer energy efficiency – regardless of PG&E’s actions, the demand for electricity in the US has stayed flat since 2007 (http://spectrum.ieee.org/energywise/energy/environment/us-electricity-demand-flat-since-2007). Much of this has been due to consumer education and price sensitivity: people want lower electricity bills and are now turning off their lights, regulating their homes’ energy usage using technology like Nest, buying energy efficient appliances, etc. I’d like to see some examples of how PG&E might be investing in this area.
Ginger, thanks for this informative post about a truly scary disease that is still too prevalent. I was saddened to see in your exhibit that malaria still affects more than 10% of the population in parts of the developing world. Regarding your first suggestion on next steps, I would think about how to advance solutions for malaria from financiers outside of the Global Fund. The Global Fund, like the Gates Foundation, is a partnership/foundation that provides grants every year but there are now biotechnology and healthcare focused venture capital firms that can contribute investment to this focus area. As an investor myself, I see a lot of opportunity for funders to communicate not just the social impact of funding climate change adaptation programs, but also the potential financial returns.
For example, an Israeli startup called Sight Diagnostics has raised $10mm of funding so far to use computer vision to recognize malaria parasites in blood samples and distinguish them from other diseases (http://www.geektime.com/2016/03/24/meet-the-israeli-startup-that-could-stomp-out-malaria-in-africa-and-india/). According to Crunchbase, both Emery Capital and OurCrowd invested in the company’s Series B and could be funds that are targeting investment into the emerging healthcare space (https://www.crunchbase.com/funding-round/98405adc0e28d8f2aa4c65dbe96f9148).
Hide, thanks for sharing this post. It’s exciting to hear about the many ways companies around the world, like Tesla and Anglo American, are trying to combat the climate change issue. While I agree that there is a market for FCEVs, I would encourage you to explore what the size of that market opportunity really is, especially relative to the price point for FCEV. Since platinum is such a rare metal, I would be curious to know how its potentially volatile commodity price translates into the price to the consumer for an FCEV. Consumers are extremely price sensitive with car purchases so platinum prices will matter – how will the FCEV producers lock in or hedge the platinum price, if possible?
I would also think about whether or not the market demand for FCEVs will be in the future in the context of our world’s shift to a more “shared’ economy, in which existing assets like vehicles become increasingly utilized and shared. If our world shifts to more ubers/lyfts and more self-driving cars and more car sharing through companies like Getaround, our future total vehicle demand will be lower, causing higher priced options to fall out of the supply curve.