Charles Bonello

The following database has some more granular information about each program, including some important information that I wanted to know about each of the programs, including: key people, application processes, important dates, the amount of seed money offered, what they take in return, notable alumni and the focus of each program.  

Here's a link to a spreadsheet of every incubator/accelerator and some extras in NYC (.xls)

Here's a link to the google doc, where you can edit or update info.

Below, I've shared a Google Calendar that has all the listed application deadlines for NYC based incubators and accelerators.  I know that it is likely incomplete, but I've attempted to piece together publicly available information, anecdotal information and information from past years to piece together a fairly accurate portrait of important dates.  It's a Google calendar, so please feel free to change, update or add any relevant dates and information:

Here's a link to the same calendar.  If someone can figure out how to allow people to edit this (like the google spreadsheet below), please let me know.  

Here are some interesting pieces of information from the research:

For accelerators/incubators that have indicated a class size, the average size is about 15 teams.  The "high" is Y Combinator (at ~80), with 500 startups following (at ~30).  The "low" is Fin Tech Innovation Lab

Among accelerators/incubators that take equity stakes in participating companies, the average equity taken is about ~6%.  

The average amount awarded to participating companies by the accelerators/incubators is about $28k.  This number assumes the high end of every accelerator/incubator's range of funding, but not any add-on investments.  

These programs typically last 3 months

Based on the figures provided by the programs that disclose the amount of money they give and what they take in return, these incubators/accelerators collectively value each of their participating companies at about $470,000.   Of course, almost every program also offers resources such as paid living expenses, free work space and access to service providers, as well as networking and mentoring opportunities and access to investors, so the level of service goes beyond seed investment. 

Every single incubator/accelerator goes to great lengths to suggest that the seed money they provide is among the least valuable resources they provide, instead emphasizing the importance of network, resources, mentoring and brand.  Based on post-participation valuations, fundraising figures and the number of jobs created by these companies, the incubators/accelerators aren't just posturing. 

There is a robust, and growing enthusiasm for networks, events and programs specifically dedicated to women entrepreneurs.  

Large corporations and institutions play a material role in partnering with almost every incubator or accelerator.  

Some of the information included in the spreadsheet doesn't necessarily fit into the traditional mold of an incubator or accelerator.  I decided to leave it because it's another resource that someone might find helpful.  

**One notable exception to this is Jed Christiansen's work at http://www.seed-db.com, which is a great resource that I, of course, did not find until after I had spent hours working on this.  Seed DB looks at seed accelerators on a global level, and has a lot of great information and statistics.  Seed-DB also looks at accelerators through a much more focused lens, whereas I am looking at basically anything that might give my companies a leg up.  

Early discussion focused on strategic positioning and valuation characteristics of emerging payment providers such as Braintree, Square and Stripe.  From a valuation perspective, the panel highlighted the enthusiasm around the space: “For a leader in an exploding category, you are going to pay up.” The panel suggested that multiples remain “Crazy” at 1x GTV (Gross Transaction Volume),  “High” on revenues, “Infinite” on EBITDA and under the assumption that these companies will be bought before they approach FCF positive territory.  While Bain has had a tough time stretching to these valuations, Harris highlighted the notion that paying less for the #2 player in any space is a particularly bad strategy.  Nevertheless, the participants stressed that they build every company to eventually IPO, despite the fact that about 80% will go to strategic acquirers, provided that “they are a threat to an incumbent.”   

Unsurprisingly, mobile commerce (rather than mobile payments) remains the “single most important” area of interest, although as a result of this it necessarily remains a crowded and highly competitive space.   Toward this end, they quantified some of the more robust areas of opportunity in mobile commerce, suggesting that “10% of all ecommerce is coming from tablets & phones,” and that this is growing dramatically.  However, conversion rates remain about 1/8 as good as desktop.The biggest opportunities, and where they are seeing dozens of companies emerging, are therefore focused on simplifying the process and improving these conversion rates.  

Ben Cukier of FTV Capital adequately summarized the view around mobile payments (paraphrased here): there are many platforms, but they are not bullish on them because there is a lot of confusion in the space, a need for more universal standards and traditional methods of swiping one’s card are working today .As a corollary to this, P2P remains a “dead space,” which I suspect would take an entire post to examine.

Rather, he suggested two important, related themes that remain interesting in the space: first, security, which will become increasingly important going forward.  Second, the participant highlighted specialties within vertical networks will continue to gain traction; in particular, he highlighted electronic gift cards, which should provide “tangible lift” to revenues and solve this problem in increments.  Finally, he highlighted directed remittance in the US, UK and Canada as an area of growth, which will continue to pressure cash to cash , as it’s cheaper and alleviates many costs around risk & compliance.

With regards to security, the participants suggested that this is a particular point of risk that these companies have to live with.  Going further, they suggested that mobile payments companies still do not have a great sense of fraud yet, and that there is a tremendous risk of V and MA simply fining them out of existence.  Toward this end, they suggested it is no accident that Square continues to get away with what they are doing, and that regulations could have a dramatic impact on them.  The PSP world is a bit more mature, and tends to have a bit better grasp on risk management.  Visa has done a good job of understanding this, while MA is farther behind.  Despite these emerging companies, they were careful to stress that the associations (Visa and MA) are not going away, and that the only existential threat to them is PayPal, which leverages the ACH. 

While sentiment around mobile payments were somewhat muted, the panel expressed enthusiasm for managed services to merchants, namely POS systems and merchant acquirers. Verifone, who spoke earlier at the conference, remained dismissive of incumbent threats from other merchant terminals, employing the malapropism that they were not worried about “Two guys in a bathtub.” Nevertheless, merchants remain very dissatisfied with the existing options and continue to actively look for alternatives.   Square is less of a threat to these companies than are Lavu or Shopkeep, both of which offer cheaper, better solutions that focus on offering cheaper solutions to shops through software on commoditized hardware.  Levelup remains less of a threat to the incumbents; Groupon also operates within this space as a result of their recent acquisition of Breadcrumb, although they are positioned to use payments as a loss leader in order to expand their reach.   Square, conversely, continues to expand merchant payments, in particular through its recent partnership with SBUX.  However, the implications are rather limited, as this doesn’t tend to work outside of a limited area (i.e. – PayPal/HD wouldn’t make a lot of sense).  Indeed, the way that new players appeal to new merchants is being challenged by this deal, although it’s a tempting land grab strategy of reducing fees.  In the end, by offering more services for the same interchange, the merchants win.    

 For a more detailed exploration of POS systems, see this earlier post.

The shift driven by these emerging companies in the space is twofold.  First, the go-to market strategy has shifted away from dealing with the ISO and toward downloading an app, which is much lower cost than conventional means of going to market. The second, and perhaps largest implication of this shift to emerging merchant acquirers is that hardware peripherals are less strategic as they move away from proprietary hardware and toward commoditized or interchangeable pieces.  Rather, software is the most important piece of the puzzle and where most of the value is in fact delivered.  I’ve highlighted the importance of software offerings on the point of sales side before, particularly as it pertains to inventory management, analytics and customer acquisition and loyalty – and this is an area of major vulnerability for incumbents like PAY. Finally, a final area of competitive advantage for the emerging companies is that developers are paying attention to them rather than CFO’s, and helping to drive adoption and growth.  Indeed, the scale players do not sell well to developers and therefore find themselves at risk of falling behind.  

 Here's a link to the entire sheet (.xls) of co-working spaces in NYC

Here's a link to a google doc where you can add or update info

My friend @AlexZerden did a great job of putting these into a Google map to visualize the info.  The map gives a clue to the next set of resources that'll be coming out (incubators/accelerators) next week:

View NYC Incubators and Accelerators, Coworking Spaces in a larger map

I'm intentionally not including stuff like Regent or Regus Business Centers, or it'd get crazy.  The focus here is flexibility, thoroughness and amenities.  

Here are some interesting stats on the research: 

There are about 600,000 square feet of co-working space available in NYC, with more coming online in the near future.  

That's roughly equivalent to 400 Starbucks, the entire 11 story building that houses Lord & Taylor's flagship store in NYC and the Port Authority/NYC's lease at the World Trade Center.  

The biggest providers here are obviously Sunshine Suites (~85k square feet) and WeWork (~232k square feet)

The overall capacity for co-working in NYC is approximately 6,500 people at any one time.  Facebook has about 3,500 employees. 

The lowest cost is free (Wix Lounge), the lowest "real" daily cost is ~$25/day (Space-4-work) and $295 (Green Spaces).  The average cost is around $325/month.

Stupid math says that that means that roughly $27.3 MM is spent on co-working in NYC alone per year.

These cater to a number of different functions, but we see specialties across verticals, including: Tech, fashion, women, "Green", media, Design, "construction", and growth.

From 9/25:

Last month, I attended the CSFB “Future of Payments” conference, where I saw the CEOs of LevelUp and ShopKeep POS present.   Both bring disruptive software platforms to the mobile payments space, the former with exposure to the customer and vendor side, the latter on the store owners/points of sale.    Both companies presented data that was suggestive of a customer base that is increasingly willing and enthusiastic about mobile payments and vendors that have found the ROI on the technology tremendously accretive as a result of three major “upside factors”, including: improved user experience, enhanced analytics/functionality/flexibility as a function of back-end innovations, greater customer loyalty and favorable price point/fee structures.   Ultimately, I think that both companies become “consolidators” in the industry, as they gain market share at the expense of giants like PAY via their disruptive price points and benefit from increased exposure of mobile payment platforms by the high profile “wins” from players like Square by enhancing functionality and flexibility within the vendor/consumer relationship.

 As mentioned above, LevelUp is a mobile payments system that consists of a customer facing application, which links to their bank or credit card accounts, and the vendor hardware+software combination, which is comprised of its “module,” which attaches to either an android or iPhone or whatever the existing hardware the shop already uses.   For the customer, the process is fairly easy: they download the app, link their accounts (which can be done using the phone’s camera) and then use it at vendors by scanning it on the module; the process is analogous for the vendor.   The company highlights its offerings as a “Shared Value Commerce System” that includes the equipment, local businesses, partners and processers. 

The LevelUp ecosystem offers three major advantages to the vendor:  

First, LevelUp charges 0% processing fees and gives the vendor its hardware for free.   The company “believes in the movement of money” and rather profits from the growth of spending.

Second, its software capabilities have revenue driving capabilities, as highlighted by its Customer Acquisition and Loyalty Campaigns.  The Customer Acquisition campaign allows businesses to lure new customers with one-time incentives.   The loyalty campaigns reward existing customers by offering them a reward for spending a designated amount. 

Finally, enhanced analytics allow business owners to track the effectiveness of these campaigns, know who their customers are and optimize its processes.  The costs of such campaigns are 40 cents for every dollar of credit redeemed by a customer, and they never charge for impressions, promotions or support.  .  

Results for these campaigns have been largely and overwhelmingly positive, with customer loyalty and spend both increasing as a result of these campaigns. This is where the real value proposition lies for the vendor and for the company as a competitive advantage over not only Verifone and MA/Visa, but also local deal merchants such as GRPN or Living Social – as credit is only taken for realized gains. 

For the customer, LevelUp likewise offers a number of attractive advantages:

Enhanced security, which is comprised of real-time receipts, signature requirements and connection to mobile device.

Multiple card hosting, which allows users to store a number of cards for use.

Enhanced analytics, which allows users to see where, when and how they spend their money.

 Unique profile that rewards users for loyalty or discovery of new places.

 Customer advantages are also robust, though I would highlight the fact that the product only incrementally changes the user’s relationship to the payment, and is largely dependent on vendor availability.  Given the nearly 360 degree advantages presented by the LevelUp ecosystem, I would continue to anticipate robust growth in its user base, driven by vendor adoption, marketing spend and general growth in the direction of mobile payments.   I believe that the incentives on the vendor side and its hardware agnosticism will be major drivers in giving LevelUp an edge over its competition in an increasingly hot field. 

While LevelUp addresses both the customer and vendor side of the sales equation, ShopKeep aims squarely at the POS by offering an cloud-hosted, iPad based point of sale system that has the potential to completely upend the existing systems that stores, restaurants and small businesses use at their front and back ends.   Similar to offerings from Square, the system involves using existing hardware (in this case, an iPad) with additions to take payments from customers using any number of methods: credit card, cash, mobile payment, etc.   I believe that this is a truly revolutionary and disruptive opportunity as a POS technology as a function of: price point, technology advantages and tremendous analytic capabilities.   

 First, from a price perspective, the hardware itself is both widely available and much cheaper from a competitive perspective.   The “total package” for a register itself is $1500, and includes the price of an iPad (which can be purchased elsewhere if desired).  While hardware pricing and flexibility with iPad, and excellent customer service are certainly positives, I believe that the Shopkeep POS software is the key differentiator and delivers the most value as a function of both capability and pricing.  The software licenses have no upfront costs and are priced at roughly $50/month per register, with obvious discounts as they scale.   

The software itself is particularly important from a front and back end system, as it is essentially a cloud based SaaS for retailers that allows them to: securely process all transactions (using enhanced encryption software), track inventory, generate “intelligent” reports using its analytical tools, regulate employee access and remotely monitor important metrics from your phone.  The inventory tracking and analytical capabilities are what I believe represent Shopkeep’s key competitive advantages over its competitors and traditional offerings, and position it particularly well to deal address the needs of larger stores and companies with a number of locations, whereas its competitors (such as Square) are largely focused on single location, smaller vendors that likely would not offer credit cards (or have a register) in the first place.  Finally, the software is a cloud-based app, which means it is particularly easy to install and uninstall from the iPad in case of technical error or internet disruption, which is particularly important when juxtaposed against current windows based POS systems, which require tremendous computing power and the multi-step debugging and installation processes that can easily disrupt business flows and take hours to fix (as we’re aware with our computers here).   

 The company has customers across the US, and they include “The Bean”( a coffee shop), The Pretty Penny (a retailer) and others.   In addition to it’s the obvious opportunities for optimizing business processes for its customers, the company also has remarkable access and opportunities to gain access to shopping, sales and price point data, as highlighted by their presentation of a map of coffee prices across the US.  In the longer term, data aggregation and sales likely represents another sustainable revenue stream that could continue to help its customers. 

 While each individual component of the Shopkeep system has its own compelling story (great price for the hardware and software, tremendous business intelligence capabilities, heightened security, cloud-based system), the sum of the parts is tremendously accretive to the business owner, offering what previously was offered by participants such as Verifone, Oracle and SAP at a fraction of the cost and infrastructure.   In a sense, they’ve been able to leverage the advances made in computing power and hardware and leverage it to the advantage of the business owner.   Historical precedent exists for disruption of these markets, including as recently as Netsuite, Salesforce and QLIK, which combined once prohibitively expensive capabilities with the budget of the SMB.

 Management of both teams presented well and exhibited the right mix of audacity and gravitas.  The founder/CEO of LevelUp is Seth Priebatsch, a 21 year old college dropout who built the entire system largely himself; its Chief Revenue Officer is Chris Mahl, who has experience in the sales departments at  ORCL, CRM, Yahoo and others. While Seth did not present, he clearly has the chops to build this system and enthusiasm to continue to drive innovation, while Mahl has the experience and gravitas to focus on delivering results.   The founder and CEO of Shopkeep, Jason Richelson, was himself a grocery store owner in Brooklyn that created this out of his own need, knows the market and exhibited a unique passion for the combination of  customer experience, the importance of data and  the tremendous opportunity at hand to disrupt industry juggernauts that inspires confidence among customers and investors.  Looking forward to the mid and long term, I believe that both companies will be important players in the evolution of mobile payments, and the focus on POS productivity and flexibility as highlighted by these two excellent companies certainly illuminates the tremendous opportunity at hand and the unspoken reality for larger, clunkier competitors that choose to ignore these quick growers. 

Tablets:

 The survey results highlight the fact that tablets in the enterprise are largely moving away from “testing and trial” and into implementation phase, as characterized by shifting sentiment toward the use of tablets, heightened demand and increasing penetration in the enterprise.    Important data from the surveys include the fact that: 72% of respondents are already supporting the use of tablets (46% of the respondents said they are already using tablets, while an additional 26% are in trial/test mode), while an additional  19% were interested in supporting tablet use in the future. All together, this suggests that about 95% of respondents either actively use or intend to use tablets in their enterprise (Barcap).

 These results suggest that a great deal of those who have tried tablets actually implement them, and that a great deal of those who indicate an interest end up trying them.  This implies that penetration should continue to improve as the 26% now in trial now move to full-time use, and the 23% that “intend to try” tablets in their enterprises move to trial phase:

I would highlight the fact that demand for tablets have grown almost entirely at the expense of Notebooks and Smart phones, and that this shift has taken place only over the last 6 months.  Indeed, tablets are the single biggest area of “Pent Up Hardware Demand.”  

 While tablet demand is drawing demand away from notebooks and smart phones in the near term, it is also important to note that fully 50% of respondents suggested that tablets are being viewed as incremental devices and NOT as replacements (Barcap).  Looking forward, this seems to be more of a function of the limitations of existing tablets, and I believe it will become less of an issue as functionality improves in later generation models – leading to the cannibalization of demand for these other devices.  Indeed, according to MS, about 5% of total PC base could be shifted to tablets over the next 3 years.

 Finally, the data suggests that increasing penetration rates of CIO’s that adopt a “BYO” device model will lead to the increasing “Consumerization of IT.”   According to MS, 50% of respondents anticipate allowing users to bring their own tablets for corporate use within the next year.  However, it’s clear that CIO’s continue to demand some level of control/security afforded by purchasing tablets for enterprise use by their employees (60% of Barcap respondents), though they will ALSO support employee purchases.   Together, these data points support the “consumerization of IT” by workers, and suggest that the enterprise tablet market will closely resemble the consumer market. 

The biggest opportunities to capitalize on tablet ubiquity from a stock perspective are clearly on the platform side, where AAPL should be able to consolidate a lead (~49% of respondents would support AAPL), Android maintain a toehold (~30% ) and surprisingly, MSFT, which had a surprising 25% support rate, almost entirely at the expense of RIMM (which only received support from 5% of the responses).    

In the broader context of the tablet market within the enterprise, some of the biggest opportunities lie in addressing the following areas of need:

 1.)    Security (and flexibility)

One of the biggest drivers behind CIO purchases of mobile hardware for employees (notebooks, phones, tablets) is clearly the perceived need for security, control and monitoring of employee activities and productivity.    Security and control have been the historic drivers of company purchases of mobile hardware (blackberries pre-2009 and government, as a quick example), and was cited as a major reason for 60% of respondents suggesting that the company will purchase employee tablets.

Given the increasing shift to “BYO” model and CIO hesitation around security & monitoring (and potential budget constraints), a major bottleneck to wider tablet adoption would be eliminated by addressing these security concerns via services/ applications that effectively “partition” the device between enterprise use and personal use in a way that doesn’t impede the worker’s use of his/her own device and that doesn’t jeopardize enterprise security.  

2.)   Workload Functionality –

 All the statistics that are supportive of tablet usage in the enterprise ecosystem largely obliterate the view that tablets are simply for consumption of content rather than creation. The fact that users have been circumventing the absence of MS Office products for iPads by downloading other applications that have allowed for productivity suggests system versatility and user willingness to work around such hurdles.   If tablet penetration is to continue (and cannibalize notebook/PC demand), the incremental improvements that drive increased productivity and adoption will likely take place along the themes of project management/workflow software.  Indeed, Mobile Enterprise Apps represented the #4 spending priority into 2013 by CIO’s.

 I won’t address incremental technological improvements in the productivity app ecosystem or on the hardware side, but focus thematically on the idea that if we see increasing tablet penetration as well as a move toward the consumerization of IT (and therefore, lack of a standard device across organizations),  “successful” project management software will have to necessarily address the issues of multiple devices per user, as well as multiple platforms across the enterprise, which I suppose is just longhand for “employ cloud technology in real time.”   With nearly 66% of respondents already employing large scale usage of server virtualization, the comfort level with and penetration of cloud technology continues to be an area of opportunity that will allow for this. 

 Given the emphasis on productivity and analytics across multiple devices, I think the more intriguing opportunity here comes in re-tooling (or integrating) email in a way that allows for a fluid expression of workflow and interaction.  Along these lines, companies like Dispatch.io have sprouted up, and which are likely one piece of the puzzle in solving the issue around multi-platform, multi-device work forces whose attentions may be increasingly stretched by the complexity and number of projects handled.   Given the fact that e-mail has remained largely untouched in function and appearance since its widespread adoption, it remains an area ripe for disruption and re-purposing as the platform for work shifts toward the tablet.  AOL recently launched its Alto service on the consumer side, and while I haven't used it and don't have an opinion worth sharing about it, it could be an interesting catalyst for wider-spread rethinking of email functionality.  

Weaknesses:

Unsurprisingly, the survey suggested continued pockets of weakness in corporate IT spend, including almost all areas of Hardware (ex –tablets and storage), including: PC’s, servers and printing.  Other pockets of notable weakness include nearly all non-essential non-IT networking, such as videoconferencing and IP telephony.   The losers here include companies like DELL, HPQ, PLCM and all the printers.   

Recently, a number of firms, including Barclays, Morgan Stanley and Piper Jaffray have released data from surveys of CIO spending intentions.   The surveys all contain about 100 respondents, and are well distributed by geography, industry and size of sales/number of employees.   Overall, the survey results suggested muted but stabilized2H 2012 IT spending intentions, and improving, but low single digit growth metrics for 2013 spending intent.    The lukewarm results for the overall survey in 2H 2012 and 2013 are understandable given macro level uncertainty and constraints to discretionary budgets.  The weakest areas of spending intent reflect this uncertainty: hardware (ex-storage and tablet), servers and printing.  However, a deeper analysis of the data highlights pockets of strength in spending, growth and transformation in a number of key thematic areas, namely: Cloud/Big Data, Storage solutions and the enterprise tablet market.  

Important themes and data include:

1.) Addressing “Big Data” problems of virtualization, storage and analysis will be the major drivers of IT spending going forward:

 2013 will mark the acceleration of major investments in Big Data solutions, as it roughly DOUBLES in importance as a driver for IT spending.

Server virtualization penetration will grow 15% to 73% by 2013; Desktop virtualization penetration rates will be much lower, but will roughly double to 20% in the same time frame.

 52% of CIO’s are increasing Storage solutions spending in the next year.  Storage spending is non-discretionary, and growth will be driven by the increase in data and virtualization. 

 57% of CIO’s are increasing spending in Big Data Analytics/BI: This will be the single biggest opportunity within Big Data.

   BIG PICTURE IMPLICATIONS:  The highest value addition in the “big data” space will come from the software side, and the largest opportunities for disruption will be: predictive analytics, bespoke data/data as a service and data control opportunities.  Being able to identify “relevant” signals over all the “noise” will be tremendously valuable. 

Big Data -- Virtualization, Storage and Analytics:

A shift toward virtualized architectures, cloud computing, myriad new pieces of user, transactional and web application data, as well as the rapid secular digitization of content and information have led to the virtual explosion of unstructured data at a rate of 3x that of structured data.  This unfettered growth of data and data creation has created two major structural challenges for enterprises: addressing data storage and organizing, analyzing and leveraging all this information. Solutions that allow enterprises to organize, harness and apply these mountains of data points will be among the biggest areas of investment into 2013 and beyond precisely because of the magnitude of the opportunity.

A deeper analysis of 2012 and 2013 spending drivers is supportive of this thesis, and provides greater detail into the timing of major spending.  The data highlights importance placed on solving “Big Data” problems, and the relative importance of spending there as well as on Cloud Computing and a number of virtualization technologies.   I would furthermore highlight the fact that spending increases allocated to “Big Data” and cloud computing should be robust and deliberate, as the both DOUBLE in importance as drivers of 2013 spending and beyond.     

While “Big Data” solutions as a category in the chart above is nebulous, the solutions deployed to handle it can largely be categorized as virtualization, storage and analytics.  

Looking to virtualization technologies, survey results highlighted notable strength in server virtualization and lesser enthusiasm for desktop virtualization.  According to Barclay’s survey, roughly 35% of respondents have already deployed some type of virtualization technology in order to handle the increase in data growth.     Morgan Stanley’s data  (chart below)  highlights the fact that roughly 56% of server workloads currently run in a virtualized environment, and that by the end of 2013, that should increase to 73%.   It is important to note how much expectations have accelerated since July, with estimates higher for each time period, and supporting 18% growth in penetration rates.   This compares to virtualized desktop rates of 9%, 13% and 20% for the current period, YE 2012 and YE 2013.   While rates are clearly lower, the rate of growth will be faster, and the opportunity for disruption more material in the desktop virtualization segment.

Storage is an item of non-discretionary spend (with 52% expecting to increase spending in 2013 and beyond), and a major beneficiary of both virtualization growth and big data growth.    Morgan Stanley’s results show that desktop virtualization alone is driving an increase in storage spending away from PC’s for 12% of CIO’s.   Likewise, Barclay’s survey suggests that about 35% of CIO’s have or will be deploying storage solutions (20% scale out, 15% NAND flash) to cope with data growth.   From a stock perspective, the most obvious winner in this space is EMC, which will benefit from exposure to Storage Efficiency and Big data through its own offerings and Cloud computing, desktop and server virtualization vis-a-vis its stake in VMW.  

Looking at the surveys in concert provides a clearer indication of spending intentions and reinforces my conviction in the thesis that the biggest economic opportunity will be in data analytics.   As discussed earlier, CIO’s across all surveys highlighted Software Applications as their top spending priority in the future and “Big Data” problems as the biggest driver of spending.  According to MS,  57% of CIO’s suggested that they would be increasing spend in 2013 on BI/Analytics.  More tellingly, the up/down ratio of spending plans on BI/Analytics rose to 3.0 (i.e. – 3:1 ratio of increase spend vs. decrease spend).   Finally, the chart below (on the right) highlights Analytics and Big Data analytics as the two biggest areas of BI spend into 2013.

On the stock side, both SPLK and TDC are interesting plays on the theme, though SPLK is the only pure-play publicly traded “Big data” company (although IBM also screens particularly well here).       

Looking forward, the biggest thematic opportunities in “Big Data” will be the software based, analytic solutions:

1.)    Predictive Analytics:

Robust predictive analytical capability is the holy grail of big data, and would theoretically offer insight and optimization capability across a number of business decisions, including some particularly important ones like: hiring/scale out decisions, predicting consumer behavior and  optimizing supply chains to match needs across organizations.   With increasing number of data-points across populations and actions, companies that are able to effectively organize and outlay this information in order to drive business decisions will be the winners in an ecosystem desperate for greater yield.  Hunch represents a visible example of a company deeply involved in machine learning being gobbled up by a larger company (eBay), but  we’re probably in the early innings of the application of big data solutions: we’ve already seen Google and Amazon do a comprehensive job of indexing, recommending products, information and services on the internet; Facebook, Twitter and LinkedIn allowed the participants of this ecosystem to connect; Newer services like Spotify/Songza/Hypem (really, you can add any social music platform) and Pinterest have taken it a step further by allowing for curation of information according to one’s social circles, interests and whose opinions one values most.  The next step either takes the form of incrementally improving the accuracy of the ads and services we’re delivered to the point of seamless “action step” of purchasing something  or being applied to business processes themselves.  . 

Enterprises have always used their massive amounts of data to inform business making decisions – the difference now is that the services mentioned above have created much more (in terms of diversity and volume) and materially better data points than they’ve ever had at their disposal before and that these are also available to smaller companies.  The ability to interpret  and assign value to those will be the inflection point on “big data” within the enterprise and SMB’s, and a tremendous amount of the value here will come from identifying noise vs. signals.

2.)    Data as a Service/Bespoke data:

I believe that the next “leap forward” will evolve around the idea of process, discovery and research automation that would theoretically allow one to assemble bespoke data sets from a variety of sources in order to identify prospects or trends in a real time manner.   In a sense, this continues along the line of “optimization” highlighted above, but looks to be implemented in a real time (or close to real time?) capacity to identify and organize information on the individual rather than enterprise level.  

3.)    Data Control Opportunities:

Privacy concerns have underpinned discussions on the web as long as it’s been around.  It has sometimes manifested itself in the form of concerns about identity fraud, sometimes about accidentally overshared or simply embarrassing information and other times simply as a desire to evade monitoring.   However, as individual pieces of data become less valuable because the sheer amount of data-points explode, a series of data or complete portrait of a certain type of person’s behavior carries exponentially richer and more valuable information.  This is precisely the reason why information from places like GOOG, Facebook, the Twitter firehose and banks are valuable – it offers a somewhat comprehensive and intimate view of a person’s life.  While there are currently ways of adjusting settings based on desired privacy levels, and while even shared information may be anonymized, the opportunity to provide enhanced value going forward lies somewhere at the intersection of providing a service to effectively manage one’s identity online and being able to profit from it by packaging and offering a glimpse into the “personal firehose of activity.” 

 The metric that most specifically quantifies the effect of the company’s efforts to revitalize the user experience within the Market Place segment is user growth.   While there are some other useful metrics to consider about the company's progress, including overall revenue growth, GMV growth and the revenue/user and gmv/user, these metrics progress almost entirely in line with active user growth (i.e. - average spend and revenue per customer remains relatively stable).  The graph below highlights marketplace user growth over the last 15 quarters, and shows the stark acceleration from a 5% growth rate in the beginning of 2011 to a 10% growth rate in the most recent quarter:

    The primary driver of the improvements to search, user experience and mobile that drove user growth has been an increased investment in talent.   This allocation to talent manifested itself two ways: an increase in product development spend and a number of acquisitions.   

First, beginning in Q4 2010, management increased its product development spending by a run rate of about $100 MM annually.   This represents an increase in product development spending of roughly 100 bps to 11% of sales going forward from the 8-9% at which it had been stalled since 2001.   Additionally, from 2010 to 2011 alone, the company saw its US employee base grow from 11k to 18k, or by about 60%.  

  Second, if we look at the list of published acquisitions made by eBay since its sale of Skype, we see a clear focus on improving logistics, technology and functionality.  Beginning in December 2010, eBay acquired the following companies: Milo (local shopping engine), Critical Path (mobile application development), brands4friends (social e-commerce), GSI Commerce (e-commerce logistics), Magento (open source e-commerce platform), Hunch (predictive technology/machine learning) and  Zong (payments through mobile carrier billing).   A simple survey of each acquisition’s focus highlights eBay’s priorities at the time and going forward: improving the user experience (through mobile, search and predictive technologies), optimizing processes (through different platforms and logistics capabilities) and driving technological change.

Finally, I have gone through a number of earnings calls beginning in 2010, which highlight the shift in management posture toward emphasizing the role of technology and talent in driving results.   I picked four random conference calls and looked at the introductory statements.  Perhaps nowhere else is eBay’s transformation more evident in the way they describe themselves, their mission and how the intend to achieve it.    What we witness is a stark change in posture as the company solidifies its role from “competitively positioning itself to win the $500 billion secondary market” (Q1 2009) to “creating opportunities for sellers and merchants online” (Q4 2010) to a “focus on enabling commerce…and giving consumers a seamless shopping experience across multiple channels, whether they're shopping online, off-line, or on a mobile device” (Q3 2011) to “enabling the future of commerce” today. 

How management spoke about the company in Q1 2009:

Mobile:  No mention

Mission:

Our Company connects buyers and sellers and we're focusing our portfolio on two core growth engines that accomplish this, payments and ecommerce. PayPal is the leading online global payments network and we intend to approximately double this business over the next three years. PayPal has unmatched advantages and will be the leader in online global payments. eBay is competitively positioning itself where we can win in the $500 billion secondary market. We're fixing the foundation of our core eBay marketplace by improving trust, value and selection and we are transforming the user experience. We're also growing other formats such as classifieds and StubHub that connect buyers and sellers. Overall, we expect our total eBay Marketplaces business to grow slower than the market this year, but with the market in 2010 and faster than the market in 2011.

Q4 2010 Conference Call:

Mobile:  

Mobile is clearly becoming a new way people shop, and eBay is helping to lead the way with innovative apps across multiple platforms, including the iPad. Our mobile apps have now been downloaded more than 30 million times in eight languages across 190 countries…..

  Mission:

“We have made steady progress each quarter, and we ended the year with strong Q4 results. I am proud of what our teams have accomplished. We are becoming a stronger, more competitive company. We are creating opportunity for sellers and merchants worldwide. Our products are becoming more innovative. And we are making it more convenient for millions of people to shop and pay online every day with more choices to help them find whatever they want, whenever they want, wherever they are

We have extended our leadership position in mobile commerce, nearly tripling our eBay Mobile GMV year-over-year to nearly $2 billion…..

We also expanded our capabilities. In Q4 we made or announced acquisitions that we believe will strengthen our position in fashion, mobile and local commerce. Brands4friends, Germany's largest online shopping club, deepens our fashion leadership position in Europe. In the US, Critical Path software gives us deeper mobile application development capabilities. And our acquisition of Milo allows us to blend local off-line retail into an easy and convenient online shopping experience. Across our core businesses in Q4 and 2010 we made progress against our growth objectives. Distinctions between online and off-line commerce continue to blur, and consumer behavior around how people shop and pay is rapidly changing….. Our customer focus, deep commitment to technology-driven innovation, and our operating discipline not only generated a strong quarter and year, but also position us well to be at the forefront of trends that are shaping the future of shopping and payments.

With our focus on technology, we are increasing our pace of innovation. We not only are responding to current customer needs, but are also helping to shift -- drive leads in online and off-line shopping behavior.”

      Q3 2011 Conference Call:

Mission:

  Before taking a look at our results, I want to take a moment to recap our strategy. Our Company is focused on enabling commerce. This means giving consumers a seamless shopping experience across multiple channels, whether they're shopping online, off-line, or on a mobile device. Consumers want to shop anytime, anywhere.

And this requires retailers of all sizes need the ability to engage consumers where, when, and how they want to shop. In today's commerce environment, a physical retail store is just another point of access. Location alone can't compete when consumers have shopping malls in their pockets. Retail must be technology-enabled and consumer-led.

Global technology platforms increasingly enable commerce, and we have powerful commerce platforms in our core eBay, PayPal, and GSI businesses. We're also building valuable commerce capabilities in mobile, local, and social. This includes technologies such as Milo, RedLaser, and Zong. And last week, we launched X.commerce, our open commerce ecosystem. X.commerce makes our technology and global platforms available to third-party developers, which we believe will accelerate commerce innovation. We believe that technology-led innovation is changing shopping and rapidly influencing customer behavior. We are at an inflection point in global commerce. In fact, we believe we'll see more change in how people shop and pay over the next three years than we've seen in the last decade. And as we enter this new wave of global commerce innovation, I feel very good about our ability to compete, win, and lead.

Q3 2012:

Mission: