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The Business of “You” Is About to Win, Big Time

nest 2I recently installed a Nest thermostat.  It was so easy and such an upgrade over my prior thermostat that it literally made me say “wow.”

And it got me thinking: we are in, or entering, a golden age of technology for consumers.  And I love it.  It’s one of the reasons I think so many of us in the VC community are thrilled to be investing right now.  We can see the revolution taking place around us every day.  It’s not hidden in some corporate data center or a manufacturing plant in Taiwan.  It’s in our homes, on our wrists and impacting our lives every day.

A lot of the credit for this revolution is no doubt due to Apple, as the iPhone has unlocked entirely new economies and capabilities on both an individual and global scale.  Remember carrier “music services” on your RAZR just 6 years ago?  Now you have millions of songs at your disposal via Pandora or Spotify.  Not to mention games, movies, TV, photos, video chat – the list is long.

What’s so cool about this new era is it’s focused on you, the individual.  Yep, you win.

In the 90’s much of the innovation in technology was around enterprise technology – think SAP, Siebel, OracleHP.  Great for big business, but not a huge direct impact on day-to-day quality of life for consumers.  In the late 90’s and 2000’s, the Internet changed the way we shop (Amazon, eBay, etc.), get news (Yahoo, ESPN, etc.), trade stocks (ETRADE) and connect with each other (Hotmail, Skype, Facebook).

Very cool and industry-changing stuff, but did it impact your quality of life as an individual?  Perhaps to a certain degree.  But not like this new era will.

My Jawbone UP gives me daily readouts on my sleep and exercise habits.  My plug-in Prius gets over 80 MPG in city driving (65 highway).  I see the Tesla Model S and Nissan Leaf everywhere in Silicon Valley.  My Nest has already learned our family’s temperature habits and is eliminating wasted energy usage (for more on how it does this, see the Nest website).  Not to mention the bazillion apps on my phone that make life better every day.  And all of these devices and apps will soon be connected – enabling the “smart” world we’ve all been talking about for decades.  They’re helping me be healthier, save money, and spend more quality time with family and friends.

The innovation happening around “you” is incredible.  As venture capitalists, we see things that are years away from hitting the mainstream, and so many of them are truly amazing.  The best and brightest entrepreneurs coming out of Stanford and MIT want to build killer applications and devices that are focused on actually improving people’s lives, not just selling standard IAB ad units (and lots of them).

I know the prevailing sentiment right now in the tech community is that “enterprise is hot, consumer is not.”  But trust me, there is a ton of innovation and funding happening around the business of “you,” and it is going to change your life in meaningful ways.  The Jawbone, Prius and Nest are just the start of what I anticipate to be a massive wave of devices and apps that impact consumers in game-changing ways.

And yes, I realize these are currently “early adopter” technologies.  But they are a big flashing sign of “things to come,” and I expect all three represent technologies that will become mainstream very quickly.  Don’t agree?  A company I sit on the Board of recently received a $20,000 credit from its insurance company to give employees wearable devices like the UP – simply because they believe it will make them healthier (and thus the company a more attractive one to insure).  With incentives like that, it won’t be long before these devices are mainstream.

This new golden age of consumer technology, the business of “you,” is still in its infancy, but it’s accelerating and happening before our very eyes.  Pretty cool.

Note: GGV is not an investor in Nest, Jawbone or Toyota (but I wish we were!).

Congratulations to the team at YY

A big congratulations to our friends at portfolio company YY on their IPO!

Edit: Additional articles on the YY IPO:

PandoDaily: “YY Soars on Opening. Is the Curse of the Chinese IPO Over?”

Forbes: “Chinese Billionaire Sees Hundred Fold Return on YY IPO”

ChinaDaily: “Social Platform YY Breaks IPO Dry Spell in US”

Wired: “Facebook is All Smiles in China Now, But YY is Coming”

 

Percolate Raises $9M from GGV and First Round Capital

Today social content creation SaaS platform Percolate announced its $9M Series A round of financing from GGV CapitalFirst Round Capital, and existing angel investors.  Read PandoDaily’s coverage of the financing here.

Social media is a category we have been investing in aggressively for several years now (examples include Buddy Media, YY, Social Touch and Meilishuo), and although the market has already seen some big outcomes (Facebook IPO, Buddy Media acquisition, Instagram acquisition), it is still very early in the market’s development.

So, why Percolate?

At a high level, the basics.  Terrific team; the founders (Noah and James) are deeply respected as emerging thought leaders in the space, and have spent many years working with top agencies and brands around the world.  They’re smart, hungry and have an amazing reputation in the industry.  Awesome business; Percolate has a unique software (SaaS) platform utilized by 30 of the world’s leading brands – companies like American Express, General Electric, Diageo and Samsung.  Many of Percolate’s users are fanatical about the platform – it is not uncommon to hear quotes like “I couldn’t scale our social presence without it.”  Enormous market; Gartner famously projected earlier this year that CMOs will spend more on technology than CIOs by 2015, noting that IT budgets make up 3.6% of revenue in large corporations while Marketing budgets are roughly 9%.  While social media makes up a relatively small percentage of spend today (<10% for most marketers, according to AdAge), it is highly likely to increase in the next few years.

At a more micro level, a few thoughts specific to Percolate:

1) The traditional model of brand advertising is being turned on its ear by social media.  Before social media, brands were content to create ad campaigns a few times per year and push those campaigns in front of consumers on a regular basis across a variety of mediums (print, tv, billboards, etc.).  That model doesn’t work across social media.  Consumers simply won’t tolerate a brand Tweeting the same message 7 times per day (or Instagramming the same photo, etc.).  Social requires constant creation of new and engaging content.  Marrying traditional brand content with social is known as “stock & flow,” and Noah, James and the Percolate team are all over it.

2) The market is evolving quickly.  It took social media pioneers Facebook and Twitter roughly 5 years to reach 100 million users (4.5 and 5, respectively).  It took Instagram 2 years.  In markets like China, we see companies like YY growing even more rapidly.  In markets that change rapidly, conditions favor the smaller, more nimble players.  Companies like Percolate are able to launch products, iterate, and embrace new areas like mobile before the large incumbent technology vendors (Oracle, SAP, etc.) have even begun to understand customer demand – much less build these capabilities into their legacy platforms.

3) The upstarts are garnering real budget.  We’ve met with quite a few marketing software providers in the past 6 months, and are continually amazed at the amount of money being spent by Marketing organizations (not IT) on technology – validating Gartner’s hypothesis.  I asked one top 10 global brand marketer how he justified the dollars being spent ($10K+/mo. in that case).  “It’s an impulse buy,” he responded.  “We spend hundreds of millions of dollars each year on marketing.   An extra hundred thousand for technology that improves our performance dramatically is a no-brainer.”  $100K per year won’t get Oracle excited, but for the upstarts it’s meaningful, and when that customer expands to additional brands and additional geographies, the annual contract value (ACV) can rise significantly.

We’re excited to back Noah, James and the team at Percolate.   Social media is a massive shift in the way brands engage with consumers – on a global basis.  Given the trends I outlined above, we think Percolate has a strong chance to create a terrific company that will make waves in the industry for years to come.

By the way – Percolate is hiring great people all over the country!

Updated 11/16 – financing coverage:

GigaOM “Percolate Helps Brands Act Like They’re People on Social Media”

Business Insider “Now THIS is the Right Way to Start a Company”

PandoDaily “Percolate Goes Big With Series A”

AdAge “Percolate Raises $9M Series A to Help Brands Create Content”

BetaBeat “Turning Brands Into Microbloggers”

AllThingsD “Twitter Tutorials for $10,000 a Month”

On BloombergWest Talking China E-Commerce

Last Friday I had the opportunity to chat with Nicole Lapin on Bloomberg TV about China’s e-commerce market.  You can watch the video here.

Why So Few Blog Posts?

Simple – a lot of the topics I used to cover on this blog are now covered (in much shorter form) on Twitter and FB (mostly Twitter).  Follow me on Twitter @jrichlive.  Still blogging, just not as frequently.

GGV Capital Raises $625 Million for Fund IV

Today we announced the closing of GGV Capital’s new $625 million Fund IV.  This new venture capital fund is composed of roughly $520 million in US dollars and $105 million in Chinese RMB, for a total of $625 million (GGV Fund III was $610 million).  Read Tomio Geron’s article about the new fund in Forbes here.

Since the firm’s founding in 2000, we have pursued a consistent strategy – one team investing out of one fund, seeking to back great entrepreneurs and management teams in the US and China.  With Fund IV, we plan to do more of the same.  We couldn’t be more thrilled, and I thought I would share two personal thoughts:

First, our responsibility to entrepreneurs and management teams.  We could not have raised this new fund without the exceptional performance and returns generated by the entrepreneurs we’ve backed.  13 of these teams have taken GGV portfolio companies public since 2010, and several have been involved in some of the technology industry’s largest M&A transactions in the last year (including hiSoft, Buddy Media, Endeca, SuccessFactors, Tudou and Qunar).  The quotes from Lars (Founder/CEO of SuccessFactors) and Gary (Founder/CEO of Tudou) in our press release mean a lot to each of us personally, as they reflect the kind of relationships we seek to build as we invest our capital, our time and every other resource we can bring to bear to try and help drive success.

“GGV Capital was a tremendous growth stage investment partner for SuccessFactors. In an extremely competitive situation, GGV had the foresight to be decisive when others waivered.  It’s that killer instinct that stands out for me,” said Lars Dalgaard, SuccessFactors founder and CEO.  “The GGV team played a major role in our growth, from IPO to expansion into Asia to our ultimate $3.4 billion acquisition.”

Second, our responsibility to our Limited Partners (“LP’s”).  Just like entrepreneurs and CEOs do, we take our responsibility to our investors very seriously.  They are investing with us because they expect GGV to continue to deliver the above-market returns we have since the firm’s founding in 2000.  I won’t go into a tremendous amount of detail here, but suffice it to say that we appreciate our investors’ commitment to GGV (many of whom have been with us since 2000, across four funds) and we clearly understand our mandate.

Thomas, Hany, Scott and Joel founded the firm in 2000 with a unique idea and operating model – one team investing out of one venture capital fund across the US and China.  Twelve years later, we couldn’t be more excited to be investing Fund IV at a time when technologies like mobile, social and cloud computing are creating massive disruption – and the world’s #1 (US) and #2 (China) economies are increasingly intertwined.

Salesforce.com Acquires Buddy Media – Congratulations Mike, Kass and Team!

The news is officialSalesforce is acquiring Buddy Media.

I couldn’t be more excited for Mike and Kass Lazerow, the founders of Buddy Media, and their entire team.  In five short years they built one of the fastest growing SaaS companies on the planet and a brand that is recognized around the world (validated every time I hear someone in another category or country say “we’re the Buddy Media of ____”).

The best part about being a venture capitalist is getting to work with great entrepreneurs.  Without going into lengthy detail, I can only say that since our first investment in 2010, my experience with Mike, Kass and the team has been the absolute pinnacle of that concept – simply amazing.  They care deeply about their employees, their customers, their partners and their investors.  In a nutshell, what you read is true – Mike and Kass are the real deal, and Buddy is a GREAT company.  I am truly proud to have been an investor and a board member.

For more on the acquisition, see Mike’s blog post here.  It comes from the heart, and provides some terrific background on his thinking and the excitement he has to work with Marc Benioff and help lead Salesforce’s efforts to dominate the marketing cloud.  And for those of you who care about the personal side of entrepreneurship, you should also watch Mike’s video – words can’t really describe it here.

The Partners of GGV feel incredibly fortunate to have been a part of the Buddy team, and are excited to see what Mike, Kass, Jeff, Susan, Patrick and the broader team go on to accomplish as part of Salesforce!

Why Twitter Is an Important Weapon for Startup CEOs

I admit it, I am a Twitter junkie.

As a venture capitalist, the breaking news, opinions and insights I get from Twitter are invaluable.  But there are only a few thousand VCs in the world (cue joke about that being a few thousand too many), so what are the other 200 million people doing?

They’re engaging in the dialogue.  What dialogue, you ask?  Dialogue on topics that are meaningful to them. And therein lies the opportunity for startup CEOs.  Being engaged in the dialogue around your company, your industry, your competition, your people – is really, really important.  Especially as you scale.

Below are four reasons why I think Twitter is an absolutely critical weapon in the arsenal of today’s great startup CEOs.

To provide a few anecdotes, I tapped into the wisdom of three very successful Silicon Valley execs: Brian Grey, CEO of Bleacher Report;  Narinder Singh, Co-Founder of Appirio; and Tom Bedecarre, CEO of well-known media agency AQKA. Brian and Narinder are running really successful companies with hundreds of employees, and Tom is both a frequent user of Twitter and the CEO of a firm that provides advice to major brands on how to leverage social media.

1) Recognition.  Trust me, a short tweet saying “Engineering team is rocking it today with our new release!!!” means a hell of a lot more than the old, tired 500 word email with too many bullet points.  Twitter is meant for short, broad messages.  If you make a typo, it’s ok!  As Narinder points out, “Connecting to talent is more important than ever.  It’s incredibly competitive out there.  With Twitter, I can stay connected in a scalable and personal way with both current and future employees in a way I just can’t with any other medium.”

2) Personality.  People want to work for companies that have a personality, that have a soul.  This often starts with the CEO.  The best CEOs I know who tweet don’t just tweet about their companies.  They tweet about interesting articles they’ve read.  Or funny stuff their kids did.  Or goofups by their competition.  Or their favorite sports teams.  The bottom line – they’re letting the people in their company and in their ecosystem know they have a personality, that they care about certain topics, and that they’re active.  If you want an example, check out Marc Benioff’s Twitter feed.  He’s active, and oh by the way he’s also running a $20B market cap company.  If he has time to tweet, you have time.

3) Influence.  Twitter is a free medium to engage with more than 100 million active users.  You can’t abuse it (don’t just keep tweeting links to press releases) or people will tune you out.  Done well, however, you can be an influencer – in your company, in your industry, etc.  Brian says it well: “I use Twitter to listen.  See what the conversation is, the sentiment with respect to our brand.”  By listening, you’ll find opportunities to add to the conversation or even influence the conversation – whether it’s that one employee who needs to know you care or the 100’s of customers who rely on your service every day.  They’re tweeting, and they’ll know when you’re listening.

4) Engagement.  It’s about being part of the conversation – whether it be among employees, your industry, your investors, the media, etc.  “It’s free, it’s widely used, and it enables you to tap into the zeitgeist of your industry on a real-time basis,” says Tom.  For more on this subject, read Gary Vaynerchuk’s terrific book The Thank You Economy.  I can’t do it justice here, but Gary describes how everyone – from global brands to the local dentist – are using Twitter and social media to engage and getting MASSIVE benefits from it.

CEOs must be good at a lot of things to succeed.  Communication has traditionally been considered one of them.  With Twitter and social media at large, I’d argue that communication is more important than ever.  If you’re a startup CEO and you’re not using Twitter, GET STARTED NOW.

It takes time to earn the benefits, but they’ll be there over time.  #promise!

(No, GGV is not an investor in Twitter.  Kinda wish we were, though…)

One of the Best Companies You’ve Never Heard Of (Until Now)

Really fired up to see a terrific article from Hamish Mckenzie (Pando Daily) on China’s Mobile Internet leader UCWeb.

Two thoughts:

First, we (GGV Capital) have been saying for several years now that it is only a matter of time until the US tech community becomes aware of innovative technology and business models invented in China.  UCWeb is one example, YY is another (both are GGV portfolio companies).

Innovation in China is taking pace at a blistering pace.  We are now seeing a second generation of web entrepreneurs, having built incredibly successful companies like Alibaba, Baidu, TenCent, Sina, raising venture capital and launching new companies that will be hitting US radar screens a few years down the road.

I might add – by the way – that we are also seeing a massive uptick in active dialogue and efforts by US companies to do business in China.  I met with two US players in the mobile space this past week who now have 10% and 16% of their business in China, respectively (and both are still in the “startup” phase – <$20M in revenue).

Second, I was really impressed that Hamish took the time to understand UCWeb.  Many US writers will instantly look to write a story that says “______ is the ______ of China…” and not take the time to understand the nuances of the company and its business that are actually radically different from anything in the US (Tudou/Youku is not the “YouTube of China,” RenRen is not the “Facebook of China,” etc.).  Kudos to Hamish for a great article.

Not All “Venture Capitalists Turn Their Backs on China”

Saw this article in VentureBeat this morning: “As Venture Capitalists Turn Their Backs on China, Funding Dries Up.”

Spurred a few thoughts:

1) Good investors invest in good and bad markets.  They do their homework and focus on finding the best entrepreneurs even when the markets are cloudy.  We invested in Alibaba Group in the early 2000’s when most investors were scared to death of China, and it’s been one of the greatest venture investments of all time – anywhere.  We consistently put $100M+ to work each year in China and the US, and we will again this year.  We’ve been doing it for 12 years – consistently – and entrepreneurs know they can count on GGV to support them regardless of what the public markets are doing.

2) The bar has been raised.  In hot markets, VC’s can throw money at copycat concepts and weak businesses in hopes they can “flip” them to the next set of investors (note: this happens in all markets, not just China).  This never works over the long run.  The bar raises, and VC’s have to work hard to find the best companies.  I am of course biased, but I believe firms that have been investing locally in China for the long term will have an advantage.  They have seen up and down markets, have the strongest relationships with the best entrepreneurs, and have built the infrastructure and teams to do their homework and find the best companies.  I know my Partners at GGV – as well as many of our strongest, long-term competitors in the market – have never been more excited.

3) The trends don’t lie.  There are still 500 million Internet users in China.  Android and iOS are taking the mobile phone market – 1 billion strong – by storm.  Consumers are rapidly turning China into the #1 market for every luxury goods maker in the world – from Mercedes to Apple to Coach.  If you want disruption on a massive scale, there is no better market than China.  Entrepreneurs know it, and the long term VC’s know it.

4) There are risks.  I won’t go into all the details, but yes there are major risks to investing in China (as there are in any emerging market).  They include competitive, regulatory, legal, currency, etc.  Some of these risks are why investors have pulled back on China.  It can be scary to invest in a new market.  Local investors with local knowledge, local relationships and deep industry knowledge tend to win when markets get scary.  As the saying goes “the tourists go home.”

There are Chinese companies which went public in 2010 and 2011 which never should have.  They were subscale without long term, sustainable business models.  But that doesn’t mean all Chinese companies fit that profile.  Ever heard of Qunar, 360Buy or YY?  They are very real companies with very real business models and massive user bases.  As it has on the VC side, the bar has been raised for IPOs, and we think that is a good thing.

But make no mistake – despite the headline at VentureBeat – not all venture capitalists are turning their backs on China.  The long term investors are hunkering down, backing the best entrepreneurs, and looking forward to the challenges and opportunities ahead.

Disclosure: GGV is an investor in Qunar and YY.

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