4 emerging themes that excite me as an investor

Entering into my 8th month in VC world, I’ve now evaluated a couple of hundred businesses and I’m beginning to find my feet.

This exposure to founders, markets, technology approaches, customer acquisition strategies, and product value propositions has refined a set of four technology themes that truly excite me.

In the spirit of openness and collective learning, I’ve penned these ideas here.

1. Large scale data-driven software

Reid Hoffman used a powerful analogy in LinkedIn’s Series B pitch to Greylock: web technologies in Internet 1.0 were about searching and transacting via flat directories (e.g. a phone book).

In a world where close to 3 billion people are online, web participants aren’t lone wolves. They’re members of an interconnected community with varying degrees of information available to qualify their identities. These networks drive today’s Internet 2.0 technologies where searching and transacting occurs via networks.

I’m interested in companies collecting a wealth of input data signals (e.g. on people, transactions, news) and using computational approaches (machine learning, artificial intelligence, natural language processing) to find patterns in the data.

By surfacing intelligence that would otherwise be challenging to reveal, these companies can spawn hypotheses that inform the evolution of their product.

This harkens back to my past in cancer research, where hypothesis-generating (new school) genome-wide experiments are accelerating the pace of knowledge creation faster than traditional hypothesis-testing (old school) experiments.

At Playfair, we’re bullish on this theme. We were the first backers of DueDil (the data backbone of business), and have invested in the likes of OP3Nvoice (the API to search for audio/video) and 3Sourcing/PeopleGraph (the search engine/API for people).

2. Enterprise productivity tools

As startups graduate from seed to Series A and beyond, their organisational structure becomes more formalised.

In doing so, there’s a need to remain nimble in pursuing gaps in the market, iterating and shipping quality code faster than competitors to keep customers happy.

Here’s where enterprise productivity that facilitate or increase the efficiency with which employees can do their jobs can help build value for their company.

We’ve seen multi-hundred million to billion dollar companies created within this theme, including Yammer in the communication/collaboration space; Dropbox in file/content storage; Zendesk in customer support; and GitHub in software development/iteration.

As more entrepreneurs dissect the pain of their experience with legacy systems in enterprise, we’ll see continued evolution of software that will help companies improve financial and operational performance to ensure customer satisfaction in the long-term.

3. Infrastructure-as-a-Service

Entertain the following analogy for a moment.

If you’re building a city from scratch, you need concrete to construct buildings, a power and water grid to supply homes and offices, roads to enable efficient transit, amongst other things.

Now, if you’re an investor and have the choice to commit capital to build the single most badass building in the city or instead invest in a core infrastructure provider that has the potential to service every building in this new city, which would you choose? I’ll bet on the latter, which I refer to here as Infrastructure-as-a-Service (IaaS).

I’m extremely bullish on this theme due to the operational scale at play in the software world. Just look at Amazon Web Service (AWS): launched in 2006, AWS now powers the technology infrastructure of household names including Airbnb, Netflix, Pinterest, and even the CIA. AWS claims a 35% market share of IaaS to pull in over $3bn in annual gross revenue representing >50% YoY growth (and that’s only 5% of Amazon’s consolidated gross revenue in 2013).

Another example is payment gateways including Paypal, Braintree, Stripe, and Klarna, which collectively processed >$200bn of transaction volume last year.

Along with their competitors in the physical world, Stripe and iZettle, these innovative behemoths are providing next generation plumbing (the infrastructure) for online and offline commerce (the city).

4. Frictionless consumer propositions

We’re now in a world where products and services (food, entertainment, travel) can be procured in seconds from a smartphone.

Consumers are, however, notoriously fickle with their choice of service provider because most of us chase the next best solution in the market.

As an investor, it’s difficult to pick the true winners that will perdure from the false positives that appear hot in the short term but will ultimately become forgotten. As an entrepreneur, it’s therefore paramount to build habit-forming behaviours into consumer products to keep users hooked.

This boils down to user psychology.

Do you understand when and why your users ideate the desire to consumer a product/service you are offering?

What hooks are you using to encourage this behaviour? Are you offering maximum reward (gratification, money or information, competency) in exchange for minimal expenditure of their most prized resource (money, time, brain cycles)?

Newcomers that focus obsessively on user experience (and for good reason!) to build long-term value include our own StreetHub as well as fast-growing YPlan.

Nathan Benaich joined Playfair in 2013 and focuses on consumer and enterprise technology-enabled investments, specifically deal sourcing, due diligence, and helping portfolio companies. Prior to Playfair, Nathan earned a PhD in oncology as a Gates Scholar at the University of Cambridge and a BA in biology from Williams College.