First Half of 2011 Investment Themes

1. Serendipity in Application Development

If Web 1.0 was about static content and Web 2.0 was about social – the next 10 years of Web 3.0 is the era of data-driven computer intelligence (also known as Machine Learning or AI.)

This shift is simply an extension of social – the reason we ask our friends for advice is it reduced friction in making decisions as users used their social graph to prune their selection set.  I love my friends – but my purchase and life history is far more indicitive of my next decision than my Twitter Followers.

eCommerce and Advertising companies have done this for a long-time – most notably Amazon & Netflix.  However, this become a critical part of the future user experience in all applications initially driven via mobile and touch – because its harder to give users options with less screen real estate (see my previous blog post on Uber for examples of great mobile UI).

Broad forces causing this trend beyond the growth of mobile computing include increased computing and bandwidth power, new computer user interfaces such as IPTV and Tablet, decreased data storage costs, increased cloud services that will make it easier for developers to build their core application.

From an investment perspective – I’m looking for companies (Internet, software, hardware) – that broadly fall into the following four buckets:

  • New Tools or Ways to Passively Collect Data (Example: Fitbit, WakeMate)
  • Data Storage Services or Databases (Examples: Anything that makes storage of large datasets cheaper, easier, or more efficient)
  • Analytics and Recommendations Systems (Example: Hunch)
  • End Use Applications (Example: Uber)

Check out this recent Wired article for some more context on the growth in AI.

2.  Tablet in the Enterprise

The enterprise loves the iPad.  Their customers love it, their employees love it, and the senior executives love to say they have it.

Unfortunately, Apple has focused initially on the consumer – leaving a massive gap of tools and applications to enable iPad adoption.

According to Terrell Woods, consulting lead at D7 Consulting:

“Simply put, there are no good enterprise management tools for deployment. Every iPad has to be set up individually, as opposed to putting iPads into a group and pushing a button for the same configuration. “The operating system on the iPad does not allow you to configure your iPad as an enterprise device”

From an investment perspective, I’m looking for companies that fall into two buckets:

  • Integration across platforms (enabling easy integration with legacy systems)
  • Vertical-specific App Developers (New Applications that are enabled by the Tablet Form for specific industries)

Over the next 3 months, the adoption will be driven by industries that have a consumer-facing aspect – mainly financial services, healthcare, and retail – however, over the next year, expect to see adoption across the Fortune 2000.

3. Video Infrastructure Services

As video becomes:

  • Cheaper to produce and stream
  • Easier to shoot and edit
  • Proven as more effective for marketing

More and more companies will use it. (For great examples today, check out AirBnb or GigaOm.)

The end result is that every company becomes a partial media company – generating and sharing tons of rich content across a variety of platforms.

However, due to the issues of encoding and sharing to different platforms, most companies will not want to keep most of their infrastructure in-house – choosing instead to outsource to a cloud provider.

From a timing perspective, IT is finally starting to trust cloud services – and next year will be a booming year for adoption of infrastructure services.

4. Connected World Stack

This is an broader extension of the previous theme – the next two years will see rapid increases in IT spending as companies look to dig themselves out of the technical hole they’ve created by not spending during the recession.

To keep costs down, many of these providers will begin shifting over to cloud services companies – including companies that enable M2M computing.

5. IP Television Application Layer

The infrastructure layer for TV is a mess.  Roku, Boxee, Google TV, Yahoo TV, Apple & Hardware providers are all fighting over content and the App Menu for IPTV.  And unfortunately, like music in the 90s, content providers have billions in legacy fees that are going to drag adoption from the content holder side to a crawl.

However, with Gartner predicting over 102 million IPTV user’s in the United States by 2014 – there is a rapidly growing opportunity to reach consumers in the home.

Companies that I’m searching for here broadly fall into:

  • Cross-Platform Media Companies (Web, Phone, TV)
  • Social Gaming
  • Advertising Infrastructure
  • Other Applications

Finally, a quick look back at my themes from the second half of 2010.  Looking back it’s interesting to see where deals came from and how some of the trends have evolved.

Second Half of 2010 Themes

1. Mass Customization of Physical Goods
2. Democratizing of Publishing
3. Search is Dead
4. New models for funding premium content
5. Innovative ways to place marketing in the conversation
6. Bringing a customer experience into new industries

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I work for True Ventures, an early-stage venture capital fund with offices in San Francisco and Palo Alto. We partner with promising entrepreneurs at the earliest stages in the technology market providing hands-on management support to guide our portfolio companies through the challenges of early growth.