When the going gets weird, the weird turn pro.

new edition of the Bright Pixel Newsletter

Weird times… with positive and negative impacts in our individual and collective lives. Personally, I have learned a lot in these last months… to value simple things, to better grasp that sometimes we tend to waste time in matters that simply do not matter, to learn more about the virtues of patience and keeping calm. I lost a bit of weight, I am also increasingly fitter and healthier, and I got closer to friends and family, oddly enough, because of the imposed social distance.

Professionally, we have proven that working together remotely works quite well – we can be highly productive and efficient, working actually more due to a better management of time… but, all of this has a toll after a long period of time. We start to miss personal interactions and the intense back to back routine of endless calls starts to sink in. To maintain company culture and build on top of the long last relationships that we want to explore with our stakeholders, we will need to mix remote with physical contact.

Weird times… indeed. Full of personal and professional challenges to overcome and opportunities to explore to our benefit.


Tech will save us all

Covid-19 sent everyone home and, three months later, not everyone has returned. In the US, before the pandemic, already 4.7 million or 3,4% of the population worked from home, and the number is increasing – according to the U.S. Census Bureau, nearly one-third of the U.S. workforce, and half of all “information workers”, are able to work from home.

Now that everyone is experimenting with the benefits of working remotely, the will to return to the offices is vanishing, with 98% of people saying they would like to have the option to work remotely for the rest of their careers. The same respondents praise the flexible schedule (32%), the possibility to work from anywhere (26%) and not having to commute (21%).

Just on a side-note, not having to commute has a very positive impact on the environment too: Xerox estimated that it saved 92 million miles of driving by allowing its remote workers to avoid commuting, thereby reducing carbon emissions by almost 41,000 metric tons.

This opens up new opportunities for collaboration tools companies, as we have seen in past newsletters – is now the time when virtual reality and augmented reality will enter our daily lives? The expectations are high. Also, it gives companies new chances to re-evaluate their cost structure. Yeah, you read well.

Remote working allows companies to avoid some basic costs such as internet, work computer/phone, or food allowance. In an inquiry done with US workers that worked remotely, 80% of the respondents said the company did not pay for home internet; 72% did not get their phones paid; 87% didn’t receive for costs related to drinks/foods in coffee shops. This is something very small – you already pay for the internet and for your phone –, but there isn’t a good principle behind it.

So why should they keep their high cost offices in Silicon Valley if their workers prefer to work from home? And if they can work from home, then why can’t they be anywhere in the world? Twitter closed its offices until September and Facebook is planning not to open them in the long-term. If companies don’t have a physical space, they can hire people from anywhere in the world and we all know that some countries/locations offer higher wages than others.


Events without sales and networking

Tech events are a big opportunity to generate new leads, which is now more relevant than ever, considering that startups’ survival depends on their sales – 50% of them said they had 6 months or less of runway and 72% saw their revenue drop since the beginning of the crisis with the average startup experiencing a decline of 32%. When all these events are being canceled, postponed or done virtually, how can entrepreneurs do business? Experts say: organize your own event, bet on content marketing, be popular on social media and work on your marketplace.


Going back to the offices

But there is also another way of thinking – the Bank of America and IBM (in the US) believe that innovation and collaboration are essential and can only be done right in person, so they are doing all efforts to bring people back to the offices

Gigging up!

While companies can send everyone home and expect to reduce their fixed costs by cutting real estate expenses and offer lower wages, some believe that it will have a negative impact on the organizational culture and the emotional connection to the company will be lost, meaning there are no reasons for people not to switch to something new that makes them feel more accomplished. There’s an opportunity for the gig economy to be filled with knowledge people.


If new companies are the new cornerstones of the economy, let’s help them!

New companies, tech companies, can save the economies from a complete breakdown, so shouldn’t all governments take some time to think about how to help them? As Startup Genome recently posted in its annual report, continuing to invest in local ecosystems will reinsure its growth and, consequently, will produce more value.

And since this is all about innovation, BCG shared its annual list of the world’s most innovative companies – led by the three A’s: Apple, Alphabet and Amazon – and Sifted shared some lessons about what we can learn from them.

Although none of these companies are European-based, the old continent is becoming more competitive when it comes to innovation – on the one hand, the EU continues to have a better performance than the United States, China, Brazil, Russia, South Africa, and India; and on the other, Europe has more ecosystems in the Emerging Entrepreneurial Ecosystems list than the other continents. And there are people who strongly believe that Europe is better positioned than ever before to lead the way from now on.


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true meaning of risk

What risk is all about… in a sad life and death story

Tolerance to risk is a tough issue to tackle in my line of work… and it is curious to see that each person has different tolerance levels due to their past experiences and the way they see the world… this article is a story that highlights well that… there are three distinct sides of risk:

The odds you will get hit.

The average consequences of getting hit.

The tail-end consequences of getting hit.

The first two are easy to grasp. It’s the third that’s hardest to learn, and can often only be learned through experience.

In early stage investing, most invest without never having a full grasp of the tail-end consequences of getting hit, or some might know what that means but don’t care (aka a lot of money to spare or a less than advisable care with the money of others)… but, I believe that the best early stage investors factor in their approach a big chunk of probability of suffering of tail-end consequences of getting hit in their investments. They have a clear idea of the risks involved and that it is a part of the game, no matter how cautious you are in every step of the way. Informed data driven risk takers are better than gun swinging ones…

a great article from Morgan Housel

the changing value of money

Interesting read that took me back to my economics degree.

In a nutshell, if you do not have the time to read this…

Long on Gold

Be careful with holding USD – it’s reserve currency attribute might be now even more at risk.

Most people don’t pay enough attention to their currency risks.  Most worry about whether their assets are going up or down in value; they rarely worry about whether their currency is going up or down.  Think about it.  Right now how worried are you about your currency declining relative to how worried you are about how your stocks or your other assets are doing?  If you are like most people, you are not nearly as aware of your currency risk and you need to be.

So let’s explore that currency risk.

All Currencies Have Been Devalued or Died

Read the article

 

the winner takes it all

Our third edition of Bright Pixel Newsletter – subscribe here!

The winner takes it all

Today is my 51th day confined at home. I would rather we weren’t in these circumstances, but I must admit I have been enjoying the slower pace. There’s a sense of guilt about it, but it was good to realize I wasn’t the only one.

Unfortunately, most businesses are unable to enjoy the silver linings of this situation. Covid-19 has been putting all companies to test, leaving them to the brutal and unsympathetic forces of natural selection. As it often happens in most crises, some players will thrive, while others will struggle to survive.

The winners and losers could be purely  temporary. Most meetings might revert back to face to face, and our problems with overbooked planes and crowded restaurants could soon be back (miss this already?).

Telling long-term winners and losers is much harder than just predicting short-term adjustments. The world has been predicting the demise of cinemas and brick-and-mortar retail for too long now.

 

At this point, we already have some clues about who these winners are

Enterprise software has seen increasing  demand for their services. Zoom is the most obvious one here. As of 28/04, its stock has appreciated 140% since the beginning of the year. Slack is also attracting the attention of remote workers. According to a series of Tweets from the CEO, its user base has grown from 10.4M in March 16 to 12.5M, just 10 days later! Facebook is also joining the party by releasing messenger rooms and even Skype has awakened from the death to make some new announcements lately.

Entertainment is going through some big momentum too. On 21/04, Netflix has crushed investors’ expectations by adding 16M new paying subscribers, more than double of what was expected by investors. Disney+ has seen tremendous growth adding 50M subscribers in its first 5 months, and HBO Max is set to launch in May. Expectations are high.

When it comes to short-video, the youngest social-media giant, Tik Tok was downloaded 2 million times between March 16 and 22, an increase from the previous week’s 1.7 million. The emerging short-video platform Quibi, a high-profile startup in the valley that has raised $1.8B, was made available to the public in April, and Youtube announced it is working on a competitor.

Among the best performing sectors this year is healthcare. Finding a cure for this virus would be the best news for any stockholder (and everyone in general) in a pharmaceutical company. At the same time, technology is also gaining space in a science-led industry. From real-time well-being trackers and medical professional’s support systems, to less obvious spaces like sextech

 

Many are struggling but not backing down just yet

Mobility is definitely one of the hardest-hit sectors. Even with questionable unit economics, the sector has been one of the hottest investment topics in recent years, with Bird holding the record of the fastest startup to ever reach the unicorn status, in only 2 years. Right now,  these companies are reinventing their purpose, such as the micro-mobility company, Felyx, that has made their electric scooters available at a reduced rate to entrepreneurs who want to serve customers at home.

Tourism and hospitality are also going through a rough period with most restaurants and hotels closed.  Travel companies are providing virtual booking services for sightseeing and others, such as online-only classes and webinars. Restaurants are selling vouchers for post-Covid-19 meals to keep their businesses alive. Airbnb has also debuted online experiences and their accommodation offers are becoming less short-term and more long-term rentals. Even movie theatres found a way. In a very “back to the future” style, some are promoting drive-in experiences. Do you have Grease vibes?

 

This time is different

At the risk of falling for the same trap of those who predict the end of industries for too long, we will place our bets on who the long-term winners will be.

The first one is Cybersecurity. The growing importance of this vertical is not new. As people and devices become more connected and dependent on online services, cyber risks increase significantly. Still, IT architectures are shifting towards becoming more decentralized and reliant on 3rd party services, exposing companies to new attacks and increasing their vulnerabilities. Just in March, online threats have risen by as much as six-times their usual levels. By accelerating remote work and promoting digital environments, this crisis emphasizes the relevancy of cyber security for years to come.

As we scale-down human interactions, our reliance on digital engagements is increasing. Existing user interaction platforms must evolve towards automation and new interfaces. We’ve never seen brands being so dependent on customer experience as they are in the digital age, and now, more than ever, customers are unsatisfied. They want refunds of their trips, they expect their favorite restaurants to have take-away, and they order groceries to be delivered within a day. How to deal with such demanding clients? You’re right: with a very efficient contact center and an optimized virtual assistant.

For the near-future, we expect a bumpy road ahead with lower growth expectations, scracer capital availability and rising unemployment. Still, on the health front, things seem to be improving, and hopefully, the peak of the worst health crisis of our generation is past us, and we can go back to business (almost as usual) soon enough

barbaric ventures

I’ve taken part and witnessed  several big discussions about changes to how VCs should manage these times of higher uncertainty in the market.

If we should delay or even stop investing in new startups, change our approach to investments (e.g. look at new areas of interest and forget several sectors altogether), put in more protective clauses to have more guarantees if we invest from now onwards, due to these weird and very uncertain times…

The article below is very good and provides insights and details about the typical clauses that can influence investment discussions between VCs and startups now and in the near future.

Personally, I do not like most of the barbaric approaches (it’s a bad way to engage in a long term relationship that should be managed with equilibrium and fairness), but a few might make sense (if we do not over engineer everything in the process). Overall, I believe that VCs (specially the early stage ones) will have to still take the plunge and assume the risk (it’s their job to do so), but there can be fairer ways of having in place some more checks and balances that simply were most of the times put aside in the last upward movement of the VC market, due to mostly competitive deal discussions that typically were skewing things to a more founder friendly approach…

Medium post by Fred Destin

VC terms — Return of the Barbarians.

I hate complex terms in venture investments. Value is created by backing exceptional companies that return your fund, not by word-smithing aggressive legal agreements. In the last decade, we’ve seen cleaner and simpler terms become the norm, which has been great for everyone and created more alignment.

However…

Founders beware. OG venture capitalists like myself remember vividly the days of full ratchet wiping out entire cap tables and leaving founders with nothing.

As we’re entering a new ice age, I’m hearing that paring knives are being sharpened and old weapons might get taken out of storage. I’m hoping I’m wrong and VCs will keep their term-sheets clean, but in case they don’t, here’s a detailed look at the arsenal that these barbarian investors can draw from.

So saddle up, grab you shield and get familiar with the subtleties of Participating Preferred’s, Full Ratchet Anti-Dilution, Pay-to-Plays and more by reading further. As Andy Grove would say, only the paranoid survive.

Here go the details – read more here

the unleashing power of marketplaces

In this new normal, I think that marketplaces will be even more important and crucial to our collective way of living…

Thank you, Bill Gurley for a great post that now with more than one year of existence is even more relevant to read carefully at the always interesting blog called Above the Crowd!

What new marketplaces are still missing in to cater our collective needs?

Bread baking marketplaces? 😉

Digital Learning marketplaces for kids?

A small teaser…

Money Out of Nowhere: How Internet Marketplaces Unlock Economic Wealth

(*) Benchmark is/was an investor in companies labeled with the asterisk.

In 1776, Adam Smith released his magnum opus, An Inquiry into the Nature and Causes of the Wealth of Nationsin which he outlined his fundamental economic theories. Front and center in the book — in fact in Book 1, Chapter 1 — is his realization of the productivity improvements made possible through the “Division of Labour”:

It is the great multiplication of the production of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people. Every workman has a great quantity of his own work to dispose of beyond what he himself has occasion for; and every other workman being exactly in the same situation, he is enabled to exchange a great quantity of his own goods for a great quantity, or, what comes to the same thing, for the price of a great quantity of theirs. He supplies them abundantly with what they have occasion for, and they accommodate him as amply with what he has occasion for, and a general plenty diffuses itself through all the different ranks of society.

Smith identified that when men and women specialize their skills, and also importantly “trade” with one another, the end result is a rise in productivity and standard of living for everyone. In 1817, David Ricardo published On the Principles of Political Economy and Taxation where he expanded upon Smith’s work in developing the theory of Comparative Advantage. What Ricardo proved mathematically, is that if one country has simply a comparative advantage (not even an absolute one), it still is in everyone’s best interest to embrace specialization and free trade. In the end, everyone ends up in a better place.

click to read the rest

backcasting

One of the best articles I’ve read in a long while…

Great concept that makes us all think that we should be looking at our reality in a different manner!

BACKCASTING RULES!

How to build a breakthrough …the secret of Backcasting

“I don’t care, I don’t care, so call me crazy. We can live in a world that we design.” — from the Greatest Showman

The future doesn’t happen to us; it happens because of us

READ HERE THE REST OF MIKE MAPLES JR.‘s ARTICLE

tech giants

A great read!

Benedict Evans’ great trends analysis – if you have something that you really should read to put your brain thinking about the future, is this excellent report – mobile & smartphone disruption is reaching its peak and its end in the typical S curve rollercoaster ride… What happens when everyone is online? What will be the next big thing in our lives?

Click here!