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Katherine Barr
1. The Reality of the
Family Tech Market
KATHERINE BARR
May 10, 2013
2. Family Tech-relevant markets are
large
$9B$11B
$20B$30B
$47B
$90B
$300B
$1T+
$40B
Grocery
Healthcare for children
Travel
Weddings
Children’s toys
Home security market
Childcare/preschool
Children’s apparel
Child summer camp and youth sports
3. $1.6B
buyout (2011)
$350M
acquisition by Disney (2007)
It’s challenging to find many large
“Family Tech” venture exits
$545M
$1.6B
$1.6B
SFLY market cap (2013)
acquisition by Amazon (2010)
$1.6B
buyout (2011)
4. Observations on the current
state of Family Tech
• Mismatch with investor(s)
“Let my wife give the product a try…”
• Don’t understand the target market
No more photo sharing platforms for moms please…
• SAM vs. TAM
Actual target market just not big enough
• Capital intensity ≠ Traction
Not enough value created for $ in
• Inefficient distribution
Won’t grow quickly enough
• “Hablo business?”
Don’t instill confidence in business building capability
5. Success for Family Tech
at venture scale
• Definition of success
• Address risk-related concerns across:
Market
Finance
Product/Technology
People
6. Success for Family Tech
at venture scale
• Massive market with strong tailwinds
• Solid business fundamentals
• Capital efficiency to product/market fit and initial sales
• Highly scalable
• Dramatically better product/service
• The “right” entrepreneur and team
7. A new kind of “chasm crossing”
needs to take place
8. Our lives are busier than ever
Income
Available Time
Available Cash
9. ERP has helped to optimize the
business side of our lives
Enterprise
Resource
Planning
A technology system that integrates
internal and external management of
information across an entire
organization
10. We now need “LRP” for the
personal side: Life Tech
Life
Resource
Planning
(LRP)
A technology system that integrates
the management of internal and
external information and tasks for
our lives
Quick self-introduction * Topic > Your talk is about "The Reality of the Family Tech Market" (why investors aren't crazy about this space, what startups need to do better, why the market needs to be communicated in "VC speak", your POV as a busy mom, what you'd like to see, overview of the 'landscape' - companies or company types that are doing well, company types that are suffering, big players/small players - general market map, etc.)
Christen: exciting space, why not more success stories?What IS Family Tech?Family Tech relevant markets are large – the markets listed all fall under the category broadly, imoGrocery: $1T+ Travel: $300BHealthcare for children: $90BChildcare/Preschool: $47B Weddings: $40BChildren’s apparel: $30BChildren’s toys: $20BHome security market: $11BChild summer camp and youth sports: $9B
- Target exit sizes+ for venture investors (explain venture math).b/c ‘families/moms’ are often just part of the target demographic of many companies (“Family Tech” somewhat self-limiting for venture-scale investing)iVillage: 2006 $600M acquisition by NBC UniversalClub Penguin: 2007 $350M acquisition by Disney [note: missed milestones for additional $350M)Quidsi (diapers.com and soap.com): 2010 acquisition by Amazon [outstanding shares of Quidsi for approximately $500 million in cash, as adjusted for the assumption of options and warrants, and also approximately $45 million in debt and similar obligations]Blackboard: (2004 IPO) 2011 $1.6 billion buyout by an investor group led by Providence Equity Partners, [for the financial year 2010, Blackboard reported revenue of $447.32 million and net income of $16.6 million]Shutterfly: 2006 IPO, current market cap of $1.6B-----By the way, for context in terms of big business building, generally:The Walt Disney Company: 1957 IPO, $116B market capCarter’s, Inc.: 2003 IPO, $3.9B market capMattel: 1960 IPO, $15.6B market cap
I have actually seen each of these issues with various Family Tech companies over the past 18 months. (Won’t name names, but helpful to share the issue.)- Mismatch between those who have the bandwidth and ability to start a company and those who actually understand the real pain that Family Tech should address but who are now too busy between work and young kids (e.g., another photo sharing app or platform does NOT my key pain point as a busy professional mom! Making sure my family actually functions is my key pain point!)- Sometimes genuinely a mismatch between male investor not being target audience (e.g., Pinterest) however male investors can usually sniff out a strong investment opportunity (even if it means they have to ask their wife and female friends about it first!); probably a reason there are two female venture investors on the Ruby Ribbon board and the founder is a woman however we just added a male board member who totally gets the market oppty even if he isn’t the target audience for the productSo, what is going on?- Market size (SAM not TAM) too small; sometimes just small, sometimes mission/vision builder versus big business builder- Blew through too much funding without enough traction (majority of future revenue projected from apps that had not yet launched)- Inefficient distribution strategy (due to fragments/antiquated market, etc.) = potentially slow growth and/or cap on ultimate market size within a reasonable period of time- Don’t speak the language of business building/venture, which does not instill confidence that they are capable of building a big business (e.g., one set of entrepreneurs didn’t appear to know what I meant when I asked to see their operating plan)If you are going to be talking with venture investors, be prepared for what they are going to ask (info, materials, etc.)There aren’t a lot of investors explicitly going after “Family Tech” – use of the term is fine for PR/marketing/sales, but probably best to define your company by standard market/venture terms when fundraising (e.g., SaaS, e-commerce marketplace, etc.) which determines who might actually be interested in investingTarget for each round is to maximize value creation
First of all: depends on your definition of “success”Need to build a real businessClear revenue model (solid business fundamentals – in most cases)Highly scalable (customers/revenue)Relatively capital efficient – especially for getting to product/market fit and initial revenue (explain reserve modeling); many venture investors will avoid expensive capex (HW or buildings, etc.)Possibility of becoming $1B+ company (otherwise venture investors not interested b/c the math doesn’t work)Not a feature or product with incremental innovation (unless you want a small acquisition, which is not of interest to venture investors)Right capabilities among the management team (why are YOU the team to build the $1B+ company?)Massive market, strong tailwinds
First of all: depends on your definition of “success”Need to build a real businessClear revenue model (solid business fundamentals – in most cases)Highly scalable (customers/revenue)Relatively capital efficient – especially for getting to product/market fit and initial revenue (explain reserve modeling); many venture investors will avoid expensive capex (HW or buildings, etc.)Possibility of becoming $1B+ company (otherwise venture investors not interested b/c the math doesn’t work)Not a feature or product with incremental innovation (unless you want a small acquisition, which is not of interest to venture investors)Right capabilities among the management team (why are YOU the team to build the $1B+ company?)Massive market, strong tailwinds
The rub with many of these massive opportunities however, is that in many cases it’s not just enough to know how to code and understand viral coefficients.How many of you are familiar with Geoff Moore, who wrote the book, “Crossing the Chasm”? (He works with us at Mohr Davidow.) Explain essential ideaNeed to merge complementary skill sets and expertise – “old world industry” meets new world of web and mobile,across the large chasm that has sat between those worlds for quite awhile now- Need someone on/close to the team who really understands the industry (understand both landmines as well as help to identify opportunities)- Need to understand sales, marketing and go-to-market strategic planning – in this way it’s ‘enterprisification of modern web/mobile company building(taking the best and leaving the rest– not everything is broken in the world of enterprise, there are lessons to be learned there)
- This is what I want to see, as a busy professional mom and a venture investor… LifeTech, Retail and Commerce Innovation, Next Generation Media.More and more data shows that a majority of people just don’t believe that they have enough time to get everything done that they need or want to. One study shows that working Americans between the ages of 30-49 in particular are the most likely to report that they lack the time they need to get everything done. (2011 Gallup Poll).During one’s life: Available time goes down, however Income and Available Cash go up; these are of course impacted by various lifestages (what stage do you think this one is?)LifeTech:It’s about the trade-offs (time vs. $); getting more time generally requires spending more on services, products, technologies that help to optimize our lives-----(Women and those with children in the household also report being strapped for time generally.)(Article that Scott sent me re ‘time crunch’ data)(MamaBear: changed from FamilyTech to LifeTech, b/c it’s actually about our lives overall, across different points of time – of course, it’s amplified by getting married and having kids)(MamaBear: mention National Center for Education Statistics)
ERP (Enterprise Resource Planning) has helped to optimize the enterprise across a number of areas: finance/accounting, operations, sales, CRM, inventory/product data, etc.
LifeTech – not Family Tech.I believe that we now need “LRP” (Life Resource Planning). We are all strapped for time and managing work, life, home, spending is complex. I want big data to bring me small data.Uber, Munchery/Gobble, Exec, TripIt, PurpleTie, Instacartare all great companies – and there will certainly be some vertical solutions that do very well – butthese services solve just ONE discrete task for meAnd the problem I have with services like Task Rabbit – as much as I think it’s a great product – is that I still need to be involved with the planning/organizing/inputting of info and I just don’t have the time to do that. (test current product functionality)LRP goes beyond what any ‘digital personal assistant’ offers today (Google Now, Donna, Osito, Sherpa, etc.) – they have some cool features but all still fall relatively flat in terms of helping me to truly optimize my life. (provide a map, still have to input info, etc.)The more automation, more valuable to both the consumer and the market. Eg., RocketFuel. Will be interesting to see just how far the envelope can be pushed in terms of automation of these tasks.We need a more holistic and comprehensive solution – and I believe that there is a huge opportunity here, in what we call the LifeTech space.(Get data on size of ERP market - contrast with multi-$T flowing through the consumer space; people are willing to pay for more of their time back to get critical life functions taken care of.)---(MamaBear: automated form filling, med info sharing – HIPPA-compliant, of course – for my kids’ activities; many of the areas to be plugged in here need to be optimized themselves – happening – will result in a lot of smaller companies though; kind of like when everyone thought that wikis were a standalone big company but it turns out that they were just part of a larger social platform that the likes of Jive and Lithium et al created)
Typical ‘big plays’ are platforms/systems for entire industriesProducts (really hard to build brand, and ‘hard good’ products in a way that is venture-friendly)- Mention Storefront
This is just a feature, but data analytics are absolutely a key part of the next generation of technology = leveraging data analytics for key business/consumer outcome/impact. (Need to have someone with the competency to actually build something of value leveraging data analytics.)-----This may not be familiar to all of you – but is one example of the potential for incredibly helpful personalization by tapping into a discrete data set.Growth rates vary considerably based on age and gender but tend to follow standard patterns. The CDC (National Center for Chronic Disease Prevention)has studied the growth of various children and developed charts to help track whether a child's growth is normal or abnormal. These charts show what are deemed to be normal percentiles which are marked by what are known as standard growth curves. Idea: Why can I not just enter where my child sits on the growth curve initially, and then get proactive, personalized recommendations in terms of what articles of clothing in what size are needed in advance of my noticing that my son’s sleeves are an inch or two too short? (Possible HIPPA issues here, though I could do the initial measurement or input myself, but just one example of data that can be leveraged for personalization – just need to a) understand the need, b) have the time and resources to build a solution, c) get creative!)Idea: There is also a ton of room for personalization of the maternity clothing and baby item purchase process which follow relatively predictable patterns as well.Point: there are discrete data sets that can be better utilized to personalize our experience as consumers.-----In terms of e-commerce: haven’t had much luck withonline stylists to date – did have a positive experience was with True&Co. though (data entry to personalize shopping experience = bought product)1) Big need for integrated, actionable data online and offline – amazing how many retailers still don’t have integrated online/offline data2) Companies like Retention Science are helping e-commerce sites with predictive analytics, leveraging a variety of data sources in terms of customer preference, etc.I’m looking for smart (or bespoke) living, where the world shifts according to my needs as a consumer (just like apartment that shifts according to usage – get more data on this) – kind of freaky, but very utilitarian
Mention ZM and ToyTalk, and any relevant points from Milken media panel.Tell story of Kaiden at 18 months, opening iPad, swiping TV, (swiping bberry at the time – on its last legs for work – you’ll be sorely disappointed!)The SW-driven next generation of media – another investment area of focus for us – is going to be unlike anything we’ve seen before.Media merged, multi-screen, real time, multi way interactive, surround-sensory, multi-tasking enabling, personalized – it is going to be intense and awesomecontent: enable binge/catch up watching (Netflix: House of Cards)E.g., Randi Zuckerberg’s dot complicated----Get more research on how kids’ brains are changing in terms of device interaction, multi-tasking capability, etc.
