On Thursday, May 16, 2013, OLC attended Worldwide Investor Network, a one-day conference that gathered investors and entrepreneurs from around the world in one building. The goal of the conference was to nurture and further the New York ecosystem by showcasing global talent in front of the New York venture community.
The event kickstarted with Eyal Bino, the founder of Worldwide Investor Network, introducing the event and the goal of WIN. Their aim is to match top overseas tech startups with relevant investors, mentors and partners to help them progress rapidly in the world of global innovation and intense competition.
After the quick overview of the agenda, Bino introduced Divya Navandra, the keynote speaker of the event.
Divya Narendra is the CEO & Co-founder of SumZero. Before founding SumZero, Narendra was an associate at Sowood Capital Management, a $3.5 billion multi-strategy hedge fund in Boston. In 2007, SumZero was conceptualized. Narendra graduated from Harvard College in 2004 with a degree in Applied Mathematics and earned a JD/MBA from Northwestern University.
"My background is a mix of social media and finance," Navandra said. “I co-founded HarvardConnection and it got into some legal issues with Facebook. I moved out to NYC and worked at Credit Suisse, then moved after two years into a hedge fund. I actually lost my job in summer of 2007, so I decided to start my second internet startup, SumZero.
The basic premise was to connect investors and share research ideas. The reason I saw an opportunity is that investors actually do share information, but within their own circles. I mean, you're not going to share research with people unless you're in a full position. It's in your economic interests to say you like this company so that more people buy into it, raising the stock. At SumZero, we try to gamify experience. The dynamism is that as the database gets bigger, the more valuable it gets. People want to post because they want to preserve their brand, their reputation. For us, what's nice about our community is that your reputation is actually measurable. People can rate ideas based on metrics. We have to cut down on noise by vetting our applicants. They need to be filtered through. We actually reject 3/4ths of applicants. So our community is full of investors that are smart and do deep research."
"SumZero was bootstrapped from the start. Our first programmer didn't know what he was doing! We lost four months of work due to that. Our first beta was terrible. It kept crashing on us. Eventually, we found a good developer that managed to correct the code.
After a couple of months, it became easier to market SumZero and people were signing up."
"I spent my first year calling people to get them to use SumZero. It was a very grassroots method. In 2009, I ran out of cash. Just ad that happened, we got an injection of $100,000 and our community capitalized us. With the capital that we raised and through word of mouth, we ended up with a community of 6,000 investors. We were forced to monetize SumZero because we ran out of cash again. Somehow Blackrock paid us $80,000 for ad space, which I still don't understand. In 2011, we generated enough revenue to keep going and we raised another $100,000."
"Ultimately with the amount of money we needed to raise, we didn't go the VC route.
Sometimes it's not a good fit. The relationship had to work. The Winklevoss twins invested in us and we ended up raising a little over a million dollars, but we found the same problem we faced early in the development cycle. We couldn't find a good developer. We just got an in-house developer this September. You have to be persistent and patient. In December, we hired a second engineer. We rebuilt a new code base for the site, which now works way better than before."
Navandra gave some words of advice to the entrepreneurs present: "To engage people on the site, you have to treat it like the real world. If you have a co-founder, make sure you have a good vesting schedule."
He also briefly touched on mobile, which he said was in sight for SumZero, but not until way later in the future. "I think we're going to focus on interactive design, but mobile is like building a new company. It's very hard. We weren't a mobile-first company. We were desktop-first."
After the Narendra’s keynote speech, the event continued to its first panel, “What’s Next for the New York City Ecosystem” featuring Ben Branham (Chief of Staff, New York City Economic Development Corporation), David Aronoff (General Partner, Flybridge Capital Partners), Jessica Lawrence (Executive Director, NY Tech Meetup) and JoaoPierre Ruth (New York Editor at Xconomy) as moderator.
“Can we talk about the New York community—a sense of what it’s like being in the New York tech scene?” Joao-Pierre Ruth asked the panel.
“NYTech was founded in 2004 by Scott Heiferman, founder of Meetup.com. NYTech was a platform to build community for people who are building tech startups. The trajectory has been insane. The tech community in the city is all taking off. The growth of tech industry is influenced by the tech community. We provide a platform where technology companies can present in front of investors and press. There’s over 650 tech meetups happening around the city—that’s one of the essence that makes NYC so special,” Jessica Lawrence answered.
“What are a couple of things that attracts people to New York?” Ruth asked.
“When it comes to the tech scene, the mayor has done many things like the Applied Sciences Contest to attract developers to NY for development and constructing innovative platforms to further NY’s tech scene. Big initiations are being put in place to sustain its growth and nurturing home grown talent. It’s also about partnering with people to take delegations and begin the dialogue about relocating to NY. Improving dialogues and meeting the right people lead to innovation. We can talk about the incredible opportunities in NYC and the industries that work in it,” Ben Branham said.
Ruth asked David Aronoff what things about New York made it attractive enough to establish an office in the city. “I opened the office about a year ago. Flybridge is an early-stage investment firm. We started investing in NY during the nascent phase of the internet. It took a lot of time to do it—the question was, ‘Was there enough developers to develop and sustain a big tech company?’ Well, the bubble burst, but there was something in NY that kept going, so we kept investing. Now, more than half of our deal flow is in NY. We have four strong enterprise companies in NY. It isn’t really thought of as an enterprise scene. It’s incredible to think that NY has come a long way in 10 years,” Aronoff said.
“Can you talk to us about how technology is being more pervasive in NY?” Ruth asked.
“I think one study that really struck with me was about recruiting engineers. It used to be that engineers would say they moved here because of their spouse, but now, it’s changed to: ‘NY is the place to be to develop new tech.’ We made a list of tech companies that are hiring developers on the front and back-end of the product. We’re all staring and trying to be better. I think it’s trickling down due to the tech scene’s community,” Lawrence said.
“Tell us about a perspective of people moving to NY,” Ruth asked.
“NYC projects that the impact on the economy will double due to technology, but office space needs to be sustainable. A lost of it is networking. It’s about who you know—who you’ve met—it’s investing your time and getting to know the landscape,” Branham said.
“Give us a taste of what you look at when people pitch to you,” Ruth asked.
“The bar in NY is the same it is in other countries. You have founders that have a lot of horsepower and a lot of passion and confidence. We’re looking for a massive market, but to have a vision to have a practical starting point is very important. Very few startups stop raising money after the first round. Startups fail all the time and to be able to navigate through all of the microfails, we’re looking for a massive market, a national go to market strategy. The idea of new business model takes lessons from the technology side. I’m looking for great entrepreneurs with passion. We also look for international companies with flair. For really early-stage companies, we like to be hands-on as much as possible and they need to be in our backyard to be able to do that,” Aronoff said.
“What are some of the things that need to happen to sustain NY’s tech growth?” Ruth asked.
“I think the trajectory has been amazing. To see how much the community has grown, the connectivity between people have been amazing. New York is one of the most wired places in the world and it’s important to address this. When you figure out that eight ways to interact, you see a bigger effect in the community,” Lawrence said.
“There has been an incredible out of maturation in the NY tech scene. We’re asking for a symbiotic relationship between tech companies and the government. Credibility is important,” Branham said.
“Just to keep in mind—NY has been open to immigrants forever. There one thing NY demands is authenticity and contribution. What persists in NY is that they know who is just takers. To get something back, you need to contribute something and we’re here for you,” Aronoff said.
The discussion ended and the panelists made way for the next topic—The Current Landscape & The Series A Crunch—with Alejandro Cremades (CEO, Rock The Post), Benjamin Sun (Venture Partner, High Peaks Venture Partners), Andrew Cleland (Managing Director, Comcast Ventures), Shay Rapaport (CEO and Co-Founder, FireBlade), and moderator Tanya Prive (COO, Rock The Post) taking the seats.
Tanya Prive demonstrated a steady growth in VC funds, as well as investments in portfolio companies. “VC is going to early-stage, late-stage, but not as much as you would think in seed stage,” she said. Seed stage took very little of the pie, at 3 percent.
Prive said that 62 percent VC funds have underperformed, while comparing European VCs to the US. “Its similar, but in Europe, they focus more on government agencies,” she said.
“What do you think has changed between seed funds and entrepreneurs getting Series A list?” Prive asked.
“The number of investors getting seed style money has really exploded. The initial number of funding has really helped,” Benjamin Sun said.
“The number of seed funds have been increasing, but not as fast as we thought. It’s not a sign of demise or collapse. We notice that the global financial market is struggling—seed deals and financial efficiency help,” Andrew Cleland responded.
“Angel investors funded 50,000 companies. Seed deals were just around 1,000. I think that entrepreneurs don’t have access to capital. We need to push to let them build their companies,” Alejandro Cremades said.
Prive asked the panel how entrepreneurs can avoid being stuck in the Series A crunch.
“One of the things we ask entrepreneurs is, ‘How are we going to demonstrate traction?’
You need to have a clear point of view that differentiates you from other companies.
Entrepreneurs need to be aware it’s also about building a network of influencers. The chances of getting an investor to invest in you depends on how much time you’ve invested with them. Try to keep dialogue going as long as possible,” Cleland said.
“From my point of view, the landscape has changed a lot. The KPIs [Key Performance Indicators] have shifted quite a bit. It used to be startups raising money for 12 months; now it’s 18 months to be involved with anybody,” Cremades said.
“Building relatives with potential Series A investors is critical and helps you sync up with investors you want to be involved with anyway,” Sun said.
“How early do you recommend entrepreneurs get out before funding?” Prive asked.
“As soon as possible,” Sun said. “Build relationships with potential investors as soon as possible. It’s not just getting investments, but advice. Having that rapport with investors, it’s definitely easier to secure funds.”
Prive asked how the panelists evaluate deals in terms of Series A. “I think to raise a startup, you need to get out and seek funding 50 percent of you time. It’s basically about being out there and exposing yourself. It’s also about being passionate and having a good pitch,” Shay Rapaport said. Cremades agreed. “Founders, when they need to close shop, it’s because they run out of energy. We need to figure out a way to get capital to those who really need it,” he said.
“Women have a difficult time raising money. Venture capital has been called a ‘boy’s club.’ What are you thoughts on that?” Prive asked.
“It comes from men with strong tech backgrounds. I see a lot of women in the business today. There’s been a recent change. The VC interests are shifting. Ultimately, I think capital will go to the best opportunity,” Cleland said.
“When I went about to raise capital, I remember pitching and people were really skeptical of my business model. We raised angel money and it was about reaching out to different backgrounds of people,” Sun said.
“All the seniority roles are males. They relate to the male entrepreneurs. It’s proven that business with women at positions of power are more successful than ones that are not,” Cremades said.
Prive changed the subject, asking the panelists about the role of crowdfunding in Series A. “The role of investors—they’re becoming pickier. The good thing about equity crowdfunding is that it gives entrepreneurs the tool to create their own story. I think they need additional resources to get funding, but crowdfunding is a great way to breach that wall,” Cremades said.
“I hope in the future, crowdfunding will replace VC funding. Hopefully, it will be the model of the future. It might be the model that covers the gap between entrepreneurs and VCs,” Rapaport answered.
“VCs are going to have to get on board with online platforms or they will fail,” Cremades warned.
Cleland, however, had a different view. “It’s an interesting dynamic—it’s appropriate for certain situations, but in business, its bringing forward customer money for better payoff in the future. It’s true for smaller startups to get crowdfunded. I disagree that it’s becoming difficult to get seed funding. If anything, it’s getting easier. I’m not convinced that crowdfunding is marketable and you have to cater to the customer’s vision. You lose the advising role,” he said.
With that, the panel ended, making way for the next discussion topic, The World is Mobile Now, So Monetize it. Hadley Harris (Founding General Partner, ENIAC Ventures), Mark Smith (Executive Director, Verizon Ventures), Inaki Berenguer (CoFounder, Pixable), Jalak Jobanputra (Managing Partner, FuturePerfect Ventures), and moderator JJ Colao (Reporter, Forbes Magazine) talked about the current and future plans for mobile space.
“There’s a billion smartphones in the world. In the international scale, that’s where all the users are. Any insights on how to address the feature phones?” JJ Colao asked the panel.
“In the last year, we saw a faster growth in smartphones than we expected. It’s not only smartphones, but bandwidth in the emerging markets. Developers need to develop apps that are not bandwidth hungry,” Jalak Jobanputra said.
“People make a difference between smartphones and feature phones. In the next two to three years, there will be a greater transition to smart phones,” Inaki Berenguer said.
“Feature phone users use their phones different than smartphone users. It’s very cumbersome to use apps for them,” Hadley Harris said.
“There are very creative things that can be done on feature phones. We’re giving money away to people who can develop apps for feature phones,” Mark Smith said.
“In terms of mobile apps—some don’t even monetize. From an entrepreneur and investor’s perspective, when is it okay for mobile apps to not have a revenue model?” Colao asked.
“It has to be a specific type of company. Otherwise, it doesn’t make sense. There’s an inverse relationship between apps and companies—apps can grow virally. Companies need to figure out ways to monetize. Some apps don’t have a good marketing method,” Harris replied.
“As an investor, you’re always looking at what the exit is going to be. I care about ongoing engagement that fills a white space,” Jopanputra answered.
“If a company can build a massive audience, you have to focus on maintaining that. You need to execute very quickly,” Berenguer said.
Colao asked the panelists if there are common attributes that these fast growing apps share. “Often these apps that become popular come into spaces that have been well served. You may look at them and ask them why they’re going in that space—but it’s been working,” Smith answered.
“The mobile market has been growing and we’re in a very early stage for it,” Jobanputra said.
“I think that you have to build you culture. Putting that part of your culture on your product will help you leverage them in the long run,” Berenguer said.
“The traditional advertising models on web—any insights on how we’re getting 2 percent to 10 percent ad spending on mobile?” Colao asked.
“For a while, we were lagging behind because we didn’t know how to advertise on mobile. Now we’re figuring it out. It’s all performance and about apps. There hasn’t been much brand building. I think you’ll see it grow over time,” Harris said.
“If you see what happened on the web, it took advertisers a lot of time to put money there. There’s a lot of complexity on mobile. In the longer sense, there’s a lot of potential, but we have to figure that out,” Jobanputra said.
“We’ve invested in a couple of ad tech companies,” Smith said. “Each new media that comes out goes through rigorous analytics and it’s getting harder to convince us that we should invest in it.”
“It seems that every boardroom is talking about mobile. What opportunities are there for entrepreneurs?” Colao asked.
“The world is going mobile. By companies are afraid of transition. They think the opposition will snoop in and take their customers from them. Acquisition-hires are very common to prevent this,” Berenguer said.
“Larger companies have a lot of advantages—it’s providing a multi-platform experience.
Mobile provides another opportunity to cater to this vertical. I don’t think big companies can iterate easily. Entrepreneurs can focus on a paying point and get a pilot in to address some concerns,” Jobanputra said.
“We have a venture group and we’ve invested $110 million in a dozen companies.
The average lifespan of apps are around six weeks. How do you keep your brand—your apps—relevant? We invested in a company that uses push notifications to try to help users and companies use the apps more often,” Smith said. Harris agreed that push notifications are the best way to retain customers.
“A trend that’s been interesting to me is ecommerce. It’s moving faster than what people imagined it to be. What do you see happening in mobile ecommerce?” Colao asked.
“Mobile commerce is our number one focus this year. If you look at FAB.com, they’re doing a great job. A lot of revenue is from mobile. Another thing is how comfortable users get with the mobile experience. It’s the UX that really matters,” Harris said.
“One thing very important in ecommerce is payment. This is a product that is shifting.
Commerce is not mobile-first, but companies are using it on mobile, capitalizing on the new way of shopping,” Berenguer said.
“There’s still some friction between companies and I’m very interested in platforms that reduce friction on payment. Mobile-first companies are doing just that and it’s very easy to use. We’re starting to see a bit of innovation,” Jobanputra concluded.
The final panel took over to answer questions from moderator Greg Satell (Contributor, Forbes). The panelists, Charlie O’Donnell (Partner, Brooklyn Bridge Ventures), Steve Peltzman (Chief Business Technology Officer, Forrester’s), Rebecca Fannin (Founder/Editor, Silicon Dragon Ventures) and Ed Sim (Founder of BOLDstart Ventures and CoFounder of Dawntreader Ventures) talked about the next big thing and what it could be.
Greg Satell asked what the panelists thought about Samsung announcing the release of 5G towards the end of this this decade. “Theoretically, we have 4G coverage in all of NYC, but your phone can’t access it all the time. Just because you have the standard doesn’t mean you can propel it. We might move to Wifi nodes and remove cell towers,” Charlie O’Donnell said.
“I think the processing power, memory and battery power on the phone is critical.
Everyone is trying to figure out where you are—taking location and context, combining both will help productivity. Google’s put effort into that software. Device is huge; it’s also the speed. It’s a combination of the two,” Ed Sim said.
“It’s about co-determining the app and the internet. It will power everything that we have today. We need an infrastructure, otherwise, we wouldn’t be able to do anything. It’s an infrastructure problem first,” Steve Peltzman said.
“China is setting a lot of standard in infrastructure. Their government is pouring money in publish transportation—people can use their smartphones in subways. Free Wifi is available on airplanes. We’re behind right now,” Rebecca Fannin said.
“I think too many developers build apps that assume connectivity. Some UX is really poor regarding that,” O’Donnell said.
Satell asked about the shifting tech landscape and what the panelists had to say about that. “People looked at Silicon Valley as tech innovation. It’s shifted definitely. We’re seeing a shift from West to East and Asia’s rise as a tech innovation space. They just copied successful business models from the US and today, you see a new generation of entrepreneurs who have more original ideas of thinking. We’re at a point where the shift is evident—moving globally,” Fannin answered.
“I look at the whole tech stock itself. Later innovation has moved from the bottom stock to hardware. Now software is the most sought after. And software engineers can be everywhere. The commoditization has sped all that up. NY is where the money is at. This is where customers are,” Sim said.
“The next growing field is the educational personal development. It’s going to be a global phenomenon. Any thoughts on that?” Satell asked.
“What’s amazing now is how accessible information is today. Through social media, you can get involved in conversations and reach out to people that way. Information and people are so accessible, but people are so afraid of talking to strangers on the internet,” O’Donnell said.
“Someone came up with the idea of art education for MoMA. We had a vertical to work with and it was a hit. This accessibility coupled with a good brand name all of a sudden gave us a good revenue opportunity,” Peltzman said.
“Most of money is spent on degrees and tests and preparation. After that, no one really makes money after that. It’s tough making a business on education when things are so readily accessible on the internet,” O’Donnell said, reiterating his previous point.
“We’re basically a .pdf business. What companies being disrupted don’t understand is that people don’t care about the quality of .pdfs. Consumers have the ability to choose what they want—they have the power. The next big thing is coming from underneath, not from the top,” Peltzman theorized.
“Crowdfunding has become a phenomenon. You can reduce your risk for your movement. The idea is that the value is in the model itself,” Sim said.
“In terms of investors, how do you look to view that value is captured?” Satell asked.
“Costs have gone down so much that you can kill 90 percent of your competitor’s business. You can basically give away your product for free. It’s very easy for a startup to give stuff away, grow and then realize that they need a revenue model. They make the consumer angry in the process—you need to make those decisions early in the process,” O’Donnell said.
“I think about it in terms of innovation. I always wanted to be the disruptor,” Sim said.
“How would you see the future role of tech versus the future role of us, people?” Satell asked.
“Hopefully, there is a role for people,” O’Donnell said, half-serious, half-joking. “We’re enabled by tech.” He gave an example of Uber, a taxi-calling app, which enables taxi drivers get clients based on proximity. “People make a business with tech as enablers of job growth. The problem is that it’s not 1 for 1. There’s friction in the model,” he said.
“I think as people go through ed tech, people have the opportunity to create new things.
As we become an information economy, our future gets more exciting,” Sim said.
“Tech for me—we say we don’t want computers to replace us, but I don’t have faith at the moment to make the right decisions. We haven’t thought it through,” Peltzman said.
From here, the pace of the event changed, as it moved on to showcase startups. Six startups from around the world were present, ready to impress the audience with their brilliant ideas.
Finland’s CrowdValley was first to present. Markus Lampinen, CEO presented CrowdValley as the platform and back office services for crowdfunding. “We’re focused on B2B,” Lampinen said. He and his team have a product that is ready to be used and he called it a cost-effective way of operating a crowdfunding portal. “You can focus on securities funding. Get set up in a few days. We do the onerous parts for you,” he said.
Slycr, from Israel was presented by Shay Abramov, who called it a “SaaS solution allowing SMBs to easily produce video ads.” Slycr takes existing raw material and its technology quickly creates a video commercial using the ingredients—text and images.
Augment, presented by Jean-François Chianetta, is an exciting way to view furniture and objects in real-time environments. It allows users to easily visualize potential purchases in augmented reality. “Augment is a sales tool,” Chianetta said. “Customers can view objects in real-time using a tracker.”
Zuk Avraham presented Zimperium, an enterprise security software designed to protect user’s devices at all times from any attacks. “This is a complete end-to-end solution to secure enterprise devices,” Avraham said. Zimperium prevents attacks from hackers from other malicious software and logs it in a management platform for analysis.
WorkInField was presented by Richard Voda of Slovakia. WorkInField is a tracking solution for SMBs with business that moves around. “This is a GPS tracking solution designed for small companies. We use GPS technology to long-end, low-tail market.
When the app is installed, you’ll know where your employees are, how fast they’ve traveled and can access dashboard to analyze finance and expenses,” he said.
David Klein of Israel presented BioGaming, a revolutionary way of gamifying physical therapy. “Physical therapy is boring,” Klein said. “BioGaming enables highly satisfying and fun interactions that the patient will enjoy. The doctor will know if the patient has performed the necessary rehabilitation or not through BioGaming,” he said.