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David Pakman's Blog
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May I Have Your Attention, Please?

The currency of the media business is attention.
So where are we spending it?

(This post originally appeared on Medium.)

The currency of the media business is attention. Those who have it have been granted your permission to speak to you, entertain you, inspire you, inform you or just plain piss you off. Each time we make a choice to play a game, read some email, scroll through a feed, snack on a video or swipe left or right, we are making or breaking the future of a media company. As a VC, I have to make bets on where the world is going. So, in order to evaluate media-oriented companies, I follow the attention.

Over the past ten years, thanks to the rise of social networks and smartphones, there has been a meaningful shift of attention away from legacy media properties like the nightly TV news, print newspapers and magazines, and onto consumer internet platforms like Facebook and YouTube. This shift has been particularly dramatic among teens and millennials. I believe the media habits of digital natives are predictive of what the future holds for most of us. Growing up with a supercomputer in your pocket connected to most of the world’s population and knowledge has created an irreversible pattern of behavior unlikely to revert to the ways of previous generations. Let’s take a look at some of the numbers.

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The chart above shows the growth of mobile devices and the decline of print and radio. Television, even when the numbers include DVR time-shifted and on-demand viewing, has fallen back down to its 2008 levels. Since there are only twenty-four hours in a day, it is helpful to look at this on a share basis.

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But this data is for all age groups. Let’s take a closer look at millennial attention.

MilltimespentTVSo, no surprise that millennials use mobile devices more and watch less TV. You can see in the chart at the left that traditional TV viewing is declining for most age groups, but for people under age 24 it has completely fallen off a cliff. The idea that this behavior will reverse itself as digital natives age sounds like wishful thinking at best.

Attention Apocalypse

With mobile completely eating our attention, what do we do while on these devices? How do we divide our attention?

mobiletime.001First, we spend 86% of mobile time in-app. The idea that the mobile web is a credible channel through which to reach consumers is largely disproven at this point. We spend a third of our time on gaming and another third of our time on social networks and messaging apps. This helps explain Facebook’s aggressive M&A strategy around properties like Instagram and WhatsApp and also helps explain Google’s weakened position as a result of our shift to mobile. Without YouTube and Google Maps, one might argue their properties are of decreasing relevance.

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Concentrating on social and messaging has allowed Facebook to completely dominate mobile. In fact, nine out of the top 10 apps globally last year were social apps or messaging platforms.

The killer-app of the mobile generation is the platform for self-expression and communication. Given this, it is baffling that none of the traditional media companies have invested in, built or acquired any of the hundreds of global properties which have hoovered our attention away from their legacy properties. In fact, the audience sizes being drawn to these new platforms are massively dwarfing audience sizes of traditional media properties. You wouldn’t know that from reading the “media” sections of The New York Times and The Wall Street Journal, who still produce thousands of stories discussing the rise and fall of cable TV programs and chronicling the comings and goings of journalists from one print property to another. Yet they comfortably ignore YouTube celebrities, Viners and Twitch broadcasters with much larger audiences. Hola Soy German, for example, has a larger audience than the NBA Finals and the World Series, but has barely been mentioned once in the NYT. Neither have ever mentioned Nightblue3 who has more than 100M views on Twitch.

To help put this into perspective, I put the following chart together, comparing the relative audience sizes of traditional media, online media and social platforms. Note that I cropped the largest eight so you can see the relative size of the tail. The red bars indicate social properties where the content is largely provided by the community, or in my parlance, platforms for self-expression and communication.

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Social and mobile have fundamentally altered attention. Platforms for self-expression and communication are the largest and most important media companies of the millenial age, dominating share of attention and engagement for young people. And the behavior of the young is predictive of the future. Facebook, YouTube, Twitch, Tumblr, Snapchat, Reddit, WhatsApp, Instagram, Vine and YouNow were all catalyzed by teen use first, and later spread to older age groups. If you want to know which companies to bet on, just follow the attention.

David Pakman is a VC at Venrock, investing in pioneering early stage internet companies like Dollar Shave Club and YouNow. He is the former CEO of eMusic, co-founder of music locker pioneer MyPlay, and co-creator of Apple’s Music Group. Sources for this data: Alexa, eMarketer, Nielsen, Temkin Group, Statista, SNL Kagan, Experian, BLS.gov, MarketingCharts, Forrester, CrowdTap, Ipsos, Inmobi, Deloitte, Veronis Suhler, comScore, IAB, Flurry Analytics, AppAnnie, NetMarketShare and Simmons National Consumer Studies. Special thanks to Nurzhas Makishev for compiling and triangulating the data.

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Here is what Jay-Z should have launched with Tidal

“The transition from CDs to digital hasn’t worked well for the music industry. Sales are down and too many people listen to music without paying for it. We think that is because digital music is too expensive for the value it delivers. For too long, music has been both too expensive for fans and doesn’t produce enough money for artists. We wanted to completely change the game. So we did.

We, the sixteen superstar artists on this stage, used our incredible power and leverage over the music industry to demand completely new economics from the labels and publishers. So today, we are launching Tidal5. For $5 a month, you get music streaming of 20 million songs to any device. And to help artists, we are introducing the same economics as the iTunes and Google Play stores into music. 70% of all Tidal5 revenue will go to the artists and 30% will be split among the operations of the service and to the labels and publishers.

We wanted to find a way to attract more buyers into digital music and we knew the only way to do that was to get prices much lower. That’s a gift to our fans. But we also needed to get way more money into the hands of the artists. And we did that too. We used our power for good. And we hope you enjoy it.

Huzza.”

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The Inevitable Evolution of Online Sharing — Live Video Conversations

It’s been an incredibly exciting few weeks as the world comes to hear more about the latest category of social sharing — live mobile video. (Disclosure: we have been bullish on this space since our investment last year in YouNow.) Given that we have had the pleasure of observing this phenomenon for a bit, I thought I would share a few thoughts.

It’s Not Broadcasting, it’s a conversation

Many people are calling these live video feeds “broadcasts” which presume they are one-to-many and are one-way. The internet has taught us that all media must be participatory now. We all have an expectation that we are not just observers, but that our voices as viewers must be part of the content itself. From likes to comments, the web is built on the “post-respond” engagement model. For any of these apps to be successful, they must engender engagement. And to be engaging, the viewer must be a participant in some way. In YouNow “broadcasts”, the chatting audience is as much a part of the content as the “broadcaster”. This is what leads to successful long-term engagement.

utility vs. platform

Meerkat launched as a livestreaming utility built atop the Twitter network. Like Bit.ly and Twitpic before it, Meerkat itself is not a platform. One does not browse Meerkat to find content, one waits for announcements in the Twitter stream. If they are useful, utilities for social networks very quickly get absorbed into the platform as a core function, leaving no room for third parties. We saw that with link shortening and image hosting, and now we are seeing it with Periscope.

However, much like YouNow, Periscope is more of a network. It uses your existing Twitter graph to build your Periscope graph, but ultimately users will prune and grow their Periscope graph to look very differently than their Twitter follow graph. The Periscope app includes some (limited) forms of content browsing. I expect, given what happened to Meerkat, and with the very talented Josh Ellman as a board member, they will quickly move in the platform direction. Platforms are much more valuable and more sustainable than utilities.

native media format

All successful social networks have a native content form to them in which users become expert. There is a form to a great Facebook post (baby and party pics), a great Tweet (witty observation and link to interesting news), a great Instagram pic (beach and sky pics with awesome filters), a Vine vid (successful loop), etc. So too with live video streams. We can see it on YouNow, as users become expert at creating engaging performances and successfully interact with (and involve) their audiences. I expect we will see the same with Periscope streams (just not yet. Give it time.)

I really think the promise of these products is in creating more conversations between creator and consumer, rather than being millions of new cameras for livecasting the world. It’s tempting to think of this in terms of crowd-sourced news-gathering, which is a compelling use case, for sure. But the web has taught us that social media must be interactive to be successful. Sure, it will be supercool to watch Mario Batalli cook in his kitchen. But that’s the TV model. Unless he personally interacts with his audience (and is really good at it), I don’t think it is web native enough to work. So I suspect the winning formats for all of these products are the ones which are most participatory.

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A Few Lessons I’ve Learned

A young entrepreneur asked me a great question the other day, “What are some things you learned later in your career that you wish you knew earlier in your career?” I didn’t have a great answer at the time, but of course it got me thinking. There are a few key lessons I have focused on these past five years or so that weren’t part of my thinking early in my career. I’m not sure I would have cared for these thoughts back then, but I thought I’d share them.

Be comfortable being uncomfortable.

Most of the great things in life are hard. The circumstances that lead to great accomplishment are often uncomfortable — strange and new, out of your comfort zone, and filled with challenges. Getting your mind programmed to be comfortable in the midst of challenge, conflict and uncertainty brings you great benefit. You won’t shy away from the conflict or uncomfortable conversations often required to influence outcomes. Your mind becomes in control of your body. In physical challenges, your mind usually quits before your body does because it is opting to avoid discomfort. It tells you your body is failing before it actually is. Take control of this and get comfort around the fact that many situations in life are not comfortable, but you can still handle it. Hang in there. Be in control.

Develop an expert point of view earlier than the consensus.

By the time everyone agrees on something, it has already happened. You can’t innovate ahead of the curve unless you see a future that most others don’t yet see. You also have to be right about it, but not every time. You can change your view about the future when you see evidence that it won’t happen the way you thought it would. For me, I first try to become expert on something by going super-deep on the topic, learning everything I can about it, talking to many people about it, and using the technology or product in question as much as I can. Once I do, I usually find that many of the people talking about it aren’t truly experts. In fact, I believe many of the loudest voices are often the most wrong.

I remember in 1996, John Markoff, then the most senior and well-respected technology writer at The New York Times, called Microsoft’s Active Desktop, “the most fundamental change to personal computers since the machines were invented in the 1970’s.” To me, this sounded like not just silly hyperbole, but a fundamental misreading of where things were going on the internet. Given his vaulted position at The Times, many people believed Markoff and accepted his view that Microsoft would dominate the next phase of the internet. As we all now know, Active Desktop was an inconsequential product and a failure, and more than fifteen years later, Microsoft is still struggling to be consequential on the internet.

I work to develop my own point of view about where things are going. I work to validate that by looking for data or evidence. Then, if I feel passionately about it, I try to bet on this outcome. And in many cases, my point of view is different than most others. This gives me confidence that I might be on to something (or just be totally wrong). Consensus scares the heck out of me. Really loud voices tend not to be right. My job, as both an entrepreneur and a venture investor, is to beat the consensus long before it happens, but to be right that it will.

Be fact-based in your observations and beware of confirmation bias.

We live in a world filled with data, so use it to make observations. Don’t live life purely on your gut. I gain confidence in my point of view by seeking out research or data that supports my hypotheses. But I force myself to be open about the data I find, knowing that we have a psychological tendency to seek out data which confirms our preconceptions. In short, be honest with yourself about what you observe and challenge your point of view.

Figure out what you are good at and depend on it.

Are you great at reading people, generally right about their capabilities? Are you an astute observer of markets and trends, usually right about who will win or what will happen? Are you a product savant whose obsessiveness with simplicity produces outstanding experiences? Are you a natural leader, able to convince a room full of people to follow you into an uncertain future? Are you an outstanding sales person, able to convince people to part with their money? Or, are you a total introvert who wants to avoid interaction with people but can architect a massively scaleable web application? Maybe you are a mixture of these things? Knowing what you are good at and building your undertakings around that is a quicker path to success. Yes, you can improve in all areas of weakness, but certainly engineer the game to play to your strengths.

Be self-aware, know your short-comings, and find mentors.

We all suck at plenty of things. The only way to get better and to level-up is to first recognize our own limitations and to work with experts to teach us. Self-aware people recognize their short-comings, are not afraid to talk about them, and seek out experts to teach them how to improve. Asking for help is not an admission of weakness. It’s the path to improvement.

Big companies are slow, do not innovate and are unwilling to self-cannibalize.

When I was younger I thought this might be true but now I have seen it happen over and over and over again. Sure, there are exceptions, but in general, startups can move very quickly and innovate on the home turf of large incumbents. As organizations get bigger, executive pay structures often do not encourage companies to cannibalize their existing business even when they see a new technology coming that may impact them. And power is more fleeting these days then in decades past. Do not be daunted by the presence of large incumbents when you can capitalize on a technology shift and catch giants flat-footed. There are too many examples of this common cycle of disruption working time and again.

 

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Brian Williams and Abundance vs. Scarcity in Media

The physical world’s native economic basis is scarcity. Value is determined by demand for each item produced. If I make only five gold Ferraris and thousands of people are just dying to have one, the value of those will increase.

In the digital world, we live in a world of abundance. We can make infinite perfect copies of anything produced without significant marginal cost. We can satisfy pretty much all the demand for digital goods, so it’s hard to drive value by limiting quantity.

The same shift is occurring in media. In the legacy media world of newspapers and TV shows, tons of scarcity exists: editors can only fit eight stories on the front page of a newspaper, cable companies only have capacity for a few hundred channels, and TV networks can only offer 24 hours of programming a day. In media governed by scarcity, editors and programmers must make hard decisions about who and what to talk about and hope their audience cares for their choices. In the archaic world of television news, the choice of an “anchor” really mattered. After all, each of the three terrestrial broadcast networks could only have one, and this anchor was going to appear on TV each night for 30 minutes or so. The investment in anointing a single personality around which your network’s entire credibility was built was significant, and made sense.

Consider now the digital media companies of the present day. The most valuable ones are platforms, not programmers. Facebook, Twitter, Pinterest and YouTube, for example, are platforms for expression through the sharing of content produced by, or curated by, their users. All of these are built natively for abundance. They have infinite inventory, can support an infinite number of creators and users, and make no decisions about which content or which personalities are “right” for their audience. The audience decides entirely whom to friend or follow, what to “like”, and what to ignore in their feeds. (Algorithms can help make this process easier.) In this model, platforms are not reliant on a few editors or a few personalities to represent their brand. And they are immune to the inevitable rise and fall of the popularity of people and topics. In fact, they welcome it.

Excitingly, early adopters of these platforms are motivated to figure out the essence of what makes them work. They produce and refine lots of content on them and watch audience engagement until they master the platform. There are now millions of creators who are great at YouTube and Vine, Instagram and Twitter. More of these platforms will emerge, and more creators will blossom. Abundance.

Traditional media, by their selection of what to cover and feature, confer an artificial sense of importance to anything or anyone appearing in their pages or on their programs. I heard an NPR story the other day featuring someone whom the reporter profiled as “a great tweeter.” According to whom? And why this person? It was classic scarcity media — anointing one to speak for many. There are millions of great tweeters in the world and featuring one as an example of what Twitter is like is kinda silly. This person’s true relevance on Twitter is indicated by the engagement metrics around their tweets, a topic not discussed in the story.

So how does this relate to Brian Williams? Well, the reason we know about him is because NBC chose, in a scarcity-based media world, to build their entire news brand around him. And now he has significantly tarnished this brand. This will have a real economic effect on NBC as a result. Brands built in the age of scarcity take significant risks when they use celebrities (or any one individual) to act as a proxy for their products. Endorsements bestowed upon athletes carry the same risks — unnecessary in a digital world of abundance. On digital platforms, brands are built by the stories brands tell and the content they share. They rise and fall based on their ability to engage us and capture our attention in the streams. We care about them when they do, and often ignore them when they hire a celebrity spokesperson to speak on their behalf.

The age of abundance in media requires a more democratic approach to programming. In this world, platforms take little risk in the inevitable imperfections of humans. They cherish it. Because when it happens, they are the places where we all go to talk about it.

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A Sensible Approach To Net Neutrality by the FCC

Today, FCC Chairman Wheeler announced a sensible approach to ensuring that the internet will remain an open platform. Many folks in the traditional telecom and cable industries have described the use of Title II as a blunt and archaic tool not appropriate for the internet. And others have derided the very notion of internet regulation as anathema to free markets and the internet more broadly.

Most of us who have lived on the internet since its early days feel strongly and personally protective of its level playing field. In order to protect this openness, it became necessary for the FCC to step in. And once that moment came (prompted by some previous court decisions), the FCC had a choice on how best to maintain the openness and freedom to innovate so important to both our society and our economy. When presented with this choice, it became clear to me and many of us who build internet companies that classifying the last-mile internet as a telecommunications service rather than an information service was the best way to maintain the essentially openness of the internet. That is why I supported the use of Title II (with the appropriate forbearance of non-relevant regulations) in this case. I am pleased that Chairman Wheeler and his staff listened carefully to the millions of comments which poured in — most in support of these important protections. And I am also thankful President Obama and his staff took such keen interest in this issue and shared their point of view with the public.

We don’t want ISPs and cable companies being kingmakers on the internet. We want the users — all of us —to get to try every product or service no matter who provides our last-mile internet connection and to vote with our attention and our money as to who wins and loses. The FCC’s new rules will require ISPs to stay out of the way and not to allow or demand companies pay them for faster traffic. This is a great development for the internet as we know it and love it.

While it’s true that any regulation can bring unintended consequences, the other choices of either (a) doing nothing or (b) continuing to use Section 706 as a means to enforce these protections both, upon closer inspection, are worse options that will likely lead to an uneven internet.

Here Is What Happens When Your Brand Doesn’t Know Its Customers

Watch the video, then click to see the hundreds of comments…

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The Artist’s Share

There is a commonality in the Hachette/Amazon and Spotify/Pandora/Recording Artist debates and it looks something like this:

  • By not paying enough royalties to the licensor (book publisher, record label), authors and artists are being starved.
  • We are told this is critically bad for authors and artists who can no longer earn a living.
  • Thus, creators won’t create, and art and culture ultimately suffer.

None of us want there to be fewer books or songs in the world. But frequently lost in this debate is a discussion of the presence, or perhaps obsolescence of the middleman and the amount of revenue they keep. Spotify, Pandora, Amazon and the other licensees of ebooks and music are ultimately just retailers. Their job is to acquire and retain customers, and sell them as much music and books as they can. They license their content from book publishers and record labels. The terms of the license are set unilaterally by the publishers or the label as they have exclusive authority over the titles they represent. The publishers and the labels form agreements with their authors and artists. These agreements dictate how much of the money received from retailers gets paid out to the creators. Spotify, Pandora, and Amazon have no control over the terms of the relationships between the creator and the middleman publisher or label.

For every dollar spent on books or music, we know how much retailers keep. In the case of Spotify, more than 70% of every dollar they collect gets paid to record label and music publisher middlemen. In the case of Amazon, we see from their gross margins that they pay out about 70% – 80% of every dollar they collect to the book publishers. Pandora pays out about 55% – 60% of the revenue it receives. Apple, the world’s largest retailer of music, pays out 70%. Most retailers of media, through both analog and digital eras, squeak by on about 30% gross margins and pay about 70% to the middleman. (Apple, in their AppStore, keeps 30% of app revenue and pays 70% to developers.) The argument is often made that “these retailers build their businesses on the backs of the creators and should keep a relatively small share.”

Fair enough. Except how much of the money collected by the book publishers and record labels makes it back to the actual authors and artists—the creators without whom there would be no art? And in a changing digital landscape, are the analog legacies of these payments appropriate for the digital world?

In music, the deals between record labels and artists have two types of royalty structures: a) a percent of revenue paid to the artists for recorded music that is sold (a CD, a digital download) and b) a different percentage for music that is licensed (for use in a film, or perhaps a digital streaming service). Different artists have different deals, and massive superstars can demand better terms, but on average, revenue sharing for music sales are in the 15% – 18% range. That is, the artist receives only 15-18% of the wholesale payments the record label receives from sales. In real dollars, for a $1 download, Apple keeps $0.30, pays $0.70 to the label and the label pays $0.10 – $0.13 to the artist. That is a shockingly low amount and helps explain why artists often feel bitter about digital music sales. If retailers only keep 30%, why do the record labels keep more than 80% of the money they receive?

Traditionally, they claimed they served an invaluable role in the creation of music. They advanced money to the artists to live, they paid for studio time, they guided the recording process and helped select material, they manufactured the records and CDs, they shipped them in their trucks to their distribution facilities and then to the retailers. They also paid for music videos and marketing activities. If the labels needed 80% share to cover all of these costs, that might make some sense. Except in record deals, the artist is actually billed for most of these costs and has to repay them (“recoup”) by allowing the record label to withhold royalties until their advance and many of these costs are recouped. Interestingly, the overwhelming majority of these activities are not needed in the digital age (trucks, manufacturing) or cost a whole lot less to perform (electronic distribution).

In the digital world, many artists have successfully argued that digital services are being licensed by labels and thus the licensed royalty amount should apply. Again, this is negotiable, but generally is about a 50%/50% split. That is, half of the royalties collected by the labels get paid out to the artists, subject to deductions and recouping of costs. In the previous iTunes download example, the artist would receive about $0.35 for every $0.99 download sold.

In book publishing, for eBooks, many book publishers pay out about 25% of royalties they receive directly to the author and pay out about 5% – 15% of the retail price (or about 25% – 30% of the amount the publisher receives) for physical book sales.

In their most recent financial statements, Warner Music Group indicates that they are paying out to artists about 52% of the revenue they collect, far less than Apple, Amazon and Spotify pay to record labels and book publishers. In the case of book publisher John Wiley & Sons, they pay out to authors only about 29% of the revenue they collect, keeping 71% for themselves.

If retailers “build their business on the backs of the creators,” so too do the record labels and book publishers. Are they entitled to the majority of profits of every sale? Are they even any good at the marketing skills required to excel in the digital age? With audience proving grounds like Kickstarter and IndieGogo, how much creative direction and marketing does an artist need in this new world? It’s time not just to revisit the very purpose of these legacy middlemen, but also to re-examine the amount of money they take for their services.

 

 

 

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Dollar Shave Club and the Modern Brands

Dollar Shave Club just celebrated its second birthday. In two short years, this modern men’s lifestyle company has captured about 9% of the U.S. men’s razor cartridge market, according to BGP Group. (This is a measure of market share by units.) It’s a remarkable feat for a young company in a very short amount of time and it shows how dramatically industries can be transformed by new entrants who reimagine a market an entirely different way than how incumbents think.

In the case of consumer packaged goods, most are manufactured by CPG behemoths who rely chiefly on two aging mechanisms for building consumer awareness: broadcast marketing and physical retail shelf-space. Dollar Shave Club, and similar modern lifestyle brands like Warby Parker and Bonobos, view these dependencies as a disadvantage and have turned the model on its head. Broadcast marketing, in the age of social media, looks as out of touch to digital natives as President George H. W. Bush looked to us when he was surprised by a supermarket price scanner . Now, brands are built by having direct conversations with your customers, not shouting at them, engaging them to provide real time feedback on your products and services and enlisting them to vouch for their satisfaction with your brand. Brands are now built by your customers, not announced to them. And because of this, product discovery is shifting away from physical shelves into the social streams we all follow. If your brand does not occupy meaningful share in the minds of your customers, it won’t move through the streams and allow influencers to introduce you to new customers.

Social marketing done correctly requires far less marketing spend in aggregate than broadcast marketing. This means brands built with the economic firepower of $100M+ traditional marketing campaigns end up pricing their products higher to cover their required marketing spend. This is why you see the modern brands able to offer their products at lower prices than the incumbents, creating a value gap in the minds of customers.

Traditional CPG has built big walls around physical retail distribution. They have leverage over the decisions physical retailers make as to which products to stock on shelves. But modern brands are born on the internet and sell directly to their customers, initially bypassing physical retailers, sometimes forever. They get to know their customers, they speak with them, they use social data to understand their influence and their habits. In short, they are hyper-informed as to who their customers are and what they want, and they have an easier time finding new ones. With so much of commerce moving online (14% of US holiday season sales were online in December 2013), customers prefer the convenience of direct-to-you product delivery and the low-friction of mobile commerce. Traditional CPG, like other industries who sell through complex multi-layer distribution, must allow for healthy distribution and retail markups and don’t get to know their customers. They are slower to learn when preferences shift or to react to the moves of competitors.

All of these differences add up to advantages for the modern brands built on the internet — price advantages, information advantages and most importantly, higher customer loyalty. Dollar Shave Club has received envious net promoter scores and, for the subscription part of the business, has extraordinarily low churn rates. About half of all of their new customers are added organically and not through paid marketing. Their products cost less and provide more value than the legacy brands. Legacy brands often cannot respond to these threats effectively. They can’t undercut their own retail partners on price, they can’t sell directly in any real volume, and most importantly, they don’t hold an authentic place in customers’ minds, so they tend not to have a strong place in the social streams. Their customers are not their partners.

Once established firmly online, modern brands do move offline. But you are seeing them do so in inventive ways. They tend not to just sell their products into legacy physical retail, they work to re-invent physical retail with their own branded presence (Apple Stores are the high water mark here, and Warby Parker has made some important innovations too). They do often expand to traditional ad formats like TV and radio, but they do it in a highly quantified and targeted way, with a holistic view of a customer across every channel and touch-point, able to see the online influence of a customer who hears a radio ad in Dallas and how many social connections of that person ended up visiting the mobile site of the brand itself.

Dollar Shave Club, like some of the modern brands in their cohort, has grand ambitions to build a multi-billion dollar lifestyle brand, in partnership with its customers. They have expanded into content such as podcasts and the hysterical “Bathroom Minutes” as a way to be even more present in their customers’ lives. They are launching many more products over the coming months to offer great value across many product categories to their customers (often in response to customers begging them to do so). Their growth is accelerating and they see a clear path to capturing double-digital market share in each of the product categories they enter. With more than one million paying subscribers and a fresh $50 million of new capital, they have grand designs on building a better bathroom. I am honored to be along for the ride and to have a front row seat.

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Venrock 7

My partners and I are thrilled to continue collaborating with fantastic entrepreneurs to help build enduring, iconic and meaningful companies. Last week, we completed the fundraising of Venrock 7, a $450M fund focused on disruptive early-stage tech and multi-stage healthcare companies. For many VCs, the process of raising a new fund brings a helpful opportunity for self-reflection — a chance to take stock of the world, the disruptive technical forces likely to bring change and a candid assessment of one’s abilities to thrive in this environment. While we are always observing the world around us and making adjustments to our areas of focus and investment strategies, every four years or so, we too go through a rigorous process of prophesy and self-evaluation. Like an entrepreneur presenting their company to a VC, we pressure test our strategy with LPs during the process of raising a new fund. We came away with some exciting observations about both ourselves and the world. I am pleased our LPs share our view of our abilities and have entrusted us with the resources necessary to help build some great companies.

At Venrock, preeminent among all of our abilities is a belief in the importance of a performance-oriented and supportive culture — internally and with our entrepreneurs. We believe we will not excel as a partnership if we do not truly admire and respect each other. We are good at listening not just to the entrepreneurs with whom we meet, but to each other, distilling each other’s wisdom and foresight. And we work hard to preserve this culture internally. Each day, I feel my partners are behind me 100% and are rooting for my success, as am I for theirs. Equally important, however, is a focus on performance. We are in this business to make money for our LPs, and that can only be accomplished by investing in great companies and participating in their upside. In my almost six years at Venrock, I have never been more excited by the team surrounding me, our expertise, our intuition, but mostly our deep mutual respect and support for each other.

Areas of Excitement

There are plenty of important trends to discuss in tech. Here are just a few areas that really excite me:

New York

shutterstock_114734815New York continues its ascent and importance to the tech ecosystem. As a firm that has been in New York for decades, we have now made a deeper and even more meaningful commitment to investing in early-stage New York City tech companies. We are doubling down in New York with a larger team and have invested in some of the largest and most important tech companies here. Appnexus, Dstillery, Smartling, Dataminr and a few others not yet announced represent what we hope to find in our investments — hungry, passionate, and brilliant entrepreneurs bent on creating enduring and very large companies, sometimes creating new industries themselves. As a firm, we are confident some of the greatest tech companies of the coming decades will be founded in New York City and we hope to find them and invest in them early.

AdTech -> Marketing Cloud

funnelTraditional adtech is evolving into the SaaS marketing cloud. We continue to focus on the highest-value layers of the adtech and marketing services stack as consumer attention continues its migration away from traditional to online media. Ad-supported business models continue to dominate the internet, are performance-based and offer brands better control and measurement of their ad dollars. Our unwavering belief in the long-term primacy of ROI-driven advertising leads us to seek out the most innovative and best-performing ad products and the technologies underlying them, especially as ad formats and consumer media platforms change from desktop web to social mobile stream to app to OTT video and beyond. We focus on the emergence of best-in-class tools for marketers to help them take control of the entire marketing funnel, from prospecting to conversion to long-term customer relationship management.

Blockchain

opengraphThe emergence of the blockchain may be one of the most promising technical innovations of the last five years. We see the highly inefficient and expensive legacy payment and money transfer mechanisms being pressured by the far lower-cost methods made possible by blockchain-driven solutions. We are excited by innovations in addition to Bitcoin that can be built atop the blockchain, especially contracts, IP transfer solutions, voting solutions, ticketing, identity, and eventually distributed computing.

Video

shutterstock_129089885Readers of this blog know of my passion for the disruption of legacy media companies. I am particularly excited by the changes underway to the video ecosystem. The emergence of mobile as both a video creation and consumption device is sucking attention away from the traditional TV screen but also democratizing the creation of engaging video. I believe changes in the traditional TV value chain are well underway and I look forward to finding more companies catalyzing these changes.

And More

We continue to explore the intersections of technology with education, financial services, branded commerce, enterprise software and, of course, healthcare and healthcare IT. As always, we believe in the power of entrepreneurship to bring progress, efficiency and new capabilities to markets and are thrilled to have fresh resources to invest in great entrepreneurs embarking on exciting journeys.

 

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