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Missed the hype part of the cycle?…don’t miss the execution phase!

Surely many of us have seen the famous Gartner Hype Cycle. It is reproduced every year by the IT research and advisory firm Gartner, Inc. We typically see the following version of it shared around which lists emerging technologies along the curve to illustrate what is hot and what is not.

While it is interesting to see if autonomous vehicles are more ‘hyped’ vs NFC technologies or 3D printing, it is important to note that all emerging technologies travel across the curve over a period of time, and above is just a snapshot in time. Every space gets hyped in the beginning, then disappoints (or gets old), and then re-emerges as real products emerge in the markets with customer adoption.

For any particular new emerging technology space, the cycle looks as follows:

Every new technology space (think connected devices, autonomous cars, drones, VR etc) sees a huge uptick in consumer interest when it is first introduced in an easy-to-understand and palatable way, driving hype among consumers (and investors). When the media/press/investor light shines on any new technology space, a few companies tend to really stand out and benefit disproportionately. They get seen as ‘potential leaders’ in the space, visionaries, capable of breaking through the clutter, and emerging as clear category winners. Why they get anointed vs others is complicated. Its likely a combination of being early in the space, having defensible technology, strong teams, great salesmanship by its founders, etc.

These companies that ‘hit the hype cycle’ just right benefit in several ways. With the press and media attention comes a reduction in their cost of capital. They are able to raise more capital at lower prices, are able to hire the best people with that money (as they appear likely to win this new exciting category), are able to do more experiments and get more shots at the goal without as much worry about costs of failure, and are able to attract early partners who are eager to participate in the spotlight.

Unfortunately, many other companies also involved in the same emerging space don’t get to participate in the ‘hype’ part of the cycle. They feel left out of the buzz surround a new space early on. They may not have the media-savvy CEOs and spokespeople, the well-placed investors and partners, or just may be in a geography that is not on the ‘radar’ of those buzzing about the new space. They don’t get the same press, the write-ups, the glorification of their teams and their technology developments, and the low-cost capital that usually follows to allow them to move fast, hire well, and make some mistakes along the way. They (and their investors) wonder how did they end up missing the ‘hype’ cycle? Regardless, the important question is: Are they doomed to fail vs competition?

I don’t think so.

Inevitably the ‘hype’ part of the cycle dies down a bit…The sexy stories start to get old and people start looking for what’s real vs what’s just good story-telling. And then the trough of disillusionment starts to set in which is when companies need to hunker down, start building real products, real solutions, and find real paying customers. This is the execution part of the cycle. And failing here is much more devastating for any company wishing to succeed in a new/emerging space. But if you win here, you win.

Companies that benefit from the ‘hype’ lavished on them benefit from the resources they are able to gather for survival during the tough part of the cycle, but that only goes so far. Let’s not forget some of the baggage they also carry into this phase. These companies sometimes end up raising more money than they need, often at higher-than-sustainable valuations. They have elevated burn-rates as money often tends to burn holes in CEOs’ pockets, and sometimes they get trapped by those hyping them setting unrealistic expectations of them. All of the above can be burdensome for a company when the real challenge becomes making technology work, getting customers to find your solutions worthwhile, and retaining talent as other emerging technologies enter the ‘hype’ part of the cycle. And believe me, any unfortunate ‘down round’ is terrible for morale across the company.

My point is not to say companies that are seen as category winners early on are doomed to fail. Of course they benefit and strong leadership can capitalize on that early success to truly leave their competition behind in the dust…but other companies who struggle to get their voice heard early on still have a second chance - an opportunity to succeed on the basis of focusing on customers, keeping a heads-down attitude towards distractions, and setting internal and external expectations that real victory is only reached by winning customers, revenues and profits. This is the real part of building a business, the real hard part. And you can win at this. Don’t miss the execution phase!

Memories of a different kind: Sight, Sound, Smell, Taste, Touch

There is something amazing happening all around us. Technology is becoming ubiquitous, accessible, cheap, connected, and always available. Our mobile phones are probably the best example of the ubiquity of sensor/data/communication platforms. Onboard sensors are able to capture the sight, sounds, location etc of what these phones are pointed at. And we have seen amazing companies like Youtube, Facebook, WhatsApp, Snapchat etc form to enable us to do more with that captured data.

Human beings in general have 5 senses. Sight, Sound, Smell, Taste, Touch. Of course, as my friend Jeremy Conrad pointed out to me, we continue to discover additional senses as well, and in fact one of our portfolio company founders, Todd Huffman, has actively worked to enable a 6th sense in his body. We experience our lives through our senses. The importance of these senses are probably best understood by people who lose one or more of these along the way.

However, the reality is the the vast majority of what we sense using our sensory networks is lost almost immediately in the next instant. Very little, if any, is retained in our minds. We take tons of photos and videos, and used to write diaries, to try and ‘record’ our memories: kids growing up, favorite moments at vacations, sights in far-off places, smells in exotic locations, feel of new surfaces and materials. But its still a tiny tiny portion of what we sense.

Imagine if we were able to record everything that we sensed during our life. Imagine all of that was immediately recordable, indexed, searchable, replay-able and share-able. Imagine if I could share with my mom in Pakistan not only a photo of the delicious food I might be enjoying in San Francisco, but also the taste and the smell? Imagine doing so instantaneously. Now imagine reliving an experience, like reminiscing food my mom cooked by actually using data stored from when I actually got to enjoy it in person? Would that not be awesome?

Physical sensors for all the above are now becoming available (optical sensors are obvious but smell, for example, may be not so obvious – Lux interested in this space so help us find the best tech). But technology is moving fast and digitization of everything we sense is clearly on the horizon. More importantly, these sensors will only become cheaper and can be with us at all times: woven into our clothes and wearables etc, and connected to the cloud for long term storage and analytics. They will record not only what we sense, but perhaps also what the world around us was sensing…and storing the complete ‘view’ for us to use at a later time, including recreating more complete experiences.

Is it not possible to imagine a world where above would be possible? I believe not only will this be possible, in fact it will be the future. We won’t be limited to storing fractured, half-captured data on our lives and our experiences. We will be able to tap into the ‘whole view’. Everything we are able to sense with our bodies will be captured using physical sensors, and not used in some George Orwellian 1984 manner, but used to augment our memories, our lives, and to allow us to live in the past, present and future perhaps simultaneously. The dividends will be huge in not just our entertainment and augmentation of human experience, but also in helping people that lack certain senses to potentially experience the world via others’ experiences in a more engaged way, help people deal with psychological illnesses, depression etc. Amazing science, research and invention…and also amazing entrepreneurship opportunities possible in this area. I am obviously ahead of myself, but I am excited about such a future.

AirMap: Accurate airspace information so innovation can take flight.

The last 10-20 years showed an unprecedented growth in real-time information about our 2-D highway systems and the vehicular traffic on it. We all have easy access to GPS units or apps in our phone that not only provide us with dynamic maps of highways, but also traffic on routes, temporary lane and street blockades, safety hazards, and weather information pertinent to driving. We heavily rely on such information and drive through unknown neighborhoods with confidence every single day without breaking any rules, and without causing harm to others. Uber/Lyft are called with the push of a button and their vehicles are tracked in real-time on our phones with full information on exactly when they will arrive. In fact, the knowledge of our street systems is getting so good that autonomous cars are now able to drive around cities entirely dependent on GPS and SLAM (simultaneous localization and mapping).

If innovation in the last century was defined by our development of roads & 2D highway networks, I believe this next one will be about our air highways, specifically the air space below ~500 feet of altitude. We have gone 3D with flying robots and there is no stopping now. We already see drones buzzing around in the air, taking photos, videos for entertainment and security, aiding in rescue efforts, as outdoors sports vehicles, and even delivering parcels. We should only expect to see more of that. However, information available about the airspace in which drones are allowed to operate remains extremely fragmented, very hard to find, and is changing rapidly and often on short notice. This airspace information needs to be organized asap so innovation can take flight. And AirMap does exactly that.

I am excited to announce that Lux Capital just led a $2.6M financing in AirMap, and I will be joining their Board of Directors. We are joined by our co-investors that include Social+Capital Partnership, Bullpen Capital, TenOneTen Ventures, LegendStar, and Haystack. AirMap co-founders, Ben Marcus and Greg McNeal, are veterans in the fields of aviation and airspace laws/regulation, and well known in the drone industry. I am proud of our partnership with them and excited for what the future holds. 

I am a huge believer in the potential of drones. And my firm Lux Capital has invested in that ecosystem before, for example in the commercial drone-maker CyPhy Works or the drone imaging app BrightSkyLabs. DJI, 3DR, Parrot and others have also done a fabulous job commercializing drone technology in the US and internationally. But for drones to operate safely, legally, and effectively, accurate airspace related information will need to be available to drone operating systems. Airspace restrictions are being set and changed at national, state, county and town levels, and compliance is often hard to figure out. AirMap solves all that. AirMap focuses exclusively on providing accurate, reliable and trustworthy airspace information so that others in this nascent industry can build amazing vehicles and applications. It is a ‘Sky Atlas‘ for the drones industry, except it is easy to use, updated in real-time with accurate information, and available as an API to be fully integrated into your own drone related apps.

The airspace information that AirMap provide to operators, developers and manufacturers includes:

  • Airport airspace for recreational and commercial use, as well as the future proposed rules
  • Temporary flight restrictions like for firefighting or presidential travel
  • Restricted and prohibited airspace, like around Washington, DC and military bases
  • National Parks and NOAA Marine Protection Areas-Schools, Hospitals, Heliports, and Power Plants
  • Several other layers of information relevant to drone flights are planned in near future

AirMap is also a member of the Small UAV Coalition and the the NASA Unmanned TrafficManagement (UTM) program. Already drone manufacturers and operators are utilizing their API, and soon AirMap will also release an SDK and a downloadable phone/tablet app for drone operators. Simply stated, if you are building a drone or drone software, or operating drones as a hobbyist or professionally, you should use AirMap. Don’t be caught flying in a space you shouldn’t be, or get fined for violating permanent or temporary restrictions. Help this industry prove drones are safe, respectful of privacy, and capable of self-regulation.

p.s. see below an airspace map around Lux Capital office in Menlo Park.

Google vs Apple/Facebook/Uber: utilitarian vs aspirational products

At Lux, I routinely invest in companies at the intersection of hardware, software and data. From CyPhy Works (drones) and Evolv (security) to Orbital Insights (satellite data analytics) and LensBricks (computational imaging). We were discussing design ethos and data related features at a portfolio company meeting yesterday when an int’g conversation emerged around how Google sees the world vs other companies like Apple/Facebook/Uber etc. There seems to be a marked difference between their core product philosophies, and quite possibly the differences are deeply ingrained in the very DNA of the leadership and the talent that these companies have developed over time.

It seems to me that Google philosophically sees the world through the lens of data and analytics on that data layer. They started by indexing the world’s data on the web, grew into the mobile web as well, and now with their products like Android, Google Glass, Nest, Google Car etc, there ethos seem to be all about building, capturing, displaying or analyzing functional layers of data on top of the world. Yes, world seems to have given into the idea that all our information online is now being mined to make money for someone somewhere…but has Google forgotten in the process that consumers still want to be amazed, to be fascinated by technology, and to be led into a future that they couldn’t have imagined themselves? Is the magic being lost?

In contrast, companies like Facebook, Apple, Uber  etc also utilize data generated by their businesses to further feed their business models, but the fundamental philosophies are not about layers of data, but about magical, aspirational experiences – ethos that appear to be about amazing people, immersing them in new mediums, and capturing their attention more than their data. Facebook is likely generating more original data/content than Google but somehow it doesn’t feel so much about zeros and ones. Apple/Facebook/Uber all service customers in practical ways, but I don’t feel like just another cog in their revenue generating wheel. Certainly my affinity to their brands now feels more personal and loyal, the way Google felt to me 10 years ago. Google relationship now feels how I felt 10 years ago about MS Word, Excel.

It is telling that Google developed Glass around the same time as Facebook’s venture into the virtual reality world with Oculus. Google slapped something relatively silly looking onto people’s faces to add layers of data to aid in our every day lives. The information contained in the augmented reality data layers was timely, contextual and possibly quite useful. Facebook, on the other hand slapped something even sillier looking onto people’s faces, but boy, that experience was magical. Their consumers were transported into a different place, a different world. They could share their 3D environments with other people (e.g. powered by Matterport), travel back in time or on a fantasy adventure, play games or socialize by a virtual beach while watching the SuperBowl (e.g. powered by AltspaceVR). This is just one example, but the aspirational experience of an Oculus certainly won more admirers than Glass. MagicLeap is Google’s next foray into the augmented reality layer, and while it certainly looks more refreshing, its still trying to put layers of information (graphics) on top of our existing world.

Google used to be the gold standard of trust with our data 10 years ago. But is that still the case? Do people trust Google anymore the way they used to? Do they even rely on Google to be the most relevant provider of data to people anymore? We used to ‘google’ everything. We still ‘google’ a lot, but we are also in a world of rapidly growing walled gardens, curated content, and push notifications. Will Google’s data-focused philosophy allow it to win again in the new competitive environment they find themselves in? Don’t get me wrong, I love Google, but I know Apple, Facebook, Twitter, Uber etc now have a larger share of my attention (and money).

Google has been on the fore-front of some ambitious projects and ideas, for e.g. their famed GoogleX division. But is it starting to look more like academic institutions – where amazing technologies get invented but such little attention is paid to design, customer preferences, and to wrapping technology with an amazing product experience that most of the stuff never gets to see the light of day? I am somewhat frustrated that such incredible technical talent, and financial support from the top leadership, is still not building something new we would crave to have. When was the last time you were genuinely excited about a new Google product and became a customer? It was gmail for me, and yes that was a long while back. I love Google’s moonshot ambitions in robotics, drones, autonomous cars, medical diagnostics, life longevity, imaging, satellites, balloons, renewable energy etc. But I really wish more of them didn’t stay as academic projects that resulted in Ted Talks by the inventors but never became properly productized and marketed.

Google, we asked for flying cars…we would still like to have them.

Satellites/UAVs, computational imaging, artificial intelligence: Lux continues our partnership with Orbital Insight

Last year Lux Capital helped seed Orbital Insight, a geospatial big data company that leverages rapidly growing availability of satellite, UAV and other geospatial data sources to understand and characterize socioeconomic trends at global, regional, and hyperlocal scales. We’re excited to continue our partnership with them as they announce today a $8.7M Series A financing with other investors including Sequoia Capital, Google Ventures, Bloomberg Beta and The company will use this financing to grow its engineering team and service clients in finance, retail, real estate, insurance, government, and non-profit sectors.

Orbital Insight’s founder and CEO is Jimi Crawford. Previously he was SVP of Science and Engineering at the Climate Corporation, CTO and Software Architect at Moon Express (a company with the modest goal of putting the first commercial robot on the Moon and winning the Lunar X-Prize), and engineering Director of Google Book Search, where he was in charge of Google’s project to scan, index, and make searchable the world’s books. He knows and understands big data.

The company uses expertise in image processing, neural networks, machine learning, and statistical analysis to glean valuable insights from satellite/drone images and other large geospatial data sets for a diverse body of customers. These customers include financial institutions such as hedge funds, real estate developers, insurance companies, but also government agencies, and international development and environmental non-profit organizations. Orbital Insight is not a traditional image analytics company. It utilizes cutting edge techniques to bring actionable insights to transform very large industries and likes to call what it does ‘macroscopic analysis’. As global tech trends in satellites, drones and other forms of geospatial sensors continue to generate very large data sets (esp. imagery), Orbital Insight’s ‘macroscope’ can help all kinds of companies better understand their industry, context, and future.

Lux Capital has significant experience investing in companies that bring the physical and the digital together. Orbital Insight sits at an interesting intersection of three sectors that we have invested in:

Orbital Insight has multiple data products already being used by customers. For example (a) forecast of end-of-season crop harvest based upon mid-season spectral analysis, (b) quarterly retail performance based upon counting of cars in parking lots, (c) measure of rate of construction in China’s real estate sector, and (d) fluctuations in global crude oil inventories. In each case Orbital Insight provides an accurate assessment/prediction months ahead of other organizations. ROI for the customers is clearly driven by the accuracy and timeliness of the insights. (see a WSJ article on Orbital Insight from last year).

Broadly speaking, at Lux Capital we continue to believe that dramatic reduction in cost of distributed sensors/hardware, combined with ubiquitous connectivity and reduced cost of computing horsepower, has allowed new types of data to be produced and harnessed for bringing insights to industries that have otherwise typically operated by looking in the rear-view mirror. The opportunity to transform such industries is a very large one, and we are proud to back Orbital Insight as a pioneer in the space.


Women that are helping bring about the drone revolution

In How Google Works, Eric Schmidt talks about how the company approached recruiting its top talent that were internally referred to as “smart creatives”. Schmidt shared “These are the folks who combine technical knowledge, business expertise, and creativity”. Steve Jobs often talked about the importance of top talent and how a small company depends on great people much more than a big company does.

Kristen Helsel
Kristen Helsel

Today, I am very excited to share that one our portfolio companies, CyPhy Works (UAS/drone systems), has successfully recruited Kristen A. Helsel to lead their commercial efforts. One of top female hardware executives, Kristen is an established successful leader (and former entrepreneur) who brings a demonstrated track record of new business innovation, industry sales and marketing, and executive management to CyPhy Works. She has had a front row seat for the evolution of the drone space in the USA as the former vice president of sales and business development for Aerovironment’s Commercial UAS business, and in her previous life she also ran Aerovironment’s electric vehicle charging business where she saw that new industry grow from near zero to billions of dollars in the US. Prior to that, she held sales and executive positions with Eclipse Management, Swift Engineering and General Motors. Needless to say, she is at home in the world of mechanical, electrical, hard-core engineering based products.

Kristen is joining Helen Greiner, founder and CEO of CyPhy Works, who is arguably one of the best engineer-entrepreneurs of our country. Helen previously built iRobot to disrupt the commercial and consumer robotics industry, and now Kristen and Helen aspire to do the same in the world of drones. It will be exciting to see what bringing vertical motion to robotics does to the world, from productivity and data based decision making to future commerce and saving lives. It has already been a great experience for me to be associated with CyPhy Works as an investor and a Board member. The team is uber-geek, they hack hardware and software for fun, and nerf-gun fights is how they release stress at work! And women rule the place: 3 out of 5 executive team members, and 2 out of 4 Board members are women.

Helen Greiner
Helen Greiner

It is an exciting time for the US drone industry. CyPhy Works is seeing tremendous growth both nationally and internationally. They have partners and customers in varied industries ranging from oil & gas, insurance and mining to package delivery. Kristen is joining to head the commercial activities to build on those relationships and scale operations, including manufacturing, customer support and services. She has already been schooling me on the regulatory landscape around drones and how it impacts commercial potential in different markets. Since I am a long-term believer in the drone space, what also excites me is her commitment to playing a leadership role not just for the company, but for the space in general. I have no doubt she will be a voice to reckon with for all drone companies and technology providers.

CyPhy Works is a Silicon Valley funded company that draws upon the strong talent pool in both Silicon Valley but also Boston’s robotics cluster. Kristen will have one foot in Silicon Valley and another in Boston. As a Board member, one of the things I am most proud of is the help I am able to provide to entrepreneurs in building great teams. Executives at portfolio companies become a part of the Lux Capital family, just like the founders and CEOs. Hence, I am excited to welcome Kristen and looking forward to working with her.

You can follow Kristen on twitter at @KristenAHelsel, Helen at @helengreiner, and CyPhy Works at @cyphyworksinc.

An investor’s perspective on the proposed drone regulations

It was an exciting Sunday morning on a holiday weekend in the world of small commercial drones (small Unmanned Aerial Systems as FAA calls them). We had heard last week that FAA was close to announcing their regulatory framework, and it has arrived. Finally, after nearly a decade of persuasion from everyone, from the drone community to the US Congress to the President of the USA, FAA has published its Notice on Proposed Rule Making for commercial use of sUAS.

I am a believer in the potential of commercial drones in the USA. We have been leaders in the drone technology space, and a lack of clarity from the FAA was hindering our progress. One could argue it was hurting our standing globally in the space, and many US companies had actively started processes to primarily focus on non-US business opportunities. My blog post at the end of 2014 outlined some areas where I envisioned innovations to bear fruit in 2015, but their exploitation hinged on the regulatory environment.

Below are some thoughts on the FAA NPRM (summary here of the regulatory document which will go through a 60-day comment period and will likely become law in 12-18 months).

  • At Lux Capital, we believe the FAA drone regulatory document is a big step forward, a watershed moment, in the future of aerial robotics.
  • Investors will no longer need to discuss product and technology innovation roadmaps of drone companies in the context of baseless rumors & leaked documents regarding s confusing and regulatory environment.
  • The drone industry is taking a collective sigh of relief that FAA is approaching regulations with a somewhat practical and common sense approach. Earlier leaked memos etc had cultivated a fear of draconian, irrational laws. Those fears were ungrounded. We hope the FAA will instill a greater degree of transparency in its process as it continues to use the regulatory process to fully integrate drones into our commercial airspace.
  • Technology in the drone space is evolving rapidly, from navigation systems to control, optical stabilization, lidar based sense and avoid to fleet management, compliance and insurance. We should continue to see great things emerge form this industry that is currently attracting some of the smartest minds in engineering.
  • I often saw investors discussing what FAA regulatory bottlenecks might look like, and if it was “the right time for this technology”? Regulatory uncertainty kept many investors on the sidelines. Clarity from FAA should help all such investors, including those interested in investing in not-technology but service businesses built downstream.
  • There remains a lot of work in bringing FAA regulations in line with emerging tech. For e.g. CyPhy Works drones can be tethered to ground for continuous use. They are not flying freely, and hence should they not be allowed to operate at nights as well? Besides, aren’t drones equally visible at night with LEDs and other lighting? Or, for e.g. current regulations limit use to visible line of sight. This sounds good but is practically, is it really easier to control dots flying at 100 mph when viewed with just naked eye vs enhanced viewing features including the use of augmented and virtual reality technologies? And what about autonomous flights? If we can have autonomous cars driving on the highways in California, drone flights are in fact easier, esp with the latest on-board sense and avoid technologies.

All in all, this FAA document is a major step forward for the US drone industry, and entrepreneurs are excited to continue to build for US commercial use-cases. The US drone industry expects to create jobs and spur economic growth, increase productivity in our agricultural fields and construction industries, improve worker safety in mining locations and oil-fields, and help protect our environment as well as save lives during natural and other disasters. The aerial robotics revolution has just begun and amazing times lie ahead. For engineers, innovators, entrepreneurs and investors!

We at Lux Capital are watching this closely, and investing in this space.

VC due diligence. Important, and helpful for everyone involved.

VC diligence is not a scientific process. I like to think every investor does some level of diligence even though there are some signs in today’s ‘hot’ market that some are willing to write big checks based on just a hunch. That should not be the case as due diligence is a good thing. It helps everyone involved.

Due diligence is a good thing. It is not just good investment practice that we certainly take very seriously at Lux Capital, but it also has additional benefits that accrue after the investment is made. It helps investors understand the space, its particular dynamics, strategies deployed by the company and its competitors, and the likely scenarios of how the story unfolds better. Knowledge about the company one invests in can help investors be better Board members, advisors, and strategic thinkers. Thus diligence across various aspects of the business, such as team, technology, competition, market size, capital needs, exit outcomes are very helpful.

I have also noticed that investors don’t often share with entrepreneurs what questions they might be stuck on. I am not sure what the reasons might be but maybe it has a little do with the fact that VCs can be conflicted if these are the right questions in the first place? Their gut and mind are at odds with each others? or they are trying to find lessons from history (pattern recognition), when short term and long term history has conflicting stories to tell?

Anyways, below I am including some thoughts I tweeted out this morning (hashtag #vclogic) on some questions investors sometimes ask that fall into that category. There is nothing inherently wrong with these questions, but good investors are careful about contextualizing the answers they may get back in cursory diligence.

  • What if Google/Amazon/FB were to do this internally? Would they buy or build?
  • If this is such a good deal, why hasn’t it been picked up as yet by others?
  • This team has no senior management, just a bunch of hipsters. Who on the team has deep experience in the space? Conversely, this team is all grey hairs. Where’s the passion and fire to walk through walls?
  • Isn’t the TAM too small for us? Conversely, don’t unicorns form when they create new markets?
  • This is a crazy price for this round. Conversely, why was last round done only at a modest step up?
  • Why does this company not have the same buzz as the other company I recently saw on TC and WSJ?
  • This is a nice widget/toy. But how do you build a business around it? Conversely, isn’t this a science project?
  • When do you reach cash flow break even? Conversely, why aren’t you growing much faster and owning the space?

My partners and I at Lux try to be transparent about the process we engage entrepreneurs in. We aspire to be prepared about spaces we invest in, but we are often surprised by what great entrepreneurs cook up to bring to us. My partner Josh calls it the “hmm, that’s interesting’ moment. When exposed to a new space or a new take on an existing business area, we quickly try to get educated by calling upon people in our network who know and understand the dynamics and economics better.

If we choose to dig further, we talk to technologists deep in the space, we call some reference and some potential customers, and we call personal references. We talk to people you might know, and some you may not, some partners of yours and some competitors. We meet key team members (sometimes individually) and talk to existing investors. And more…There is no laundry list of diligence items (except for legal diligence which seems to have such laundry lists), but our process hopefully shows a genuine curiosity on our part to figure out how the value chain works and where will dollars accrue, how would this particular company play and win in the space, what protective moats can it build, what are its strengths and weaknesses, and how Lux and our amazing set of LP partners can help if we were to make the investment. We try to be fast and respectful of your time. And by the way, if we end up choosing to not invest (which happens more often than not), we are happy to share our learnings with you so you can be helped regardless.

And yes, entrepreneurs hold us to that standard, and we love it.


Devices, gadgets, robots, virtual worlds and selfie-sticks: some thoughts on CES

I recently attended my first ever CES show in Las Vegas. I was only there for a few days, and frankly, found it entertaining and useful. I know there are many SV folk who look down on CES. Oh well…I do plan to go back there next year if I can.

CES is a crazy place simply because there are so many people there. Long lines for taxis or shuttle buses, booked up hotel rooms from months in advance, ginormous exhibition hall floors and lecture halls from the Las Vegas Convention Center to the Sands Convention Center and Venetian. All mixed in with Las Vegas lights, music, casinos and street artists. I stayed two days, walked many miles equivalent each day and was pretty tired by the end of it.

IMHO CES is great for a few reasons:

  • It is a really a tremendous concentration of all things technology in one place. From next gen TV sets, cameras and robots to phones, PC peripherals, cars and gadgets. Some times one has to see the hundreds upon hundreds of companies innovating in technology to realize SV is not alone in moving technology forward, and there is tremendous supply and demand from consumers all around the world. Some of the most interesting companies I met there frankly came from Israel and France.
  • Unlike some other conferences, one can actually see founders and senior executives of companies often on the exhibition floors or in nearby vicinity. Its not just marketing folk surrounded by booth babes (ugh!).
  • CES is not just about large tech companies and their megabooths. Its also about the little guys tucked away in corners who might be doing something unconventional, something that may not make news this year but is bound to see more attention in the future. At the same time, major sponsors like Intel had actually also opened up much of their booth spaces to smaller startups that had incorporated their technology in the products.
  • So many different types of people attend CES. I met several fellow VCs, CEOs, product development folk, marketing consultants, young and old consumers, Las Vegas locals, and press/media. It was interesting to be able to somewhat compare and contrast the opinions formed by different people on the same products.
  • Its not a bad place to meet people if planned in advance. I mostly met people who live further away from SV – people from the East coast, Canada, Europe, and as far away as Russia.

Some other observations even though there are excellent CES summaries now published online.

  • TVs occupied a huge space. Everything was 4K and above. Curved TVs still occupied shelf space but it was clear their use-case is unclear to even their inventors themselves, and most TVs touted some level of connectivity. God only knows how many different Asian TV manufacturers were there, and fwiw, it would be hard for someone to tell a difference if they had slapped a more well-known label across their product. Some companies showed off glass-less 3D TVs as well, but they stayed a novelty. TV industry is certainly grasping for something to hang on to as its share of our attention erodes.

  • Virtual reality was present in full bloom. It wasn’t about the devices themselves as much as it was about experiences created within VR. From shared VR experiences to flying drones inside VR. Some interesting 360-degree camera systems were on display as well for video filming from 3D/VR/immersive content.
  • There were dozens of drones and drone-related companies. While US continues to muck around with the FAA regulations, drone companies are sprouting elsewhere in the world, esp in Asia. In fairness, besides DJI and Parrot, US companies still seemed to have a lead on hardware, software, UI and applicability of the small drones.
  • There was a gigantic section showing of Internet of Things devices and systems. One could not have counted how many such companies were present. Many still remained as point solutions (use an app to turn a device on/off/measure etc). I think as far as VC investments go, we may be reaching past the stage of “lets connect this device to the internet”. Next up is how these devices perform important tasks together by exploiting their collective intelligence and networking. Nest, IFTTT, Smart Things etc are early experiments in that space.
  • I was honestly a bit disappointed to see the fitness trackers/health device spaces. I may have missed some important sections otherwise what I saw was unimpressive. I am not sure what utility there is any more in simple fitness trackers embedded inside fancy looking watches and devices. We need better vitals, better integration between devices and what physicians might know/measure periodically, and then AI engines to help translate all the body of knowledge into actionable insights.
  • There were several robotics companies but only a few stood out. I don’t fully understand the market opportunity around simple remote presence systems but some of those companies had a significant presence (e.g. Suitable Technologies). Their systems certainly entertained the audience for at least a short while.
  • One thing that really stood out at CES was the need for distance wireless charging systems. Unfortunately I did not see a good solution. Witricity had a big booth, and given the company has been in stealth for years, I expect to be more wow’ed by their product manifestations than I actually was. It feels they might have an int’g business in licensing their technology to larger product companies, but much work remains to be done to turn it into something that leaves consumer with a ‘wow’ experience.
  • 3D printing has certainly come of age and now a well understood, growing field. Small printers showed how to print in composite materials, including carbon fibers, and there were plenty of companies utilizing 3D printing to mass customize their products. This trend will not stop and investing behind it is probably a wise thing to do. At Lux we continue to look for opportunities downstream in the 3D printing value chain.
  • Some other interesting technologies were around cameras/imaging (certainly mobile is eating the DSLR world which is shriveling back to really high end systems mostly for professionals), gesture recognition & eye-tracking systems for use in gaming and VR, heads up displays for cars are definitely slowly making their way towards becoming commercially available, novelty items like heated shoes, solar bag-packs etc, and tons of phone cases, screen protectors, and ah-yes, the selfie sticks! If you think of a product, somebody likely has something at CES in that category. And its more likely to be a Chinese company than from anywhere else.

I am sure CES is not for everyone. Sometimes it reminded of my visits to crowded Japanese electronics malls in Tokyo, but I actually enjoyed those places as well….so maybe I am an odd person who enjoys such setups, but it was certainly a useful spend of my time. I hope there will be Uber there next year!


Tribes, clans, groups, religions, unions, societies…a rant.

Most humans like to belong to groups – we belong to tribes and clans, we are patriotic and national, religious in our beliefs including atheism, and affiliate ourselves with certain churches or sects, we have labor unions and political action committees, identify ourselves as Democrats or Republicans, liberals or conservatives, and call ourselves libertarian or communist, so on and so forth…I don’t know why but there is clearly an innate interest in us to be communal, to ‘belong’ to a larger faction, and form societies with rules and regulations that we may or may not like if we thought about them some more. There is much good, and much bad, that results from this group behavior.

This is not a philosophical post even though it is the end of the year and time to ponder on things like this. This stream of thought came to my mind as I was talking to my kids about our own identities, and realized how complicated it is. I told them we were humans first, boy and girls, Muslims by faith, Pakistani-Palestinian-American ethnically, part of the larger Zuberi and Rimawi families, relatively liberal in our views as a family, affiliated with MIT/Yale/Wooster/McGill alumni groups, members of the Red Sox nation and the Palo Alto library and and and…gosh, so many affiliations, so many cultures to learn about and adhere to, customs to practice, rules/regulations to follow, communities to give charitable giving to, and so much more. Oh, and is there a rank order for these in terms of what takes precedence?

That last sentence is an important one that I have been grappling with recently. 2014 was in many ways a terrible year for Pakistan, country of my birth. It was hit by terrible acts of violence perpetrated by terrorists.  But what’s been most incredible is that these acts were carried out by people from inside the country, acting in the name of the same religion that more than 98% of the country ascribes to. Muslims around the world were haunted by images of terrorism committed in the name of Islam…and wondered are those guys really Muslims? Do we really want to be a part of the same group that these murderers also happen to be a part of? Do we denounce them and kick them out, and can we do that? Did people forget that we are humans first and belong to any religion afterwards? Can we create our own group of reformed Muslims and walk away without being seen as heretics?

I have been thinking for the past few weeks/months that what internet has allowed us to do now needs to become more commonly practiced: namely, creating ad-hoc groups and affiliations as needed and moving/walking away when not needed or not in line with our individual points of view. Just like on Facebook or Youtube or Google Groups where we are able to Subscribe or Unsubscribe from groups and email lists, why can’t we do the same thing in life. Join a religious sect that may preach peaceful existence and leave one that starts to incite intolerance towards people of any religion, sex, class, race or sexual orientation. Form a labor union composed of both workers and customers to demand higher minimum wage from corporate overlords, but then walk away if the same union starts to put hurdles in the path of operational efficiency. Essentially, find a way for people in the real world to come together around causes and issues they care about at a point in time and easily disperse when priorities don’t align.

I would imagine an opportunity to practice above might result in at least incremental good in the world. Without this we are living in a world where people are either born into, or find their way into, affiliations and ‘memberships’ that often have to be maintained even when it is not the right thing to do. Hey, you can be killed if you denounce Islam, or lose your job if you leave a union. I have had members of labor unions tell me that they tolerate the crap labor unions sometimes engage in simply because they have no other way to voice their valid concerns about workplace environments and benefits. I have heard devout Muslims keep quiet when murder is committed in their name because they can’t be seen as airing dirty laundry in public, and I have seen people turn a blind eye on racism, bigotry and sexism because it was one of their ‘own’ that perpetrated the injustice. Similarly I wish there was a way to easily build an affiliation with people who cared about poverty alleviation, or those who had a liberal streak in their practice of Islam, or create a social movement with those willing to commit time, money and political capital to work on exciting ways to improve how we all lived.

I am hopeful even though I know there is no silver bullet, and what I wrote above now reads more like a rant. Yes, the decision to join or leave any and all groups is, after all, in our hands. But it is not so easy at the moment…But I am hopeful that lessons learnt from ad-hoc real-time networks that we have seen come together on the internet will make this much easier in the future. Then we will be able to simultaneously satisfy the innate need to be a parter of the large ‘whole’, and still remain independent. It will be a truer democratization of our society.

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