TECHNOLOGY MEGATRENDS

INTERNET OF THINGS
New wave of connected de-
vices are able to sense the
world around them, analyze
data in real-time, share data
directly with other devices,
and trigger actions.
Driving factors: better data
is widely available; network-
ing technologies are better;
Internet access is cheaper;
hacker subculture has ac-
cess to cheap and powerful
devices; democratization of
hardware.
Opportunities: informa-
tion and analysis (tracking
through time, real-time mon-
itoring, tracking over time);
automation and control (pro-
cess optimization, resource
consumption, system guid-
ance).
ONLINE - OFFLINE
The links between online and
off|ne commerce are be-
coming stronger.
Services like Foursquare let
merchants know how online
behav|or |nfuence off|ne pur-
chases.
O2O combines payment
mode| and foot traffc gen-
erator allowing merchants to
build new and durable rela-
tionships with consumers.
Allows merchants to shape
behavior before the con-
sumer arrives while providing
measurable actions.
For consumers this trend is
about local discovery and ex-
periences.
EDUCATION TECH
Creating new ways to con-
trol, distribute, and process/
analyze knowledge both in
the classroom and on the
web.
The increased amount of,
and access to, information
is being organized and de-
livered in more meaningful,
engaging ways.
Areas of focus include: stu-
dent learning, coordination
tools, content generation,
and data/analytics.
Keys for success: extensive
knowledge of classroom
operat|ons and |neffc|enc|es
that exist within; products
that are able to work con-
gruent with existing standard
curriculum.
BIG DATA
Explosion of real-time and
social data present oppor-
tunities and challenges for
companies dealing with
'petabyte"-|eve| data for frst
time.
Opportunities: deeper an-
alytics; customer targeting;
improved internal processes;
new sources for R&D.
Challenges: separating sig-
nal from noise; turning data
into actionable information;
current database software
and tech may be too slow or
ill-equipped for new opportu-
nities.
SOCIAL COMMERCE
Online shopping experienc-
es ranging from high-end
invite-only clubs to mass
adoption deal sites have
gained rapid momentum and
revenues.
New models around on-
line commerce are shifting
whereby technology can en-
able greater relevancy and
service for consumers.
Sites like Pickwick & Weller,
Everlane, and Pinterest have
tapped into the social graph
to prov|de a new f|ter on the
E-Commerce experience.
Zappos and Warby Parker
have made amazing ser-
vice a new standard for on-
line commerce.
SHARING ECONOMY
No Fixed Costs: There is a
growing movement of people
who prefer to rent than buy -
particularly big-ticket items.
Access trumps owner-
ship.
P2P commerce happens
where individuals are both
buyers and sellers of goods/
services.
These communities are built
around trust and reputation
deve|oped off|ne and carr|ed
online
Services which enable con-
sumer fex|b|||ty and remove
the burden of |arge fxed
costs have potential to dis-
rupt long established indus-
tries.
MOBILE: mobile devices and services are the ideal, and increasingly the go-to, platform for creation, sharing and consumption of media. Mobile
frst" |s ga|n|ng s|gn|fcant tract|on.
PAYMENTS: payment p|atforms are key to c|os|ng the |oop on both on||ne and off|ne transact|ons. Oompan|es know more about the|r consumers,
spending habits, etc.
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Snapchat
SOFTWARE EATS THE WORLD
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Sofware is creatively destroying
huge ofine, physica| markets
at an unprecedented c|ip.
As software eats one industry
after another, the market for
technology business expands,
rendering previous market size
estimates obsolete.
-Ben Horowitz
MUSIC
PAYMENTS
NEWS, MAGAZINE
EDUCATION
DIRECT MARKETING
COUPONS,
LOCAL COMMERCE
FASHION, BRANDS
TICKETS, EVENTS
TRAVEL
DOCUMENTS
PHOTOS
Snapchat
TRANSPORTATION
COMMUNICATION
O2O COMMERCE
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People discover new products and experiences or services
through branded ads. Display and rich media advertising
he|p dr|ve awareness and cons|derat|on. Measur|ng effca-
cy |s d|ffcu|t. Generat|ng 'foot traffc" |s st||| a pr|mary goa|
of off|ne reta||ers, but th|s |s hard to do (or measure} on||ne.
D|rect market|ng and search dom|nate here, compr|s|ng
over 50% of on||ne ad spend. However, on|y 5% of stuff |s
bought online. Most commerce is completed at physical
prem|se (e.g. pay for mea| at restaurant}. S|tes that create
'awareness/cons|derat|on" trad|t|ona||y haven`t comb|ned
'purchase |ntent" (e.g. Ye|p and O|tySearch are d|rector|es
and don`t c|ose the sa|e.
Many social media sites create loyalty and advocacy. But
these metr|cs aren`t as measurab|e (for now} |n determ|n-
|ng how they have contr|buted to a prospect|ve customer`s
purchase decision and action.
St||| |n |ts |nfancy, these mob||e-base compan|es have the
potent|a| to create |ocat|on-based, spontaneous aware-
ness and consideration. Marketers are now interested in
brand campaigns based on location.
Oompane|s can he|p customers 'compar|son shop" or
seek realtime opinions via their mobile device. They can
also create demand by sending location-based promo-
t|ons, for examp|e. But c|os|ng the sa|e through these
companies may involve a mobile payment mechanism.
Oompan|es can re|ate |oya|ty/advocacy by the check-|n
(|.e. the new 'status update"}. There`s a|so opportun|ty to
tie location with loyalty points.
New sites and services are emerging where users use
social interaction and share what they want and what they
buy.
Many compan|es are mob||e-based frst and so |ntegrat|ng
mobile payments with each company is critical to extract
s|gn|fcant econom|c va|ue.
Shar|ng what you`ve bought/consumed turns users |nto
advocates.
These companies have used email marketing and social
media to create awareness and consideration.
These companies have cracked the initial code in tying dis-
covery to purchase. Groupon |s generat|ng $2BB |n gross
revenue in less than two years.
Group buy|ng serv|ces create effect|ve |oya|ty and advo-
cacy because they can track purchase and consumption
history.
Ty|ng on||ne buy|ng to off|ne act|v|ty |s the 'on||ne-to-off|ne" (O2O} opportun|ty. Trad|t|ona||y, th|s has been d|ffcu|t because of |nadequate measur|ng and track|ng.
The c|oser a company |s to the actua| purchase, the b|gger the opportun|ty. Thus compan|es |n the m|dd|e co|umn have had the h|ghest revenues, profts and va|uat|ons.
A|| compan|es |n the frst co|umn can cap|ta||ze on the O2O opportun|ty and these co|umns may merge over t|me.
A|ex Rampe||, Tr|a|Pay Founder/OEO, co|ned th|s term |n th|s TechOrunch arBc|e: hp://techcrunch.com/2010/08/07/why-on||ne2off|ne-commerce-|s-a-tr||||on-do||ar-opportun|ty/
MEGATREND
DISCOVER PAY RECOMMEND
OONSMER |lFEOYO|E
EDUCATI ON TECHNOLOGY
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MEGATREND
MASSIVE OPEN ONLINE
COURSES (MOOCs)
Open enrollment courses are typi-
cally free, sponsored by accredited
universities, and have a very large
enrollment capacity.
These organizations are at the
forefront of democratizing con-
tent, as they s|gn|fcant|y reduce
the barriers (price and accessibili-
ty) faced by many students around
the world.
DATA, ANALYTICS
Tools that provide analysis and
dashboards for instructors and dis-
tricts to track student progress and
assess instructor effectiveness.
Huge policy trends in education are
pay for performance, data driv-
en instruction, and data driven
teacher evaluations. For all three,
data analytics will play a crucial
role. The data infrastructure used
in districts is antiquated, creating
opportunities for startups to play a
major role.
PLATFORMS
Infrastructure for the next gener-
ation of classroom technology
that ties together multiple content
sources to create a cohesive learn-
ing experience.
The hastening adoption of varied
content sources will require an
underlying platform to provide a
seamless experience for students.
These platforms may ease access
(e.g. s|ng|e s|gn on}, un|fy data fow,
or provide cross-content adaptive
curriculum.
COMMUNITY CATALYSTS
Tools that enable more seamless
communication, content sharing,
grading, and sharing for teachers,
students, and other stakeholders.
P|atforms can be spec|fc to a par-
ticular course/teacher or imple-
mented across a department or
institution.
By connecting teachers to stu-
dents, technology builds stronger
classroom communities. By con-
necting teachers to parents, tech-
nology induces more involved par-
enting. By connecting teachers to
other teachers, technology helps
break down traditional educator
silos allowing great ideas to spread
faster.
ADAPTIVE, SELF-PACED
LEARNING TOOLS
Tools that enable an individu-
al learning experience, either by
adapting to the student or allowing
students to work at their own pace.
These may be used without a
teacher, but are often used in a
blended environment alongside
great teaching.
Solves #1 overarching goal of ed-
ucat|on: student-spec|fc teach|ng,
leading to better outcomes (replac-
ing the factory model in educa-
tion).
Blended learning offers teachers
visibility into an individual students
challenge areas and gives teachers
the bandwith to target interven-
tions.
The for-proft educat|on market |s current|y $130 b||||on |n s|ze; represent|ng approx|mate|y 10% of the overa|| market, and |s grow|ng at 4-5% per annum.
The for-proft sector |s expected to cont|nue to grow faster than the overa|| educat|on market due to (|} the |ncreased recogn|t|on of the benefts of ear|y educat|on, (||} the grow|ng focus on
accountability and educational reform, and (iii) the overall expansion of the addressable market through technology.
Recent trends have shown that econom|c cyc|es matter, part|cu|ar|y for th|s sector; as we|| as the |arger regu|atory env|ronment.
SHARI NG ECONOMY
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eBay 2.0
The Sharing Economy describes a new trend in how people are consuming things. [1] Theres a growing movement of people who are more interested in renting and
not buying; accessing and not owning. This movement is driven by many demographic, societal and technological factors, some of which we describe below. Founders
are us|ng techno|ogy and soc|a| |ns|ghts to create and cu|t|vate trusted commun|t|es that power new peer-to-peer marketp|aces. The fagsh|p examp|e of th|s movement
is portfolio company AirBnB, which uses technology and community to build a marketplace around renting ones space.
Another way to th|nk about th|s trend |s 'eBay 2.0". eBay was the frst mega 'shar|ng economy" market where |nd|v|dua|s used techno|ogy to act as both buyers and
sellers; online communities were built around the transactions; and where billions of dollars were transacted. This new generation of startups is creating similar market-
places using new technologies and infusing them from the ground up with an emphasis on trust, reputation and social capital.
We are proud to be investors in the following companies who are leading and enabling this new trend:

AirBnB Community marketplace for unique spaces
Getab|e OpenTable for the rental industry
Grubwith.us Building friendships over crowdsourced dinner parties
Listia Marketplace for free stuff
Sidecar Peer-to-peer marketplace for transportation
Ski||share Marketplace to learn anything from anyone
Vayab|e Marketp|ace for un|que trave| exper|ences
Zaar|y Location-based, real-time marketplace for services
We believe that this mega-trend is driven by 2 related trends (among others):
1. Socia| Networking 2.0. The |ast generat|on of soc|a| network|ng was about mapp|ng your off|ne fr|ends to the on||ne wor|d (e.g., MySpace, Facebook}. These compan|es he|ped create
a vital social layer of data and connections that companies used - and will continue to use - in creating new applications and businesses.
But we`re now w|tness|ng the oppos|te happen as we|| - portfo||o compan|es ||ke Grubw|th.us and vayab|e are us|ng techno|ogy to he|p peop|e create new connect|ons and shared exper|-
ences |n the off|ne wor|d. These new commun|t|es are creat|ng c|rc|es of trust and reputat|on, wh|ch are cr|t|ca| p|||ars for co||aborat|ve consumpt|on.
2. No xed costs. The up and com|ng generat|on |sn`t as |nterested |n own|ng 'b|g t|cket" |tems ||ke huge houses or fancy cars. They`re more |nterested |n hav|ng exper|ences and not
covet|ng 'th|ngs." [2| They`re d|s|||us|oned by the recent fnanc|a| cr|s|s, and mov|ng to dense|y popu|ated areas ||ke New York, SF, or Tokyo where b|g-t|cket |tems s|mp|y aren`t feas|b|e.
Theyre also more environmentally conscious and interested in giving back. [3] These demographic trends help drive the demand for peer-to-peer marketplaces that have an emphasis on
sharing, minimizing waste and giving back. Related portfolio companies in this area include Sidecar and Listia.com.
[1| 'What`s M|ne ls Yours: How Oo||aborat|ve Oonsumpt|on |s Ohang|ng the Way We ||ve", Amazon.co.uk: Rache| Botsman, Roo Rogers: Books http://amzn.to/qusKAk
[2| Out|aw Oonsu|t|ng presentat|on on 'M|||en|a| Generat|on" http://out|awconsu|t|ng.com/s|tes/a||/themes/out|aw/pdf/M|||enna||s7.12.key.pdf
[3| 'How go|ng green can be a boon to soc|a| recru|ters," Fortune Magaz|ne, June 2001 http://tech.fortune.cnn.com/2011/06/02/how-go|ng-green-can-be-a-boon-to-corporate-recru|ters/
Networked Industries Networked Consumer Electronics Networked Societies
I NTERNET OF THI NGS
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Internet of Things (IoT) is the integration of physical objects into the information network. This enables direct com-
munication between devices, decreasing human involvement and changing the way we interact with technolo-
gy. As an increasing number of devices are created that can collect, store, and transmit information in real-time
and more data is created, well need more systems and algorithms in place to analyze and act upon the data.
INTERNET OF THINGS TODAY
WHY ITS HAPPENING NOW
SOURCES
Er|csson Wh|te Paper. 'More Than 50 B||||on Oonnected Dev|ces". February 2011
Evans, Dave. 'O|sco: How the Next Evo|ut|on of the lnternet ls Ohang|ng Everyth|ng". Apr|| 2011.
EvRYTHNG.Everyth|ng Oonnected - How Web Object Techno|ogy ls Putt|ng Every
Phys|ca| Th|ng On The Web". 2012.
Hobsbawm, Andy. Forbes. 'Goog||ng Your |ost Keys, And The Oom|ng Revo|ut|on ln
Smart Products". September 14, 2012.
McK|nsey Ouarter|y. 'The lnternet of Th|ngs". 2010.
OEOD D|g|t|a| Economy Papers. 'Mach|ne-to-Mach|ne Oommun|cat|ons: Oonnect|ng
B||||ons of Dev|ces". 2012.
PHASES OF INTERNET OF THINGS
lncreases |n process effc|ency have
been a driving force behind hardware
development. A detailed understanding
of the value chain improves business
operations and creates new areas for
innovation, which has led to the develop-
ment of many new network technologies.
Example: industrial plants keep-
ing track of processes in real-time.
This is where we currently are. The de-
velopment of a wide variety of consumer
products will increase consumer reach
and add s|gn|fcant va|ue to the con-
sumer ||fecyc|e. W|th dev|ces commu-
nicating directly with one another, data
co||ect|on and f|ter|ng w||| be paramount.
Example: activity-tracking devices that
deliver insights about your daily health.
Inter-industry communication and col-
|aborat|on w||| |mprove human effc|ency,
g|v|ng way to the 'Ouant|fed Soc|ety"
idea. This phase is dependent on the
previous two and has a broader focus
of furthering mankind in general. An
area of focus will be improving consum-
er relations with industry and observing
consumer patterns in greater detail.
WORLD POPULATION (BN)
CONNECTED DEVICES (BN)
6.3
0.5
2003
6.9
12.5
2010
7.2
25
2015
7.7
50
2020 Only 2 of 7 people
are Internet users
Its estimated that by 2020
each connected person
will have over 16 devices
... from the connected home and enabled
appliances, to wearable devices and smart toys
Data is increasingly abundant and
instantly available
Communication tech is rapidly
increasing in quantity and quality
Costs of Internet access and
digital storage are decreasing
Hacker subculture has access to
cheap parts with networking tech
(machine-to-machine)
enables devices
to
M2M
communication
Analyze data about itself in real-time
Share gathered data in machine-
readable format
Action desired behavior and be
highly controllable
Sense the surrounding environment
and be accessible on the web