10+ Trends: Recap of 2011 and What’s Next…
July 16, 2011
As a venture capitalist, I am privy to innovations long before they become mainstream, one of the things I love about my job. But even more exciting is when I see inflection points of adoption — which is why 2011 was a particularly exhilirating year for me. This was the year that the promise of technology to truly change the world and empower individuals (the reason I entered the tech world in 1994) reached global scale. Powered by cell phones and social networking platforms, we saw revolutions taking place, businesses being transformed and our daily lives made more convenient (if we could tear ourselves away from our Facebook and Twitter updates). This is my recap of what stood out to me this year and what I’m looking forward to in 2012 — we are only in the beginning of many revolutions. Yes, we have huge challenges ahead…but if you read these 10 trends it’s hard not to be optimistic about meeting these challenges.
What We Saw in 2011….
Women Rising: Microfinance institutions have known for years that women have higher repayment rates than men and that women are more likely to invest the borrowed capital back into their families and local communities. I’ve been speaking and writing about the need for more diverse perspectives for many years (see The Gender Issue Part I and Part II). 2011 was finally the year when the media spotlight shone on how under-represented women are in almost all power structures in business, government, technology and media – and how crucial it is that we leverage the leadership skill set that they bring to the table to tackle the problems facing the world today. The era of the patriarch is nearing an end. In 2011, Facebook COO Sheryl Sandberg, among many others, emerged in the technology world as a role model for women, as has US Secretary of State Hilary Clinton, who has tirelessly been promoting women’s rights and entrepreneurship around the world. The 2011 Nobel Peace Prize was awarded to three women: Ellen Johnson Sirleaf, Leymah Gbowee and Tawakkol Karman “for their non-violent struggle for the safety of women and for women’s rights to full participation in peace-building work”. The times, they are a-changing.
The Power of the Individual: This was the year that the individual, amplified by technology platforms, became empowered to rise against oppressions both large and small. If anyone dismissed Facebook and Twitter as purely recreational activities before, they certainly changed their minds when revolutions throughout the world were sparked by these platforms, and spread via the now ubiquitous cell phone. In places where international diplomacy had failed, citizens around the world found their individual and collective voices to topple dictatorships and demand better lives for themselves and future generations. What comes next remains to be seen but these revolutions even empowered individuals not touched directly by the uprisings. Nothing seems impossible anymore. On more local levels, municipalities throughout the US rolled out platforms (such as SeeClickFix and Public Stuff) for citizens to report community issues such as potholes and outages and to communicate directly with their constituents. In India, two female journalists launched a mobile app to allow women to report harrassment and abuse, an issue in their hometown of Delhi and throughout the world. The list of applications to engage, empower and organize citizens continues to grow, and will be one of the most defining legacies of 2011.
Mobile Marketing Comes of Age: Retailers finally began to see the promise of location based applications and consumers changed their shopping behavior using their mobile devices. Foursquare evolved from a check-in gaming app to one that allowed retailers (and Amex) to offer coupons and other incentives for people to visit their stores and restaurants. As of year-end, Foursquare had over 15 million users, with an exponential growth rate globally. Startups such as Shopkick offered real time deals when users were in stores and Shopsavvy and similar mobile price comparison tools from Amazon and Google empowered consumers to find the best deals. Applications such as Xtify, Local Response, and Placecast provided turnkey mobile solutions for retailers to target consumers. Mobile advertising became more targeted and user friendly by adapting to the small screen — but advertisers are slow to adopt, with much upside still to come.
The Mobile Phone in Emerging Markets: As the US adopted smartphones and tablets in greater numbers and consumed media, played games and instagram’d to its hearts content, users in emerging markets innovated with their feature phones. In Kenya, M-Pesa processed more transactions domestically than Western Union did globally, and “provided mobile banking facilities to more than 70 per cent of the country’s adult population”, most of whom never had banking services before. Mobile minutes are the new currency in regions often plagued by high inflation: they are offered as rewards for filling out surveys or for using public toilets (in India, where cell phones exceed the number of toilets). Farmers subscribed to daily updates via SMS on weather and crop prices. Armed with new information via mobile phones, they are able to make more informed decisions about when to plant and where to sell their goods. Villagers in rural areas are now connected to health services via SMS updates and “dial a doctor” services. The mobile phone has transformed billions of lives by providing previously unavailable connectivity, information and economic development (studies have linked a 10% increase in mobile penetration to a 1.2% increase in GDP), and this will only accelerate as 3G and 4G networks spread to these regions and smartphone and tablet prices continue to drop, encouraging adoption.
eCommerce/Social Commerce: New models continue to evolve as ecommerce rebounded this past year. From big brands creating campaigns on Facebook to group buying sites like Groupon to subscription services such as Birchbox and Shoedazzle to highly curated specialty sites such as Fab.com, 2011 saw large increases in consumers buying online. The viral nature of social media no doubt aided this growth, as did improvements in the online shopping experience. Discovery, in contrast to search, took center stage as Pinterest displayed hockey stick growth (and raised VC money near a $200M valuation in late 2011). Sites such as OpenSky and Send the Trend utilize recommendations by celebrities and experts to sell products. Given the growth of information online, it is not a surprise that consumers are now looking for more personalized, curated shopping experiences on the Web, and leveraging their social networks and other trusted sources to find products.
Startups are Sexy Again: Entrepreneurship was the rage globally, ironically driven by very different market forces: stalled Western economies where traditional jobs dried up and growth in the emerging markets demanding new services and products. Meanwhile The Social Network movie chronicled the founding of Facebook, bringing startup lingo and culture into the broader lexicon; and Steve Jobs’ legacy highlighted the importance of innovation to our daily lives. What’s different this time around (as opposed to the tech bubble of the late 1990s) is the widespread use of technology, “digital natives” (millennials who grew up with the Internet and mobile phones) coming of age, and a cultural shift towards self-employment and risk taking (again, powered by stark economic realities). Startup accelerators modeled after YCombinator and Techstars sprouted up from NYC to Nigeria to New Delhi, spawning hundreds of new startups worldwide. This will continue as more role models, mentors and capital are created from the resulting success stories, thereby creating more support for the next generation of entrepreneurs.
The Rise of Conscious Capitalism: I’ve been involved with social entrepreneurship for years through my involvement with organizations such as Echoing Green and the Unreasonable Institute, and this is the year that I saw massive growth and interest in the sector from the mainstream. Business schools throughout the country, include my alma mater, Kellogg, established or expanded their social entrepreneurship offerings due to increased demand from students. No longer solely nonprofit enterprises, socially conscious businesses developed hybrid or for-profit models to achieve sustainability, scale and access to a broader range of investors. Companies such as Warby Parker, which offers high quality prescription eyewear for $95 online and donates a pair for each pair bought, raised a significant round of funding from venture investors. As the world “stabilized” into a new reality post 2008 crash, there was a realization that there has to be a better way of doing business, that we collectively can no longer sacrifice everything in pursuit of profit. The spread of Occupy Wall Street captured this sentiment as did the passage of the B-Corp in 7 states (including NY and CA), a new class of corporation which requires fiduciaries to consider a range of societal implications, from employee satisfaction to environmental impact, when making business decisions (as opposed to focusing solely on shareholder value). Richard Branson’s recently released book Screw Business as Usual outlines how conscious capitalism can also be good for the bottom line.
Collaborative Consumption/Giving: From Zipcar to Airbnb to Couchsurfing (a B-corp, see above), the concept of collaborative consumption continued to gain steam. The notion of renting and sharing instead of acquiring fits into the trend towards environmentalism and conscious capitalism and is further powered by social media. People also shared labor and skills in greater numbers: sites such as TaskRabbit, Solvate and Zaarly offer marketplaces for errands and tasks ranging from standing in line for the next iPhone, to grocery shopping, to website development. Social media and online payments have also enabled collaborative and peer to peer giving (in the form of donations or loans). Kiva pioneered the concept, allowing individuals to lend or donate small amounts online (as little as $25) to entrepreneurs around the world. Kickstarter enables people to donate money to artists, filmmakers and inventors for specific projects. DonorsChoose is an online charity that allows teachers to post projects for their classrooms and raise money from individuals. All of these organizations have shown tremendous growth in the last year, and key to their success is creating highly personal narratives around projects posted, and an ability for the lender to connect emotionally to (and gain transparency into) where his/her money is going. Charity Water is a great case study for this. The marketing strategy also translates offline: I just attended the 5th Anniversary Charity Water Ball in NYC, where they raised close to $2M in a live auction in increments of $6K and up, in which people could donate individual wells or discrete infrastructure components. To watch in 2012: a crowdfunding bill in Congress about to be passed that would allow entrepreneurs to raise up to $1m annually from unaccredited investors in return for ownership stakes in their businesses. Kiva co-founder Jessica Jackley’s latest venture Profounder is one platform that could power these transactions.
Technology “Creation” Becomes Multidisciplinary: Technology usage is mainstream: I often communicate with my parents via text and my 70 year old aunt just bought an iPhone. Rickshaw drivers in India have cell phones as do camel drivers in the remote Rajasthan desert. Thus, the need for intuitive interfaces and seamless technology integration into devices becomes more important than ever before. Apple became the most valuable company in the world (measured by market capitalization) in August by offering simple, attractive design that made technology invisible to the user. Technologists are now aided by sociologists, psychologists, anthropologists and domain experts in every field (from media to fashion to art to architecture) to create products and applications that will appeal to this expanded target audience. Universities are also creating more interdisciplinary programs in order to encourage this collaboration.
Disruption in the Education Space: When I first started looking at education technology investments in 1999, very few VCs would go near the sector. Selling into school districts was notoriously difficult, and teachers nor administrators were technology savvy. Today the education technology field has expanded — it is no longer necessary to sell to districts to reach the consumer: whether students (of any age) or teachers, the consumer is online. I am particularly excited at what the future holds in this sector, given the amount of activity over the past year. Edmodo received funding from Benchmark and Greylock to build out its social network for teachers and students; Chegg continued its growth in offering online textbook rentals; Knewton is testing its adaptive learning platform (under development for several years and potentially game changing) with select beta partners in advance of a broader rollout. Sites such as CodeAcademy and Khan Academy are bringing quality instruction online to the masses. Stanford University rolled out a free online Machine Learning course. Sites such as Skillshare allow people to monetize their skills by creating and teaching classes that students sign up for online (and attend offline for now). The list goes on; given the challenges of current education institutions in the US and abroad (high cost, limited distribution), technology coupled with strong content can help make quality education available to all.
What’s Next in 2012….
I’ll address the following (and a few more) in greater detail in subsequent posts but these are 5 themes I will be keeping an eye on in the next year:
Everything Mobile: I liken the evolution of the mobile segment to the evolution of the wireline/broadband Web — except multiplied, due to the growth of mobile connectivity globally. Mobile payments, content creation, advertising, infrastructure (managing bandwidth requirements for data as more smartphones are sold, security), and location based marketing are all areas poised for growth, as are localized solutions in the emerging markets.
The Intersection of Online and Offline Worlds: Meetup was one of the first to address this intersection for social and learning purposes, but the virtual world is also increasingly driving traffic and offering discovery to local retailers and service providers (see SideTour).
Healthcare: Given the inefficiencies in the US healthcare system, this sector is ripe for disruption. From remote monitoring, data collection and diagnosis to more widespread adoption of digitized records to more effective clinical trials to preventive analysis, technology can help cut costs out of the system.
Globalization hits Startups and VCs: There have been a slew of funding announcements in recent days of companies raising funding to expand across borders. Spotify came to the the US from Europe this year, and TaskRabbit and Outbrain just raised money to grow beyond the US. As penetration peaks in the Western countries (see my post on global internet trends), startups are looking to expand quickly to underpenetrated markets before local solutions are developed. This race for global market share also requires investors and board members that are globally savvy (and multicultural) in order to capitalize on these opportunities.
The Enterprise: The last few years have focused on consumer usage and adoption of technology. However, large companies are recovering from the shock of the 2008 collapse and re-aligning to the New Normal. Technology can play a role through cost reduction and creating efficiencies (virtualization, cloud computing) as well as top line revenue enhancement (utilizing data and social media for better customer service and sales strategies). New financial services and healthcare regulation will also create the need for related IT solutions.
I’m most excited about the global trends that are empowering more and more people around the world. As Western growth stalls, and emerging and frontier markets (such as Africa) grow, we will collaborate in ways not imagined before. In the West, we have been living in relative prosperity for decades. Billions of others have lived with significantly less resource and learned to innovate. The Indians have a term for this: jugaad. Jugaad is “now an acceptable management technique…and also applies to any kind of creative and out of the box thinking which maximizes resources for a company and its stakeholders”.
Here’s to an era of global Jugaad…