We also have a great panel coming up next Thursday night, Jan. 17, on “How Investors Are Increasing Their Returns Through Collaboration and Technology”.   This is another joint event between HBS Angels of NY and the HBS Club of New York.

I hope you can join us Thursday night at a joint event of the Harvard Business School Angels of New York and the Harvard Business School Club of New York, on "How Top Venture Capitalists Create (and Sometimes Destroy) Portfolio Company Value".  I'll briefly discuss my research study on this topic, and then we'll have an all-star panel speaking.

Christopher Fralic is a Managing Partner at First Round Capital’s New York office, and has focused on a number of the firm’s investments in Advertising Technology, Social Media, Ecommerce, Gaming, Mobile and more.  Mr. Fralic has 25 years of technology industry experience, with significant Internet business development roles since 1996.  Prior to joining First Round in early 2006, Mr. Fralic was VP of Business Development at social bookmarking and tagging company del.icio.us through the Yahoo! acquisition.  Mr. Fralic was also one of the early employees and VP of Business Development at Half.com starting in 1999, and after the eBay acquisition, spent six years with eBay in a variety of entertainment, business development, and media roles.  Mr. Fralic earned his BS in Finance from Villanova University and his MBA from St. Joseph's University in Philadelphia.  You can reach Chris at www.nothingtosay.com and @ChrisFRC.

Dave Tisch is Founder and Managing Director of TechStars in NYC and is an angel investor through the BoxGroup.  BoxGroup is an investor in companies like Boxee, Flavors.me, Goodsie, fab.com, art.sy, Coursekit, Skillshare, GroupMe, DataMinr and many more.  You can reach Mr. Tisch at Tisch@techstars.com and @davetisch.

I’m kicking off a new series on this blog: detailed notes on events of interest to the investing and technology community.  Conrad Wadowski, Business Development at Xamtech, is initiating  with his detailed notes on the inaugural panel of the new Enterprise Tech Meetup.  Livestream video here.

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In startup land, consumer internet startups have gotten quite a bit of media attention. But if you're not interested in the idea of building the next great dating app, there's always the option to turn to the $230b B2B market for pain points to solve.

As companies like box.net, which just raised $50 million, stimulate the imagination of entrepreneurs, corporations are also making an effort to start conversations with early-stage companies.

Given the mutual need, a group of organizers in the greater New York area (myself included) have launched a meet up called Enterprise Technology Innovation that's designed to connect enterprise entrepreneurs with a panel of corporate executives.

Our inaugural event, "Corporations speak: How I think about buying your startup" was live streamed on September 28th from the Cooley office.

Panel:

Moderator: Safa Sadeghpour, McKinsey

Fionna Dodd Simmonds, VP M&A, American Express

Bill Taranto, Managing Director, Global Health Innovation Fund, Merck

Greg Merkle, VP Product Strategy, Corporate Markets, Dow Jones

Michael Monson, Senior VP of Performance & Innovation, Visiting Nurse Service of NY

Ben Boissevain, Managing Partner, Agile Equity

--

Safa Sadeghpour: Through my other life working at McKinsey, I realized there are some real challenges for corporations working on ideas internally. Someone once said there is no monopoly on great ideas. I noticed a lot of passionate and driven people that have had difficulties reaching out to corporations so I thought, let's create an interface to connect the two. While there are a million exciting events for consumer oriented companies, in New York there aren't any for the enterprise, so we started this.

For our first event we wanted to start from the backend. I want to ask about what you see as new trends in the M&A world. Secondly, what makes a startup attractive for acquisition? Is it sectors, stages, geographies, or is it a revenue or growth issue? Thirdly, from your experience what are the big deal breakers?

Fionna Dodd Simmonds, VP M&A, American Express

What are the current trends in start up M&A?

• The point of sale is being revolutionized. 10 years from now you won't use a piece of plastic with a number on it. We're looking for anything having to do that that next step. Of course no one really knows the next step so we dabble in different types of companies to have a foot in the door when we find out the company actually is the next best thing.
• Another is understanding social or behavioral information. Understanding the reason customers transact the way they do through social data. When you use your card, the issuer can typically see where you spend, what time you spent and how much you spend. Having this data can help create value for merchants. The information can then be tied into loyalty programs in a point of sale coupon or deal.
• Any technology that helps us gather data or data analytics is important as we try to understand how customers spend and how we can get them to spend more.
• Emerging markets is hot. US consumer tend to be behind the curve in terms of using their cell phones to transact, whereas Asia is probably ahead of the curve.
• India and China are also significant focuses given the sheer number of people that are unbanked and use their cell phones for many other things such as paying utility bills, transferring money. Being able to tap into that network, and get to those countries logistically isn't easy because of regulatory concerns, and is also very much a hot area for us.

What makes a start up attractive for acquisition?

• This is really the difference between pre-revenue, pre-EBITDA versus EBITDA.
• A lot of times we're looking at companies that are profitable, that have PTI, but these companies are incredibly expensive and so I think that there is a general sense that there tends to be inflated valuations in the sectors we're currently looking at.
• Cost is a very big issue. We're willing to pay for something that's good, but I think there is a general sense that valuations keep going up and up, and we're wondering is that bubble going to burst?
• Companies that have open APIs where you encourage developer community use are interesting for us. One topic we weigh is investment versus acquisition. We can use an investment to get our foot in the door as opposed to doing an outright acquisition.
• IP is actually really important for us. Do you have any patents that are really interesting and that are defensible? We look at IP, which is one of the first questions I'll ask a startup. Are you in the patent process, is there something that differentiates you and that you'd be willing to get a patent for?
• I think a lot of times, even if we're looking at a company that's pre-revenue and the technology is good, but maybe something that we wouldn't want to acquire -- what kind of talent is behind that? And how would they do at American Express? We've looked at acquisitions purely for talent but we have to balance that because we're a large company. I've got into some start up meetings where you're in a tiny room and it's great -- you have people innovating and creating new products, and if you want to do something you hit enter and it happens. At American Express, 17 people have to sign off on hitting the enter button. We don't want to stifle that innovation, so there's a balance, and that's something we consider when acquiring talent.
• We also think about what type of product development pipeline you have for the next 6-18 months. Overall revenue, let's be honest, EBITDA and PTI are important. It's great to have it, it's great to make money, but it's not a deal breaker. A lot of companies that we look at are very small, but have great technology. If we were able to take that and feed it out to our network, we could provide a lot of value.

What are the deal breakers?

• Other than price, operating illegally is actually a big deal breaker. You laugh, but there are a lot of companies that are very small and you can fly under the radar. Maybe you need a license to do something and no one really knows you exist yet. In the financial services industry, you have anti-money laundering and government all over that. Another aspect is succession liability, if we bought it would we still be on the hook?
• Lax KYC or AML standards, know your customer or anti-money laundering for American Express, very important. When you're dealing with transferring money. For example mobile payments has money laundering written all over it, so you have to have good procedures in place to ensure that this doesn't happen. It does' t need to be American Express standards, we understand you're not Amex, but having some processes in place and making an effort is very helpful. Because if not, the cost of getting a company up to speed to where we need it to be is incredibly high.
• Also, an ability to integrate with a bank holding company regulations. This is an American Express specific issue. We are a banking holding company, and because of that, if we own greater than roughly 10% of a company, this may have changed to 5%, but roughly 10% then we have to push out all of our bank holding regulations on that sub regardless of we having a non-voting stake. It doesn't matter, we're still controlled for BHC purposes. Being able to understand how a company can adapt to that. And this is something we usually discuss in negotiations, but the ability to institute those practices is important.
• Finally, one key thing we think about is how do you balance the cost of acquiring a company versus building it ourselves internally. This is a big decision and argument I have to make internally. Why should we go out and spend X number of times EBITDA to buy this company, when we could spend Y dollars to do it internally, and yet it will take 8 months. Where is that trade-off, what's the time to market?

Ben Boissevain, Managing Partner, Agile Equity

What are the current trends in start up M&A?

• Seeing a lot of cross border activity. China's active, India is certainly active. They still see the US as a hotbed of innovation.
• For enterprise IT, cloud is certainly hot, Verizon just bought CloudSwitch. Verizon is a multi-billion dollar company, so everyone is looking at the cloud and figuring out what to do. Also, mobile.

What makes a start up attractive for acquisition?

• As a general statement corporate america has spent four years cutting their R&D budgets and are looking for growth and innovation.
• If you're a startup with revenue, growth and believable milestones, you can become very attractive.
• Another key in early-stage cloud and mobile is talent acquisition. It helps to study the company buying you and it helps to create competition with potential buyers.

What are the deal breakers?

• We've seen deal breakers where the CEO of the talent acquisition doesn't want to stay with the company afterwards. I've also seen it where the seller wants a 1-year term and the buyer wants a 3-year. As management it's better to be upfront about this.
• Financials are also important. You don't have to be audited by E&Y, but you should have your financial house in order. A regional accountant can be enough to look at your financials and make sure you're GAAP compliant.
• Groupon modified their S-1 for the third time and their revenue went down by half. This is because they were booking the money they had to pay to merchants later on as revenue.

Bill Taranto, Managing Director, Global Health Innovation Fund, Merck

• Runs a $250M fund. Doesn't invest in compounds, molecules or traditional products and isn't trying to sell more Merck products. Rather, I try to invest in companies that serve a broad set of clients, even competitors in the healthcare space.

What are the current trends in start up M&A?

• Technology is the fundamental driver of the future of healthcare beyond the pill. What makes up the healthcare market is pay, provider, clinical, regulatory and employer -- the one asset that links each is data. Data is the currency that will be used to transact in the future. All healthcare is driven by outcomes and this is driven by data.
• One component is about access, aggregation, integration, analytics. We have to understand what the patient wants, what the physician wants and how that drives value.
• In terms of investments, we like to see our investments data enabled. Do they capture data, or can they do something with data? You often may hear about data such as electronic medical records, lab data, claims data -- that's a commodity, I can buy that from anyone, this is meaningless.
• What's happening is the creation of new longitudinal data in new service industries that tech is supporting. For example, a remote monitoring company. Who owns that data, how do you get access to that data? Then how do you turn that data into something valuable if you're monitoring a stroke or heart attack victim?
• Another theme is the power of the patient. We're seeing healthcare reach beyond the four walls of the hospital and/or physician office. The home health market is projected to be over $350B in 2020. This will all be enabled by technology. How do we move healthcare to the place where the patient wants it? And then how do you turn it into something of value? This is a tremendous market with high reimbursement.
• Another trend is you hear about personalized medicine. The problem is there isn't something that you'll be able to take that cures you immediately -- this type of technology is 10 to 15 to 20 years away. Just because they've done genome sequencing doesn't mean they know what to do with this.
• When we talk about personalized medicine we talk about how do you affect workflow? Right physician, right place, right medicine, right diagnosis, right treatment, right service around it -- you can do this through the right use of technology.
• Regarding emerging markets, we certainly want to be global. We want to invest globally and we want to be sure our investments can be used globally.

What makes a start up attractive for acquisition?

• Price has a large role, but we think in terms of platform. We want something to be broad based. Many entrepreneurs think very narrowly about a widget, but we want to go beyond this. An example might be diagnostics. Instead of just a one off, we think, can a company do multiple diagnoses?
• Another example is monitoring. We don't care about the device, we care about the platform. Multiple devices, being able to go anywhere and monitor anything.
• Transferrable, we want to go to the emerging markets. The US is the highest paying reimburser in the world. The problem is nothing is transferrable to outside the US. If I can do something at an attractive price point in India or China, that's easy to bring back to the US or anywhere in the world, and that's a big business.

What are the deal breakers?

• Healthcare is extremely complex. Most don't understand regulatory pathways and how to get approval for reimbursement and how to get clinical validation. What we find is that entrepreneurs get so focused on a particular widget that they forget how they will be reimbursed, whether it's out of pocket or through a provider or payer. There has to be some type of FDA approval to get yourself to market. You don't have to get approval yet, just a pathway how to get approval.
• Data enabled. We want all of our investments or acquisition to have a data component.
• Talent. If you don't understand healthcare then you're not going to make a good investment because we're going to have to come in and do it for you. We make pills and sell vaccines -- we don't create remote monitoring or technology companies -- so Merck's goal is not to take over the company. We actually want to set up the company as a separate LLC under the Merck umbrella and keep the talent that's there. We're very interested in not only your understanding of healthcare, but also the business of healthcare.
• The whole goal for Merck is to drive EPS and revenue. We want to use the power of Merck to help it grow to a point were it's actually meaningful. We're a $46B company, and $1M is revenue from a company isn't interesting in the grand scheme. We're looking to see how we drive additional revenue with portfolio companies that is helpful to Merck.

Greg Merkle, VP Product Strategy, Corporate Markets, Dow Jones

• Traditionally Dow Jones is a publisher, but I run corporate markets or the B2B side. While we are traditional publishers that create content such as WSJ, Dow Jones Newswire, Barrons, there is also another side called Factiva that has a heritage going back to 1977 with Dow Jones news retrieval.
• We were one of the first search engines around. Pre-internet so an interesting place to be. We now provide business intelligence tools to corporations by aggregating 38,000 sources.  Instead of crawling or scraping, we typically license content from publishers and pay out royalties.
• We take all those sources and reduce them to a single form of XML and we tag and code it. We categorize by industry, subject, region etc. and now we have a billion article archive. The idea is that you can mine this information. It is all updated by the minute and we have content in 22 languages.
• We serve consultancies, financial institutions, banks, insurance, hedge funds, small companies, healthcare, retail, etc.

What are the current trends in start up M&A?

• The five basic capabilities are searching, alerting, monitoring, analytics, sharing and dissemination, the last two being the hotbed.
• Getting close to the customer and understanding what they do is important to us and critical to our success.
• There is also influence of social tools that are now coming to the enterprise. Think of the enterprise as the next frontier of consumer-like behavior.
• Because as a larger company we can just as easily hurt innovation, what I try to focus on is building an internal innovation center like an agency. The areas I'm focusing on right now is customer intimacy -- we're working directly with consultancies as an example to find out how they work.
• These large enterprises can't seem to build their own tools and are looking for partnerships. In many cases there are gaps in terms of the workflow that they are trying to achieve such as sharing and collaboration. Something as simple as moving document around -- and while we have Microsoft SharePoint and LotusNotes, we've seen lightweight tools such as Dropbox or box.net that address mobility and workflow pain points.
• We're also looking at building rich intelligence tools. Going beyond the search box and into rich monitoring views. We hear about big data. Everything can be measured now. How can I correlate news and the events that are happening now with my hypotheses and analysis? How can I bring that in an actionable dashboard? We're actually dovetailing into a knowledge management strategy that is so far from where we were even a decade ago in terms of information retrieval.
• Big data is a trend, cloud based services is a trend. Also, globalization -- with many major corporations having operating centers around the world there is a need to mine data in different languages and normalize it.

What makes a start up attractive for acquisition?

• Talent for acquisitions is important in the mobile space such as HTML5 and iOS5 early adopters. It's easier to lease talent, partner or acquire it.
• Build versus buy are some of the challenging decisions we have to make. Many of the partners we work with are able to come to market much quicker.

What are the deal breakers?

• IP, copyright issues. Are you violating any? Valuation. You want to keep that founding talent on board -- after all, you're buying skills.

Michael Monson, Senior VP of Performance & Innovation, Visiting Nurse Service of NY

• Nation's largest non-profit home based healthcare company. We do $1.3B in revenue and serve the New York metro area. We're both a payer and provider -- roughly equally split. We have a large payer business that's focused on keeping people in their homes. Also as a provider we do home care, hospice services  in people's homes, focused mostly on the frail and elderly.
• I run our corporate strategy group as well as our innovation office. This is a cross between a venture arm and a development arm. My job is to be on the market place looking for healthcare companies that can provide improved care and outcomes or decrease our cost structure

What are the current trends in start up M&A?

• There is a lot of money in health IT and home health. As a result of this, the valuations in the space have gone up and there are more strategics at play. In the last year Aetna bought Medicity. This type of deal is beyond what most vcs or private equity companies would have been able to pay.
• Behavioral science is also very interesting from a healthcare perspective. People make bad decisions. You would think a diabetic in bad condition would be more compliant about their diet, but shockingly they're often not. We're very interested in companies that allow people to overcome these humps. This is an emerging space and has a lot of promise.
• We are also very interested in informatics, big data, natural language processing which is exciting for the provider space. It would be easier to have a clinician adopt a system where they can take notes the same way they always have and information could simply be sucked out. We're also interested in companies that focus on medication compliance. Many patients simply don't comply and there are a number of new tools that help people with this. Also how do you create an environment that allows you to stay in your home safely and at a reasonable cost.
• Productivity enhancement is another area in healthcare that is a critical factor. If we don't use our scarcest resource, our clinician resource, healthcare costs are going to continue to skyrocket. Clinicians are doing tasks they shouldn't be doing or are not using the skills they have.

What are the deal breakers?

• If building something for mobile you need FDA approval and HIPPA compliance. Engineers build great technologies, but because they haven't spent time studying the customer or consumer, no one may want to use it.
• Many times entrepreneurs haven't tested their products. If you've built something for the home, it needs to be able to work in many different settings.

Q&A

Safa Sadeghpour: When you think about a company, how much value is placed on a product versus validating a market and revenue?

Ben Boissevain: It's more challenging to sell a company that's just a technology. Proving revenue is important, but look at who's buying whom. Smartest client I've ever had, kept a log of who's buying whom and was sold for 14X revenue with only one product.

Bill Taranto: It's good to talk about how broad you can go with your business, and creating a platform -- being able to map out where the business can go. For the most part you'll get a valuation on a single line of business as well as the comps around that.

Safa Sadeghpour: How do you think about equity participation versus acquisition?

Fionna Simmonds: There is no easy answer. Minority investments are hard for us, so the default would be -- is there some sort of partnership or operating agreement we can do, or otherwise acquire it. Sometimes however, start ups have a particular culture and if we feel that is best left alone, incorporating them under the AMEX umbrella is not the best bet. Typically we are not a financial investor, our goal is find out how can we add value and capitalize on that value. Also for an acquisition, is this a technology we want to own outright?

Safa Sadeghpour: Pharmacos have expanded, but there hasn't been that big play by health IT. When do you see this happening?

Bill Taranto: If you look where the industry is going, it's going to happen and fast. The traditional pharmaceutical company is really good at clinical informatics, what we lack is post-market informatics which is where reimbursement occurs.

We know how to get reimbursement for pills, vaccine and consumer products, but when you start to talk about remote monitoring or creating efficiencies in the market, it's all enabled by IT. For us to survive we have to invest in infrastructure and health IT. We're looking at Merck, but also the industry -- how do we help the industry better manage data. Every big pharma company has an informatics strategy right now.

Safa Sadeghpour: I hear about two trends in the market. One is a flight to safety and the other increased valuations of early-stage companies. These seem to be pointed in opposite directions.

Ben Boissevain: I think it goes back to global corporations, they've got large cash balances. What they're missing is innovation and revenue growth. Large corporations are looking for innovative companies because their revenue has been flat on a global basis. The VC and private equity communities are all relatively healthy.

Safa Sadeghpour: How do they find you and create conversations. When you’re looking for advice you get money, when you're looking for money you get advice. How do you approach this in a smart way?

Greg Merkle: The meetup is a great networking opportunity. I've found them to be incredibly fertile -- semantic web meet ups for example. There is someone like me at every major corporation and I'm actively looking for technologies and looking to invest or build. The meetup is on the leading edge and I try to be as open as possible, and will listen to anyone. You have to have an open mind. Email always works great

Michael Monson: I'm very active in health 2.0 and we've gotten a lot of opportunities through here. Every email that comes across my desk, we'll read. Even if it's something that's too early for us, we'll make introductions to venture firms to facilitate the conversation and stay in touch with the company.

( Photo courtesy of pagedooley .)

One attendee, a partner at a Silicon Valley VC, recently attended the demo day of a major Silicon Valley accelerator.  He observed that ER far surpassed “the accelerator who shall not be named” in two areas specifically: the slickness of the pitching companies' marketing, including some very professional videos; and the focus and thought that had gone into the business models of the companies.
Complimenting a tech startup on marketing is a bit of a backhanded compliment, but they’ll take it.

Thanks to our intern Raffi Sapire for her detailed notes below, with some of my thoughts inserted:

Centzy- comparison-shopping for local services

• Less than 25% of local businesses post their prices online, so as consumers we are presented with a challenge when trying to find the cheapest place to get a service.
• On Centzy, you are able to search for a service such as a haircut or oil change, and the results are sortable by price, quality, and distance. Thus, you can find the best and cheapest option within your price range that is near by.
• Unlike other sites, Centzy focuses on everyday services under $100, which they estimate to be a $350Bn market.
• There is also an app in beta.
• Scalable- 15k up front to launch in a new city
• Revenue: long term is lead gen and booking companies. Immediate is ads and citygrid media.
• Achieves $0.40 per click, $4 per lead and $10-$25 per booking

Buzztable- mobile CRM

• Mobile CRM increases customer retention.
• It’s estimated that 80-90% is spent on customer acquisition. This is 7-10x more costly than keeping current customers.
• Restaurants pay a fee to use the CRM tool, and they enter customers cell phone information and text them when their table is ready. This way they are able to collect information about their customers and even offer them a free drink for next time via text.
• They have launched this app at over 4 restaurants and found that 91% give numbers during peak hours.
• Rev= SaaS platform fee.

Web Thrift Store- Online peer-to-peer market

• We all have items in our house that we don’t need and would be happy to donate to charity.
• EBay moves 60Bn but eBay makes it increasingly difficult for people to sell stuff (over 30 steps to posting something on the site!)
• Seller chooses a charity (they have partnerships with four major charities). The seller posts their items online, and when someone has requested to purchase it the seller receives a box and label in the mail. The money the buyer uses goes to charity.
• DT: my concern—this is a lot of work for items which many people will just as easily throw away.

Pricing Engine

• Create free account, import data, receive insights on what they can do to improve
• They make money off of free users. Cost is <$1 per user. Get $70 LTV. Spend <10 customer acquisition.
• Pay per click. Content strategy marketing.
• Raising $750k seed round.

Parking Panda

• Parking is expensive. Go online and rent your space out.
• $20B in parking in the US last year. At a single Ravens game, the team collects $750k from parking.
• 20% transaction fee.
• Driver is charged no fee beyond cost of parking space
• 2 weeks, 117 cars.
• $750k to expand into new cities.

Public Stuff- service request management system

• When there is a pothole, a fallen tree, how to report these issues? Who do you report it to?
• NYC spends $25mm to operate 311.
• Receive, track and assign requests.
• 92% of cities are not using any mobile systems.
• Suite hosted online, portal, CRM and mobile. It hits a backend CRM system.
• License the CRM to customers. The backend system houses all data, which leads to savings.
• $9 to close a request using cities current phone methods. Using Public Stuff costs $0.44
• Submitted per account.
• The system plays for itself within first month of operation.
• Sales and outreach.
• On average, 2-4 months to close a deal. All online.
• In 35+ cities.
• Addressable market of 3.2b internationally.
• Also can be used for facility management companies in the US of 5.3bn dollars.
• Competition charges 210k. They charge 3-40k.
• DT: Impressive wins, but a long sales cycle.

NumberFire - the next generation sports analytics platform.

• Sound actionable analytics for fantasy football owners to make the most educated and analytical decisions they can
• People spend 9hrs/wk on fantasy football.
• $5Bn market in fantasy sports.
• Also could sell data to managers
• The have closed 400k, are raising 750k

LetGive - the first open giving platform.

• 8% of $212bn were made online for charity.
• You can donate to a charity online but these are destination sites you must purposefully go to.
• It provides a platform that connects developers, charities, and consumers.
• Every day, 560 apps are submitted to app store. Crowded marketplace. Differentiate your app by making it also a fundraising vehicle
• Revenue derived from 20% fee on all transactions processed through platform
• 3k downloads and 15k using it.
• City harvest are releasing a mobile restaurant guide. Leave a tip for city harvest in the process.
• Raising funding to build 100 additional apps, 50 partnerships with charities

BespokePost – subscription service for products men want

• Similar to birchbox for men except with “mancessories,” food & drink, and things for home and office
• Chance to access this targeted market (men aged 20-35 who like nice things but don’t want to go shopping) is very valuable.
• $40 per box and it has accessories.
• Scale, increase customer marketing for 500k
• DT: I’m skeptical of this.  It doesn’t have the low COGS of Birchbox, and then it becomes the low-margin distribution business.

Sitesimon – find the content you’ve been missing.

• Push content to people to make good recommendations based on where people have been going.
• 27mm pages shared daily. 60K new websites created daily.
• The average person views about 85 pages daily. It privately analyzes who you browse.
• Seamlessly integrates into browser.
• Content discovery should be effortless and personalized.

We recently hosted an idea dinner on "Disruptive Companies in the Asset Management Industry". 

The most attractive industries to disrupt are highly profitable ones, and asset management is traditionally a highly profitable industry.  IMHO, the most successful disrupters in this area to date have been Vanguard (who popularized index funds) and the ETF industry.  We thought it would be interesting to brainstorm about what are the next great ideas and companies that will/can disrupt this sector, based on the ideas on Clayton Christensen's "Innovator's Dilemma".  The dinner included a cross-section of senior finance executives and experienced tech entrepreneurs.  I've attached below the notes from the dinner in slideshow format. 

For this who don't flip through the slideshow, here are the highlights:

What Do Investors Value? (What Jobs Does the Investor Want Done?)

.Returns

.Investment Team Stability

.Relationships with other investors and investment teams

.Visibility

.Capital preservation

.Job security (of the investor)

.Tax minimization

.Social welfare

.Exposure to target sector (e.g. China, commodities)

.Networking

Examples of Disruptive Innovation in Asset Management

.Index funds

.ETFs

.Structured products which minimize downside

.Investing in new asset classes: domain names (Oversee.net), equity-like student loan instruments (MyRichUncle), litigation (Law Finance), patents (RPX), etc.

.Credit Default Swaps

.Crowdsourced financing: Indiegogo/Kiva/Kickstarter

.Discount Brokerages

.Expert Networks

Examples of Sustaining Innovation in Asset Management

.Quant hedge funds

.Private company markets

.Motif Investing

-Allows exposure to investment themes (eg, "I want to invest in African oil expansion"

New Asset Classes in Which Some Are Investing

.Domain Names

.Patents

.Human Equity

.Litigation

.CDs

.Virtual Currencies

-Facebook credits

-Frequent flyer miles

-Carbon Credits

Gregory Sanzone, an intern at Parse.ly, took details notes on today's Real Time Data, Content, & Analytics Roundtable, hosted by PluggedIn Ventures.

Real Time Data

Real time data is valuable in two ways, mainly. The first is that it crudely allows content providers to recognize spikes in popularity of pieces of content, so they can "double down" and mash on the proverbial "promote this content" button in order to drive engagement and uniques on their sites.

The second way in which real time data is valuable is in the context of historical data. A rich historical data set allows content providers to establish significant correlations between behaviors and outcomes. Websites can then use real time data to identify, segment, and serve consumers in real time, based on how their behavior correlates to historical data.

Algorithmic Content Curation

There was consensus among the panel that strictly algorithmic content curation lacks the je ne sais quoi of human discretion. Computational editorial methods are necessary in order to deal with the massive scale of the Internet, but ultimately, human intuition and sensibility must supervise the editorial/curatorial process.

Complete Discussion Notes:

Discussion prompt 1: "Only human curation can deliver real time content that is relevant to people."

Subsequent discussion:

Data in consumer space is noisy. There is a need for tools that filter and remix and use data in order to take informed actions.

The sheer scale of the web's content and user base makes manual curation difficult. One needs computers to understand users and rationalize content strategy/decisions

To know if curation is working, one needs performance metrics. Metrics allow for pattern recognition and machine learning, which allow for automation.

Again, human curation is super difficult when dealing with something as massively scaled as the internet.

Dan Patterson, ABC News Radio: In his experience, computers help curators get really close to the content sweet spot, but there is a need for human discretion to truly optimize. Human/computer-curated radio out performs strictly computer-curated radio.

Machines with humans to override them when necessary - "humans vs. cyborgs"

Jon Steinberg: some editor offices look like trading floors, with six to seven editors looking at many data displays, looking to pick up on lower-level/subtle trends. They utilize algorithmic-based curation methods.

David Teten: Trend line is pointing toward automation.

Steinberg: it takes a computer to notice in an efficient manner when content in the background gets lots of (social) traffic. Example of the frowning flower girl @ the Royal Wedding. First, how do you recognize the genesis of such a trend as it forms? Then how do you best capitalize it, push it further?

You can't curate until you aggregate.

There is an algorithmic limit to natural language processing. The promises of the technology have been slow to materialize, and some of the challenges are proving to be intractable.

Big data and automation help to define performance goals and match them to actual performance. Curation is an optimization problem - what gets deployed, in which order, in which rank? These are optimization problems.

Andrew Montalenti: It's not a strictly binary argument. To get the best performance, it's about how humans can leverage digital tools. Cyborg.

"Filter bubble." Is all this automation creating personalized content echo chambers? Cf. Eli Pariser. 

Sociocast: Predictive, real time data. They process 30m+ user events on a daily basis. All this data allows for discovery of significant correlations. Behavior of humans is redundant. They use their insights to behaviorally target ad serving.

Breadcrumb path of data. Calculate quick decisions to create better user experiences. Ability to experiment and discover what data is good to use, when to use it. All in this space of content provision and digital advertising are trying to optimize to create better experiences for people.

Scripting languages and data stores today did not exist even a few years ago. Technical feasibility of this domain is new and still expanding.

Search data is great for understanding and correlating user actions to user intents. But search doesn't generate intent. Data collection and user tracking allows websites and 3^rd parties to organize and classify users, content, ads, etc. and answer basic questions such as (1)how'd a user arrive at a page?; (2) what did they do while on the page?; (3) where and when did they leave the page/site? Data, metadata, etc.. reveal patterns. Once classifications and trends are understood and modeled, one can use real time data to recognize correlative behavior and exploit it.

Different kinds of data -> real time, panel data and survey data.

David Brinker, The Daily: Different patterns of news consumption (e.g. some read in the morning, some in the evening). Within apps you can't get all this data [my note: the issue of devices, particularly in the context of Big Data and behavioral, demographic, and psychographic segmentation, is a really interesting and underexplored topic, deserving of its own panel discussion!] For the Daily's publication schedule, real time data is not very relevant. Furthermore, their advertising is brand-based, they want to create an intimate experience between themselves, their users, and their advertisers. It's not direct response.

Dan Patterson, ABC News Radio: branding and relevant content delivery to older, aging people -> still looking for an intimate connection. Advertisers want people to have intimate experience with ad, brand, product. Dan's philosophy is that if you take care of your users, advertisers will follow.

Someone commented that most AM radio ads are direct response. Advertisers want consumers to call/act immediately

[My comment regarding David and Dan's comments: every content provider and their mothers are trying to create these personalized, intimate experiences. iPad apps and radio are interesting in that they try to do so with limited access to data, particularly real time data. Neither panel members offered what kind of data they use to inform editorial decisions.]

Tony Haile, Chartbeat: Glenn Beck monitors two Chartbeat dashboards that display his website's stats, as he presents his radio show. Dynamically curates his radio content in response to the real time web data.

Andrew, Parsely: almost 50% of news consumers get their news from the web. He believes there is no distinction between print and web audiences anymore [?]

Real time data allows editors to respond to immediate goings-on, not past goings on. Example of Nick Denton, identifying a spike and doubling down on that piece of content.

Feeding winners and starving losers. Throwing gasoline on a fire to turn it into a conflagration. Exploiting ephemeral opportunities to the maximum.

"Feed fatigue". We live in a digital world of fleeting content relevance - if a publisher misses an opportunity, it could be gone forever. No second chances, can't revisit an event or meme that was hot three days ago. Need to make sure that deployment happens at the right time.

The key to getting someone to do something is timing and context. Marketing 101. The value of real time, then, is that it enables one to recognize when a consumer is vulnerable to influence, as he is vulnerable to influence. Recognize when someone is in your wheelhouse, and knowing what to do to optimally exploit him.

With respect to engagement, there are value tiers for different consumer news products. E.g., Twitter is temporal, noisy, and therefore discounted. Magazines and newspapers of record are highly curated, edited, and thoroughly substantive.

Lawyer: asked about FCC Do Not Track regulations.

It will harm consumers and businesses. The internet allows for co-created value. Consumers give information to companies, who use it to create more enjoyable, personalized products and services for consumers.

Someone else says that the legislation would mainly, negatively affect the collection of cross-session data, which is not very valuable or informative, anyway.

.Standard hot air and buzz words. "Data economy"."the notion of privacy is changing"."user opt-out"

.Discussion shifts to the topic of making analytics products actionable for their users:

User experience of data products is hugely important. Key performance indicators and other such visualization/communication methods that make data accessible and digestible. Need to create affordances as to what to do with data.

Automation is the future. Make more money at less cost.

.Discussion shifts to macro-effects of shift to automation:

David: creative destruction and the rate thereof is dramatically disrupting legacy economies, labor markets, etc.

To close out the discussion, each panel member suggested one technology/trend that will die out soon.  Answers included: 3^rd party data, niche social networks, most of the tablets slated for release, dumb phones, haphazard social publishing, standard display ads for brands, lots of seed startups, AOL, traditional display networks, and irrelevant TV adds.

ff Venture Capital is launching a periodic Meetup for people who work in the innovation community and who are parents of pre-teen children. Our Venture Partner Michael Yavonditte (father of a 2-year-old) and I (girls ages 6, almost 4, and 8 months) are leading this. We envision organizing activities that our kids, partners, and we will all jointly enjoy. For example:

- Visit to the NY Hall of Science/Childrens' Museum of Manhattan/Sony Wonderland

- Meeting at a playground in Central Park

- Craft projects

Our first event is free and is Sunday, July 31, 10am-1pm, at the Sakura Park Playground, off Riverside Drive, between Claremont Ave and West 122nd St, New York.  We're holding this event jointly with the Columbia Venture Community, with Alex Poon, co-founder & VP of data modeling of Visual Revenue, as our liaison.  However, you don't need any affiliation with Columbia to attend.  Wear a white shirt if possible so we can identify you.

(Note that 1pm-4pm on July 31 is the Columbia Alumni Association picnic on the Columbia campus, so many of us will walk directly to that event after the playdate.)

-----> RSVP <------

Now that I'm up to my 3^rd child, effectively all of my weekend/spare time is spent with the kids. That's great, but it also means that I'm somewhat cut off from some of the great activities that the NY innovation community organizes every week: the classes, panels, presentations, networking events, pitch contests, etc. That's why we're working on this initiative.

We are extremely receptive to creative suggestions from the community for activities we can do. In particular, if you are on the board of any organizations serving pre-teen children, we'd love you to host a special event for our community (in the 9am-5pm window, so the kids can come). I think that we can generate a strong turnout relatively quickly, given how many people have a family situation similar to Mike and me.

Some of my friends in the corporate world think that people in the innovation community spend an excessive amount of time going to the 2-5 events happening every night in the NY innovation community. I've given some thought to this, and I think that they're in most cases incorrect. If you work for a large company, a big part of your job is internal meetings to align different parts of the organization and to learn from your peers. When you work for a VC/startup, you don't have to worry very much about those issues. That's one of the reasons a lot of people want to work in startups!

However, regardless of your work situation, you still have a need to benchmark with peers, advance your professional development, and so on. Even if you work for a 5-person startup, you really are working for "NY Startups Inc.", which in aggregate is quite a large company. (The VC community collectively functions like the CFO's office of NY Startups Inc., allocating capital to projects which promise the highest return.) All of those events are the equivalent of the internal meetings that I spent time on when I worked in a prior life at Bear Stearns and Procter & Gamble.

As one more general comment: I think that the Internet startup world is currently focused disproportionately on services relevant to the single crowd, e.g., yet another app to find where the girls are.  As people in the innovation community partner up and have kids, hopefully more tools will emerge to serve the large percentage of the population that are parents and have very different social needs.

(Cute photo, not of my kids, courtesy Epsos.)

On Thursday, July 28th, DreamIt Ventures New York will be hosting a presentation by me on "How to Recruit Rockstar Team Members to Your Startup". I'd really appreciate your feedback on my draft slide deck, below.

"David Teten will share his insights on the issues and challenges of building a great team in an early-stage company given the hyper-competitive market for talent.  You'll learn how to effectively identify, woo, and sign rockstar talent.  .  Space is limited, so please register now for this special session, presented by DreamIt NYC and Pillsbury Winthrop.  "

WHEN: Thursday, July 28 at 6pm

WHERE: DreamIt NYC, 28 West 27th Street, 11th Floor

RSVP via TicketLeap:  http://dreamit.ticketleap.com/dreamit-speaker-david-teten-best-practices-in-hiring-firing/

I hope you can join us at the HBS Club of NY / HBS Angels of NY event below on Thursday, June 16:

Click here to make a reservation

From enormous marketplaces such as eBay and Craigslist, to emerging sectors such as social lending (Zopa), peer-to-peer travel (Airbnb) and car sharing (Zipcar or peer-to-peer RelayRides), Collaborative Consumption is disrupting outdated modes of business and reinventing not just what we consume but how we consume. New marketplaces such as TaskRabbit, ParkatmyHouse, Zimride, Swap.com, Zilok, Bartercard and thredUP are enabling "peer-to-peer" to become the default way people exchange - whether it's unused space, goods, skills, money, or services - and sites like these are appearing everyday, all over the world.

Until recently, most Internet innovation has centered around improvements -- big improvements, but incremental ones nonetheless -- to existing business models and familiar social structures: Amazon is the ultimate retail destination, Zipcar the ubiquitous rental-car agency; Meetup is a sewing circle on steroids.

But what if these institutions, valuable as they are, are just a transition state on the way to truly new modes of communication and exchange, and even a new emphasis on values other than profit-and-loss? Our session looks at the rise of socially enabled platforms that blend commerce with community, where reputations trump credit ratings, and where hyper-distributed service businesses outgrow traditional monolithic suppliers.

Technology is changing the way we do business; crowd sourcing and social networks have become a default security system. Redistribution of resources and services through social platforms is creating new business and new revenue streams by monetizing previously underutilized assets.  Ebay, Etsy, AirBNB, and many more rapid growth businesses are redrawing the map of trade. Come and meet some of those on the front line.

Panelists
Adam Berk, founder Neigh*borrow
Adam Black, founder KeyWifi
Jeff Stewart, founder Lenddo / Mimeo
Cameron Tonkinwise, Associate Dean for Sustainability, Parsons, The New School
Moderated by Roo Rogers, President of Redscout Ventures, and Co-Author of What's Mine Is Yours

Adam Berk, Founder of Neigh*borrow

Mr. Berk graduated from Emory University and began his career trading equities (not tools or electronics). He created neigh*borrow after realizing that he wanted an easy way to share with those around him and that others probably did as well. Adam has a great affinity for travel, photography, golf, movies, music, and surfing (ok fine, web surfing). In addition to helping you save money and conserve our environment, neigh*borrow allows him to share HIS FAVORITE THINGS, with HIS FAVORITE PEOPLE, in HIS FAVORITE PLACES all over the WORLD!

Adam Black, Founder KeyWifi.com

The twin interests of sustainability and the realities of human nature interested Mr. Black from an early age. After studying Biotechnology at London University, he worked in over 18 countries on the production side of the film business, setting up desert camps in Jordan, managing huge projects and teams from India to Argentina. After twenty years out of The UK, he emigrated to Australia to produce award winning marine natural history documentaries with the hope of saving fragile ecosystems. He also developed economically and environmentally sustainable housing projects in the UK, Australia, and most recently in upstate NY. Mr. Black came to New York in 2005, founded SustainabiliTV.com, producers of 'The Business Case for Sustainability' and produced several important films in Darfur and Nepal. In 2009 he founded KeyWifi a web company that enables redistribution of Internet bandwidth through a web-based platform. KeyWifi enables the cost of access to be reduced for everyone, with significant ramifications for low-income families, the developing world and just about everyone you know. KeyWifi is the world first peer-to-peer wifi exchange platform; it launched in May this year at TEDxEast in New York.

Jeff Stewart, Founder of Lenddo

Over the last ten years Mr. Stewart started over a half dozen companies that employ over six hundred people. One of them, Mimeo.com, is a Deloitte Fast 50 Technology company that has made the Inc. 500 twice in the last three years. A serial entrepreneur, inventor and investor specializing in technology-enabled growth businesses, Mr. Stewart is the founder of Urgent Group, a venture development firm and the founder and managing director of Geometric Group, LLC and Urgent Ventures, LLC, both focused on seed-stage investments. Mr. Stewart is also a co-founder of Belgrave Trust; a carbon offset service tailored to the needs of high-net-worth individuals. Jeff's latest venture is Lenddo, which seeks to improve the lives of millions by helping community members use their online reputation to access financial services, which in turn fosters economic development. Lenddo was started with the belief that professionals in emerging markets should have access to the same high level of financial products and services as are enjoyed in more mature financial markets such as Japan, Germany, United Kingdom and the United States.

Cameron Tonkinwise, Associate Dean for Sustainability, Parsons The New School for Design

Previously the Co-Chair of the Tishman Environment and Design Center, which oversees the New School's Environmental Studies degreeprograms, Mr. Tonkinwise came to the New School from Sydney, Australia where he was Director of Design Studies at the University of Technology, Sydney, and Executive Director of Change Design, formerly known as the EcoDesign Foundation, a think-tank focused on design-enabled social change toward more sustainable futures. Mr. Tonkinwise's current research concerns lowering societal materials intensity by decoupling use and ownership - in short, sharing.

Moderator:
Roo Rogers, President of Redscout Ventures & co-author 'What's Mine Is Yours'

Working at the intersection of entrepreneurism and social responsibility for the majority of his career, Mr. Rogers most recently served as the co-founding partner of OZOlab, the fund and incubator for environmental start-ups, and the former CEO of OZOcar, the eco-friendly car service. In 2004, Roo founded we:nited magazine - a youth politics magazine and website. In 2000, he launched Drive Thru Pictures and Drive Thru Films, the award-winning British and American film company devoted to communicating social issues to mass youth audiences. After working for Medecins Du Monde/ UNICEF in South Sudan, Mr. Rogers co-founded UNITY TV, and a start-up initially funded by the United Nations and the BBC. Roo is the co-author ofWhat's Mine is Yours: The Rise of Collaborative Consumption, delving into understanding the exploding economy of collaborative consumption. He received his Bachelor's degree from Columbia College and his Master's degree in Economic Development from University College London. He sits on the boards of Medecins Du Monde UK (Doctors of the World) and the Bronx Community Charter School.

Thursday, June 16th

Location:  Pillsbury Winthrop, 1540 Broadway, New York at 45th Street
Time: 5:30 Registration and Reception, 6:45pm Program
Cost: $15 Members; $40 Non-members & Guests; please register by 3:00pm on June 15th
Sponsor:  Pillsbury Winthrop Shaw Pittman LLP, Harvard Business School Club of New York, Harvard Business School Angels of New York

Click here to make a reservation

The new FinTech Innovation Lab, an annual program run by the New York City Investment Fund and Accenture, had their launch event on Thursday night.  It attracted a very high quality crowd of senior executives from major investment banks and members of the innovation community --- two groups that don't normally mingle. 

One peculiar note: they didn't disclose the companies selected.  I spoke with the CEO of one of the chosen companies, who told me he was told to keep his selection confidential.  This is definitely not the norm in accelerator programs; I'd be curious to know the logic.

My rough notes follow:

Mike Dubno, CIO, Global Markets and Research Technology & Operations, Bank of America

Previously CTO, Goldman Sachs. After Goldman, ran startup Gadgetoff, which brought together inventors and entrepreneurs.

Introductory remarks.  Very enthusiastic about the potential for the NY tech ecosystem, leveraging our strength in finance.

Maria Gotsch

Our goal is to make an innovation center comparable to CA. Leveraging our strength in financial services.

Planning demo day July 22, and a Big Data day in the fall.

Panel:

Cary Davis, Managing Director, Warburg Pincus, Moderator:

Ben Fried, Chief Information Officer, Google, runs in-house technology. Formerly MS IT department.
Andy Brown, Chief Technology Officer, UBS
Tim Lyons, Senior Vice President, Technology Innovation Portfolio, Bank of America . Does R&D/biz dev services for company. 15 yrs at MS.

Adrian Kunzle, Head of Firmwide Engineering & Architecture (CTO), JP Morgan Chase.

DAVIS: What is the #1 emerging trend?

KUNZLE: Mobile. The back-end systems look the same as before, but aren't tuned for the needs of mobile. We're researching how to enable salesforces.

We might develop ipad trading applications for customers, but not internally.

We certainly want to enable internal employees to be more efficient. "Everyone is bringing them in nowadays".

BROWN: Mobile is a delivery channel for capability. We're advising and relationship management, at the end of the day.

The trick is delivering business insights over this channel: use social networks to support relationship management.

LYONS: How do you grow the customer relationship thru these channels?

FRIED: I look forward to Google Wallet simplifying my life. The cellphone is the 1^st new thing to enter the pocket since the invention of the housekey.

I see a lot of companies making a huge institutional investment in the equivalent of Apple IIs and Visicalc. I think android / 4g networks will take over tablets.

BROWN: Cost of managing a data store is negligible. Most people are downloading more than they have to.

FRIED: Non-structured operations on data are as least as powerful as structured operations. Especially with machine learning techniques.

DAVIS: Comment on consumerization of enterprise computing. How are you allowing employees to interact with social media?

LYONS: We allow them to use social media on their personal devices (laughter).

FRIED: Prevalent notion of a corporate network is very antiquated: a firewall around it and unlimited communication within . This is ostriches with heads in the sand, on a dessert island with the water lapping up.

BROWN: the notion of perimeter-based defense is gone. We need to start thinking like the NSA. Assume you've been compromised. Assume the device connecting to your website is compromised.

BROWN: Impersonation on social networks is a big problem. Ask the senator who was on TV.

The water has already come over the damn. Consumers have 7-10meg on them. Social networking is governed by SEC 17a4, and SEC hasn't opined on this.

How do you use the social network as part of the relationship network?

4-5 companies are doing 'facebook for business'.

LYONS: Internal use of this is not fully played out. We're locking down more doors so you can't get outside. A whole bunch of your corporate communication/interaction is going to happen on these impromptu networks. You have to build systems internally that are as good as what's available externally.

BROWN: Not clear if you can build anything on the inside of the same scale / quality as Facebook/Google/Twitter, because you don't have as big a market.

DAVIS: How do you think about buying from smaller/emerging companies?

LYONS: You have to encourage companies to pay attention to these entrepreneurs. At my prior company, we structured programs to encourage doing business with smaller companies.

KUNZLE: Push us for fast decision. Sales cycle can often go into something like co-development. 2-18 month sales cycle.

FRIED: You need to identify the business value at the beginning.

Find the thing that makes peoples' eyes light up.

Companies that ask 'what are the problems' are the ones that are successful.

DAVIS: What are your problems?

BROWN: Real time intra-day risk. End of day is fairly easy, but not real time.

Video platform that works well inside the enterprise, but doesn't require $500K telepresence rooms, but allow a lot of mobility / flexibility.

KUNZLE: Decent digital rights management, which moves around with a doc, and works on ipads/ iphones.

LYONS: There's some immaturity around how large enterprises adopt these technologies. Reminds me of early days of Unix, when you had to have data scientists. A lot of new capabilities emerging around Hadoop.

DAVIS: What services in the cloud are you using?

LYONS: We already use these systems for HR, payroll, Salesforce.com, etc. Clearly there are more scenarios.

LYONS: Cloud providers are ahead of the game, because they assume they'll be attacked every day. Corporates don't. The cloud grows/shrinks as you need it. The programming paradigms to take advantage of the cloud are one of the biggest challenges we have.

Packaged platforms (Force.com/EC2/Azure) are much more likely to succeed than a pure infrastructure play. Do you want to have virtualization to reduce the number of servers to minimum possible? Google is essentially platform as a service. Appliances will go into the enterprise. Java/Azure appliances will come in . If we give programmers something that scales out of the box, knows when it will hit an infrastructure limit and scales itself out, that's powerful.

FRIED: Cloud starts from a macroeconomic observation. A few companies (Google, Amazon, MSFT) have compute economies of scale that no other entity can touch, including government. Google sites its facilities next to fully depreciated hydroelectric dams, to lower our electrical costs. We design them grounds-up optimized for our particular needs. I talk with a few people who want to 'build a private cloud'. That's like labeling your security guards a 'private army.'

For the last 3 years, almost every internal app at Google is built, not bought. We build on our platform as a service. I haven't had a single sysadmin, or a day of downtime.

I get a lot of complaints from developers, because this may not be as convenient as what they had before.

Ex: we recently changed our remote access capability in 1 day. It didn't cause a burp.

KUNZLE: We're tracking 14,000 apps.

BROWN: There are going to be a lot of post-credit-crisis regulatory changes particularly around risk. Most of these changes will be announced in the next few months, so you have to move fast.

Tal Liani, Managing Director, Equities Research-Communications Equipment, Bank of America

comments on current state of the market

I'm "sort of" head of tech research. I want to speak about an interesting phenomena happening in the public markets. When I started covering space, comm. companies were trading at 50 P/E, then down to 30, now down to 8.

HP 8x P/E

Apple 11-12x P/E. Apple, HP, Microsoft, all about the same

When I virtualize, eventually I'm going to buy less. Price/bandwidth is plummeting. The public markets are forecasting that.

The assumption is that big companies can't grow, and that's why we're seeing a massive contraction of multiples.

Riverbed is trading at 35 P/E. 7 years old. Penetration rate in branches about 15%.

If you took a basket and invested in mid-cap growth in tech, each individual company will be much riskier than Cisco. However, a mid-cap growth basket will always outperform large-cap growth.

Every 3 years in optical networking, capacity goes up 4-10x, and prices go up 30%. Think of what happens to margins in these companies. So, you're never profitable.

Good VCs add value: they make the cycles short.