From 22nd to 25th May, 25 members of the Horizons community were in San Francisco. This was the flagship event of our Innovation Insights programme, a series designed to inspire investors and cultivate ideas that shape the future. This is the summary of the first two days of the trip.
Our jam-packed schedule mirrored the high octane nature of America’s thriving West Coast. Visits to the heart of Silicon Valley, pitches from budding startups, and seeing how ancient technology meets contemporary business strategy in Napa Valley were all intended to educate, stimulate and challenge those who went.
After welcome drinks in San Francisco’s famous Clift Hotel on Tuesday evening, the agenda commenced at Sway Ventures’ office, where Marc Hendriks introduced us all to ‘The Game’. This is the constant battle between Silicon Valley tech startups for funding, and investors of all stages to identify that diamond in the rough. But despite this survivalist milieu, Marc noted that it is the forging of relationships which is the fulcrum around which the region’s staggeringly rapid progress has pivoted. Even in a place notorious for its cutthroat nature, cooperation and a shared vision for progress (in its general sense) is imperative.
Wednesday also began back at Sway with a talk from co-founder Brian Nugent about venture capital. He provided the important reminder that, whilst VC is inherently about the big picture and aspiring loftily, it can only function effectively once the small details have been addressed – from choosing location to employing your back office wisely. Illustrating this micro, bespoke approach, he explained why Sway has elected not to invest in the driverless vehicle industry; although pipped by many to be a monumentally influential force in the mid-to-long term future, Brian believes that attentive governmental oversight will ultimately restrain the pace of monetisation in the field.
We then heard from Doug Hodge, former CEO of Pimco and now Venture Partner at Sway. Doug approached the topic of investment from a generational viewpoint, exploring why millennials are turning conventional wisdom and practice on its head. Unsatisfied with merely sustaining the status quo strategies of their parents/parents’ advisors, the generation collectively is far more mindful about the ethics of their financial decisions. With this increased awareness comes a greater focus on ESG/impact investing. Crucial to this, he said, is the auspicious rise in big data capabilities, which provides enhanced information, control, access and speed. Combined, he believes, these two trends will augment one another and develop massive, positive changes in the investment world.
Immediately after, blindfolds were handed out as our next arrangement was at Coinbase’s secretive HQ with Director of Strategy, David Farmer (moved almost the moment we left to General Manager of Coinbase Pro, their brand new cryto exchange). This event had piqued the most prior-interest, shrouded as cryptocurrency and blockchain are in controversy and, for some members of our group (this blogger included in that number to a spectacular extent), incomprehension. However, a one-on-one discussion and Q&A with someone at the forefront of the crypto front soon put rest to any such ignorance.
Coinbase itself is an impressive force. Founded just in 2012, it clocked in at $1bn revenue last year and 20m users, with $150bn traded on its platforms. Its role as a game-changer in the world of cryptocurrency is impossible to deny; before Coinbase arrived, you had to physically meet someone to buy or sell bitcoin, a restricting hassle if not outright dangerous. Providing a digital and reliable platform for this has been an integral part of cryptocurrency’s galactic rise in usage.
David was understandably coy when predicting the future of his field. He did say, however, that increased stability in the infamously mercurial market would only arrive when agencies and regulators themselves had decided what cryptocurrency actually is – an asset, a security, a commodity? There was something undeniably intoxicating about getting a behind-the-scenes glimpse into a fledgling technology which is set to have a drastic impact on the world, for better or for worse.
Lunch at SoMa StrEat Food Park followed, where oversized burritos and pizza felt satisfyingly wholesome and tangible after all the techno talk and notions of invisible money. Straight back into the eye of the storm in the afternoon, though, as we were introduced to two companies which Sway Ventures is currently investing in: Haven and Penrose Studios.
At face value, the two could not be more different. Haven, founded in 2014 by Matthew Tillman, has digitalised the logistics of the shipping industry, streamlining and creating liquidity between shippers and carriers. To appreciate the efficiency they are bringing to an antiquated system, simply consider how it used to take 12 hours of human work to fill out the forms for one shipment. Using Haven, it now takes 13 minutes. As Matthew said, that is a lot of freed up time to paint sunsets and go on long walks in the rain.
Penrose Studios, on the other hand, is attempting to change the face of media entertainment forever with VR technology. Ever since the birth of opera in the 16th century, explained founder Eugene Chung, humans have aspired to discover the perfect form of art. It is his belief (and, having seen a preview of their upcoming VR film, Arden’s Wake, we are far from doubting it) that VR can tap into the senses in an unprecedented way, permitting art to recreate and indeed challenge life like never before.
The group left impressed by both. We wondered, however, how easy it will be for Penrose Studios to translate their astounding vision into that which ultimately matters in the competitive scene of Silicon Valley: cold hard cash. Haven, perhaps the less sexy of the two, appears to have a clearer path to monetisation. The gap between dream and quantifiable success, which entrepreneurs must face every day, was pertinently highlighted.
This thought fed aptly into the day’s final event, hosted by Marlon Evans, CEO of incubator, Nex3. Their premise is that “innovation is needed to solve society’s toughest challenges”, and that the best way of doing so is to infuse social impact goals into startups at a very early age. One fact spoke volumes of this approach: sustainable initiatives increase sales revenue by up to 20% and market value by nearly 10%. As the coming generation is one which values ethics more than any before it, these figures are set only to rise.
Three of their startups were introduced to us to showcase what Nex3 is doing. Trials.AI, a business dedicated to speeding up clinical trials and reducing failure rate, endorsify, an Instagram influencer marketer, and FanAI, which advises e-sports venues on how they can monetise their audiences through the use of data analysis. This diverse range of industry and goal underlined the sheer amount of innovation and talent driving the world forward in so many directions, but also the difficulty in being an investor in this climate. How do you choose whom to back?
Marcus Solarz Hendriks