The Equity Kicker - Latest Comments

Re: Roll up, Roll up – European tech companies undervalued

David Smuts — Sat, 25 May 2013 06:53:38 -0000

Rather than promoting this discrepancy Nic, we should be decrying it. The reason for lower valuations, which European Entrepreneurs have been complaining of, is largely due to the lack of a healthy active VC-PE market. Simply put, competition for the deals and deal promotion among European VCs just does not measure up to US VC performance in regards to selling & marketing their protfolio companies.

Another point of concern is the time it takes for M&A transcations to complete. Once again, the lower level of competitive activity and deal promotion means M&A transactions in the EEA take a hell of lot longer than they do in the US.

Where does the problem lie? Underperforming European VCs I'm afraid.

Re: Roll up, Roll up – European tech companies undervalued

brisbourne — Sat, 25 May 2013 04:34:55 -0000

It's still harder to get to scale in Europe, but once you are there the difficulty of the journey shouldn't affect multiples, or arguably it should make them higher because it is harder for competitors to do the same. I don't recall the size of most of these deals, but I imagine a good number of them will have achieved scale.

Re: Roll up, Roll up – European tech companies undervalued

Jurrie Hobers — Sat, 25 May 2013 01:53:55 -0000

Though the total sizes of both 'markets' are more in balance, the reality is that breaking out as a company in the US an cover the whole region is way more easy than in Europe. In Europe the market is fragmented way more with all country specific things to cover. Which takes up much more management time and resources to manage. I think this reflects in the lower 'value' (cost to get there)...

Re: Building businesses around passionate communities of users

brisbourne — Fri, 24 May 2013 12:48:29 -0000

Good luck with the new business!

Re: Roll up, Roll up – European tech companies undervalued

brisbourne — Fri, 24 May 2013 11:23:43 -0000

:) too true. Doesn't help us as much though...

Re: Roll up, Roll up – European tech companies undervalued

Ed Freyfogle — Fri, 24 May 2013 11:10:12 -0000

An alternate way to look at this would be that US tech companies are over valued and a selling opportunity

Re: New Pew Internet data–Twitter growing, but Facebook still teens’ favourite

brisbourne — Fri, 24 May 2013 10:29:59 -0000

Thanks Ian. I didn't see the qualitative stuff until after I wrote the post, which is a shame because it does point in the other direction. The signals you describe are definitely there, but I'm not sure how strong they are. I get the sense that everyone is looking too hard for signs that Facebook has problems.

Re: New Pew Internet data–Twitter growing, but Facebook still teens’ favourite

Ian Collingwood — Fri, 24 May 2013 08:55:14 -0000

I saw this too and was going to reference in relation to your previous post about Tumblr.

I can see that the quant data shows Facebook use is stil high, but the qualitative data that the Pew study mentions is really interesting too. It shows that FB is becoming a "necessary evil" and is felt to be almost a burden for many teens.

This is extremely interesting and to me signals a potential shift ahead. It shows that there is a desire for some of the core functions that FB provides, but a visceral dissatisfaction with the environment FB provides. To me that hints that a new competitor could emerge that solves some of these problems in a better way. It's often true that quantitative data lags the qualitative stuff. Big opportunities can emerge if you know what to look out for. (A big if).

Re: The next wave of ecommerce

Jonathan smith — Fri, 24 May 2013 03:52:32 -0000

Next wave of Ecommerce will bring some new Ecommerce designs. The latest trend is good enough an is in huge demand but we can expect more.

Re: Building businesses around passionate communities of users

NappyValleyNet — Thu, 23 May 2013 16:04:41 -0000

Couldn't agree more! I have a hyper-local mums community for South West London: http://www.nappyvalleynet.com. We're self-funded and profitable and have struggled long and hard with whether we should seek finance. However we can't reconcile the size of the business with what we'd have to achieve (even if we have eight NVNs across London) to make the process worthwhile. We have another business (in beta) which would definitely need funding but that is a totally different opportunity in terms of a) size and b) scale. It really is getting finance to "fit" as opposed to closing the big money deals.

Re: Building businesses around passionate communities of users

brisbourne — Thu, 23 May 2013 11:16:46 -0000

Yes. I was originally thinking of the one product companies I know in this space, but your comment reminded me of the fashion boutiques. So I think these can be pareto businesses if they have enough products.

Re: Building businesses around passionate communities of users

Nicholas Lovell — Thu, 23 May 2013 10:51:17 -0000

Hold. First you say they are linear businesses, then in the next comment you say they are Pareto business (more 90:10 than 80:20).

So yes, they are Curve businesses :-)

Re: Building businesses around passionate communities of users

brisbourne — Thu, 23 May 2013 10:38:39 -0000

They already work like that, albeit through retailers. Talk to a top fashion boutique (online and offline) and they will tell you that their top 10% or so of customers drive the vast bulk of revenues. Some of these newer community oriented startups don't have enough products to make this work though, which points to a ability to extend the product range as an indicator of future success. Interesting.

Re: Building businesses around passionate communities of users

Nicholas Lovell — Thu, 23 May 2013 10:20:01 -0000

Let's try a thought experiment. Imagine that the KPI at a fashion house was not "how many frocks did I sell", but "what is my average revenue per user".

I could imagine a strategy where High Street retailers are a sales outlet but also a customer acquisition outlet. The fashion house aims to build one-to-one relationships with the best customers, say 10% of them. Those are the ones that love the brand, not just an occasional frock. They will be receptive to email marketing, to offers, to buying something every month or something several times. Some will be *everything* in the new collection each time.

I don't know that it is a power-law, but I am sure that there is a way to increase revenue AND satisfy your biggest fans at the same time.

But please, pick this argument to pieces. The more the better.

Re: Building businesses around passionate communities of users

brisbourne — Thu, 23 May 2013 10:01:36 -0000

:) Hope I'm not stealing your ideas.

More seriously - do businesses like these have the same power-law type distribution of revenue per customer?
I'd have thought they were more linear.

Re: Building businesses around passionate communities of users

Nicholas Lovell — Thu, 23 May 2013 09:32:02 -0000

It's at times like this that I wish the Curve was already published :-)

Re: Will there be a wave of ‘maker-centric’ companies?

Roger Ellman — Thu, 23 May 2013 04:23:44 -0000

True, historically, of all new inventions and concepts - at least initially. Takes the showcase to make the main case!

Re: Will there be a wave of ‘maker-centric’ companies?

brisbourne — Wed, 22 May 2013 14:48:55 -0000

indeed

Re: Will there be a wave of ‘maker-centric’ companies?

Nicholas Lovell — Wed, 22 May 2013 14:26:50 -0000

It's funny that the bit that will make digital manufacturing more visible and acceptable may not be where the most interesting investment opportunities lie.

Re: Will there be a wave of ‘maker-centric’ companies?

brisbourne — Wed, 22 May 2013 13:25:21 -0000

Hi Nicholas – I think you are right. As I’ve looked at more companies in this space it’s become clear that laser cutting, robot manufacturing and short run manufacturing in China are all more important than 3D printing.

Re: Why Tumblr is not Twitter or Facebook

brisbourne — Wed, 22 May 2013 05:38:06 -0000

I was reading some research this morning which found that teenagers are using Twitter and other social media sites as a supplement to Facebook. They find the new sites more exciting but Facebook is the mainstay, and time on the other sites isn’t detracting meaningfully from time on Facebook. If I was Zuck I would be looking at Tumblr and thinking about how I should respond, but I wouldn’t be worried about them as an existential threat.

Re: Why Tumblr is not Twitter or Facebook

brisbourne — Wed, 22 May 2013 05:34:49 -0000

agreed

Re: Why Tumblr is not Twitter or Facebook

Mark Hammond — Wed, 22 May 2013 04:38:02 -0000

I'd agree, it's also just a much more of a niche audience; there's only a limited number of people that want slightly more space to express them selves that twitter or reddit but don't care enough about it to put a proper blog together. It also has a MySpace feel to it which for me limits it to the teenage demographic.

Re: Why Tumblr is not Twitter or Facebook

Ian Collingwood — Tue, 21 May 2013 17:48:28 -0000

Good points Nic. The use cases are definitely different, although I wonder whether Tumblr might be encroaching a little on FB and twitter turf in some segments. Chatting to my young cousins and nieces made it clear to me that for this demographic (12-16) both the incumbents are old news and that the majority of their time online is spent on tumblr. If I were FB I would be concerned about this.

Re: Will there be a wave of ‘maker-centric’ companies?

Roger Ellman — Tue, 21 May 2013 04:51:18 -0000

I think there will be much "trying and doing" - a la early days of "throwing up a website" and seeing what happens. (It still do something close to that!)

But there is going to be an explosion of things made, tried, improved and then going - the ones that work at least - mainstream.

Investing will be a broad learning curve. Progress on the other hand is going to take another leap forward by allowing anyone who wants to have a garage workshop to give their ideas a try.

I think what will also be worth watching, perhaps more so, as an investment opportunity, will be the geopolitical or perhaps geo-economic changes that could, may and certainly can come to be. Greece could manufacture many things it cannot now do, so could Myanmar or Spain. Excluding transport costs, excluding inventory requirements and applying design of local suitability and preferences, on the manufacturing and industrial level....that's to be a big thing.

There will in the miox, be a wave - no doubt about it. Surfing that...it's pre Beach Boys time all over again!