Mobile is eating the web

Marc Andreesen famously said that “software is eating the world.” Now it looks like mobile is eating the web.

Back in 2010, Mary Meeker and Morgan Stanley predicted that within the next five years, “more users will connect to the Internet over mobile devices than desktop PCs.” We’ve arrived at that milestone. The shift from desktop to mobile, whether smartphone or tablet, is happening across a variety of activities. For example, as of January 2013 Facebook has more mobile users than web users – as more and more people are checking their Facebook updates on their mobile device and skipping the desktop version entirely. Likewise in 2013, news consumption on mobile devices surpassed desktop, and consumers now spend more time interacting with online retailers on smartphone and tablets than they do on desktops and laptops.

Like any platform shift, this mobile wave obviously has major implications for any business. Here are four key trends that companies, whether web-first or mobile-first, need to be aware of.

1. Don’t just adapt for a smaller screen, but re-think UX

Most web-first companies have completely underestimated the radical change that mobile brings about. Many still think that mobile is simply an extension of the Web. After all, it’s human nature to view something new within the context of what we already know. That happened when we moved from radio to TV, print to web, and web to mobile. Luke Wroblewski speaks about this in a great talk (discussion of shift from one media to another begins around 10:30).

Every new medium needs a new way of thinking. A mobile device is not just a smaller or less powerful version of a desktop computer. It’s an entirely new form of media that’s unique to itself. For example, it’s always on; it’s always with us; and it offers more interactivity than ever before. Businesses need to invent new use cases and applications that make full use of the new platform, rather than just copying existing models from the web.

2.  The risk of unbundling

Albert Wenger discussed the risk of unbundling as it relates to Facebook: “On my phone another app is just a button push away and there is relatively little that fits on each screen.  So it is just as much effort to go to another part of the Facebook app as there is to go to a different app altogether.”

This means that each mobile app is continually competing for attention with countless other apps. It also means that one large platform/app doesn’t necessarily enjoy a monopoly, as users can just as easily opt for six best-of-breed point applications.

3. Distribution strategies are different

For companies looking to build a presence via mobile apps, there’s the matter of discoverability. Strong product market fit is often no longer enough to get to a large user base, instead “you need to master the “download app, use app, keep using app, put it on your home screen” flow and that is a hard one to master.” And many distribution strategies that worked on the web (like long-tail SEO), simply don’t work in an app ecosystem.

4. Customer support opportunities

Considering the fact that more than 50% of inbound customer service calls will be made from mobile devices by 2016, mobile presents a big opportunity to rethink the customer support experience. From a pure voice-call standpoint, it doesn’t matter whether a call originates from a landline or mobile device. However, mobile devices give companies even more ways to reach out and assist their customers. Customer service apps can provide a level of interaction not possible on a landline – including the ability to use video, send photos or instructions, chat, and voice. But companies need to think beyond what has been done before, and invent brand new experiences for mobile.

While the rapid pace of mobile adoption has caught many businesses off guard, there’s a big opportunity for start-ups to rethink a product or vertical in a mobile-first way. There’s also an opportunity to provide the infrastructure for traditional web companies to move to mobile.

More than half of Version One portfolio companies are either mobile-first or mobile-only companies, so it’s safe to say we’re excited about seeing the next generation of mobile businesses and experiences.

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Jelly app: the challenge of immediate primetime

When Jelly launched a week ago, it was amazing to see how quickly the app got traction – over 100K questions were asked during the first week.

Certainly, Jelly’s high profile team (co-founder Biz Stone, and individual investors like Jack Dorsey, Bono, and Al Gore) helped spark widespread speculation and buzz leading up to the launch. In addition, Jelly leverages users’ existing social graphs on Twitter and Facebook, so it immediately overcame the cold-start problem most platforms and marketplaces face when trying to build a user base at the beginning.

However, digging deeper into the quality of engagement during Jelly’s first week reveals some potential problems with this rapid ramp-up. Only 25% of questions posed ever received an answer. The daily active user count has been trending downward as the media buzz surrounding the initial launch tapers off. And, the number of people asking questions has outpaced the number of people answering them – pointing to a potentially unbalanced marketplace. You can find more data about Jelly’s first week from RJMetrics.

When an app’s user base ramps up so quickly, there’s no time for a community to form or for the product to mature. Immediate primetime is often a real risk for both. Jelly’s users are still trying to figure out how to make use of the service beyond identifying spiders or asking “What does the fox say.” And the very public nature of this launch may turn off casual users before its power users have a chance to hash out the most meaningful use cases.

At a time when growth hacking is top of mind for everybody, the Jelly experience reminds me of the value of growing slowly during the early stages of a product. A closed beta and/or delaying the push into existing social graphs might be two strategies to go back to.

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Can office design improve innovation?

If you want to make sure your start-up fosters innovation, office design may have a larger impact than you might think. Unfortunately most North American offices and office parks have focused on cost-effective design, rather than aesthetics and function – with generic gray cubicles, and the same drab carpet, wall color, and blinds. Upgrades like adjustable desks and exercise balls can help, but innovative design entails more than ergonomic furniture. It’s about creating an environment that allows better communication, and where people feel appreciated and inspired.

After reading Steven Johnson’s Where Good Ideas Come From, I’ve been thinking about the relationship between office design and innovation – in particular about how workplace environments can either stifle or encourage the flow of information, and consequently employee innovation.

The beauty of an adaptable workspace

MIT’s Building 20 (which has since been demolished in 1998) is the perfect example of how an adaptable space can promote innovation. Initially built as a temporary research space during World War 2, Building 20 became an incubator for many MIT programs, research, and student activities (here’s a list of all its occupants over the years).

Building 20 wasn’t pretty; it looked more like a barracks than an office. But because it was considered temporary, researchers felt free to modify the space as they needed. Residents didn’t think twice about tearing down a wall or punching a hole in the ceiling. MIT professor Paul Penfield said, “If you wanted to run a wire from one lab to another, you didn’t ask anyone’s permission – you just got out a screwdriver and poked a hole through the wall.”

There’s something to this kind of purposeful chaos. In most physical structures (whether owned or rented), we wouldn’t consider tearing down a wall; rather, employees are expected to adapt to their environment and make do, rather than adapting the environment to their needs. Building 20 may represent an extreme example, but it’s important to give employees some level of control over their surroundings. A study from University of Exeter found that the more control people have over their work spaces, the happier and more motivated they are in their jobs. “They felt physically more comfortable at work, identified more with their employers, and felt more positive about their jobs in general.”

Wide open, collaborative spaces

The way an office is structured can significantly impact the flow of information. Do people from different departments mingle with each other in common spaces, or are they isolated in cubicles or separate wings/floors? If employees are siloed, you can bet that ideas and innovation are too.

Johnson talks about the concept of flow to describe the mind when it’s at its most productive. Good ideas don’t usually emerge from a single moment of focus or brainstorm, but are more the product of fluidity (“it is more the feeling of drifting along a stream, being carried in a clear direction, but still tossed in surprising ways by the eddies and whirls of moving water”). Space needs to encourage this liquid flow of information. This could include large collaborative workspaces, as well as common lounges and café areas that encourage interaction and relationships.

When Microsoft researchers were consulted during the design of Microsoft’s Building 99, they requested tons of collaboration space where there could meet and surfaces they could write things on. As Robert Scoble wrote about after his tour of Building 99, “Wide open spaces make the building more social. I talked with several researchers I knew from my time there and they said it has massively changed how enjoyable it is to work. The theory group even gets together for tea at 3 pm every day.”

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What makes a great investor?

As someone who is still relatively early in his investing career, I often think about what qualities set successful investors apart from the rest. Good investing doesn’t just happen. And while luck may help at times, it’s not the answer. Here are few key ingredients that I consider important for being a great investor:

Live in the future

Paul Graham advised start-ups to “Live in the future, then build what’s missing.” Once you’re living at the leading edge of a rapidly changing field, you’ll see things that are missing…challenges or frustrations that need to be solved. And, once these problems are solved, they’ll seem very obvious in retrospect. This same advice applies to investors as well. You can only create above-average returns if you invest in companies that are ahead of the mainstream.

Have a well-defined investment thesis

Fred Wilson once wrote, “So many folks in the venture capital business are sheep that just want to follow the herd. They are momentum investors purchasing highly illiquid investments. That is a recipe for disaster.”

In order to not follow the herd, you need a strong set of convictions to serve as the foundation for making bets, and then following through on them. For Version One, I’ve created a map of what particular areas we should focus on and where they’re going over the next few years. Then, I can evaluate each potential investment within the context of this map/thesis.

Stick with it

Not every investment is going to be wildly successful right away and one of the hardest things to do in the venture capital is hence to stick with a struggling investment. However, if you’re going to be successful as an investor, you need to realize that once you are in, you’re in. There’s no turning back, or ignoring a flailing start-up until it just goes away. Of course, it’s much easier to stick with your guns, if you’ve made the initial investment based on your own core principles/investment thesis, rather than simply reacting to market trends and current momentum (point three).

Be both a cheerleader and a critic

There will be times when your portfolio teams need an enthusiastic backer and a quick pep talk. Then, there are other times when honest, sometimes even harsh, feedback is necessary. I think an investor needs to be a start-up’s biggest cheerleader and their most honest critic. You can’t just be one or the other: praise without honesty are just empty words. Yet, a constant focus on the negative won’t generate the results you want either.

Remember who runs the company

Successful investors are usually active investors; they show up at board meetings, respond to emails and phone calls from the founders, and constantly think about the company and the ways they can help. However, the exact level of participation is a delicate balance; an investor should never cross the boundary of getting too involved. At the end of the day, the entrepreneurs run the company; the investor is an active bystander. Founders make the ultimate decisions; investors can only advise.

Those are the five essential ingredients that I’ve been thinking about lately. If you have other thoughts, share them in the comments below…


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Our year in review: a look back and ahead

As the year comes to an end, it’s a natural time to pause and reflect on what we’ve done and where we’re headed.

2013 was busy for Version One. We made 3 new investments: Figure 1, a photo-sharing network for medical professionals; Upverter, a cloud-based hardware engineering platform; and one unannounced investment. These new investments bring the total number of portfolio companies to 14. We also participated in 6 follow-on deals this year to further support our portfolio.

And in 2013, Version One got its first analyst, with the hiring of Angela Tran Kingyens. This not only doubled our size, but also bolstered our physical presence in Silicon Valley. We now have Boris in Vancouver and Angela in Palo Alto.

Today and tomorrow

 Here’s a snapshot of where Version One stands today:

Moving forward, we will continue to focus on e-Commerce, SaaS, marketplaces, and platforms, but there are a few areas that we are particularly excited about.

Figure 1 represents our first healthcare investment and we’re very bullish about this segment. Healthcare has always been a conservative sector, but it’s primed for some dramatic changes, especially behind the scenes as technology and the cloud will help providers work smarter, faster, and more collaboratively. The right tools will bring together professionals, as well as patients, to generate faster and more effective diagnoses.

There’s also a massive opportunity for B2B marketplaces to replace paper-centric, error-prone supply chains for small businesses. New B2B startups can improve on earlier versions by lowering the costs of transactions and helping identify the right suppliers and products.

Other specific areas of interest include Bitcoin (more as a protocol/platform than currency), mobile SaaS, and machine learning. Above all, we are looking forward to working with great entrepreneurs looking to change their industry or the world.

Finally, thanks to our network of supporters (our LPs, our colleagues, our partners, our portfolio companies, our friends, and our followers) for a great year.  We wish you all a wonderful holiday season and best wishes for 2014!

-Boris & Angela