Up & Right

Apr 03

Apple & NFC -

HOW WILL APPLE LEVERAGE NFC?

This is the billion dollar question.

My guess is that Apple will focus on creating a new security and authentication infrastructure on the phone, and in the cloud. This infrastructure has both software and hardware components, and will change the way other “apps” interact with customer data, and customer sensitive information.  For example, today apps that require location must adhere to policies consistent with “location services“. Think about extending this type of control over your credit card information, name, address, e-mail.. what apps get access to which data? Now also think about this new service which can identify you are who you say you are (identification) which will be present with AuthenTec capabilities.

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This is the paradigm which must be broken. Don’t think of NFC in terms of payment, it is just another radio.. actually it has 3 parts.. the radio, controller, and secure storage.. each of which can take on very different roles in a new Apple architecture. Why transfer data view NFC/ISO 14443 @  424kb/s when Bluetooth V2.1 is 2.1 Mbit/s and Bluetooth V4/V3 is 24Mbit/s… (60x faster).

Handset manufactures (Apple, Google, Samsung, …) are flipping the NFC value equation. From a SIM based SWP approach to an multi functional embedded approach with integrated consumer authentication. I’m amazed that there is not more press here. The implications are tremendous.

This post is just spot on. Tom Noyes is crushing it right now on his blog. I totally agree—my instincts tell me that between the nightmare that is authentication (isn’t it fun typing usernames and passwords on mobile phones?! See my previous post), Apple’s purchase of AuthenTec and the lack of a value proposition for NFC for payments, Apple is most likely to deploy NFC along a security and authentication vector. I don’t know if it is the iPhone 5S or the iPhone 6, but that timing feels about right.

Mar 27

VC Seed Investing Signaling Risk Fact or Fiction? -

So this is pretty interesting:

the data shows that companies that receive seed funding from larger, multi-stage venture capital firms attract follow-on funding at a higher rate than companies that are just funded by seed or micro-VCs.  Let’s let that sink in for a moment as this flies in the face of most of the anecdotes on this topic to-date.

It really is amazing what happens when people bring data to a discussion that was purely theoretical previously. So after all that hoopla about VC funds being bad guys for making seed investments, it turns out the opposite is true. Well at least now I have a pretty simple and easy response the next time an entrepreneur asks me about signaling risk—I’ll just send them a link.

At Y Combinator, Social is Out, Revenue is In -

Now is the perfect time to start that social networking company.

What’s “in” and “out” in the Valley always amuses me especially when painted in overly broad strokes such as consumer vs. enterprise. The truth is both are always hot. If there’s any statistical correlation to “hotness” it is that you should do the opposite of whatever everyone else thinks. 

Mar 21

Startup Hockey & NHL '94 for Sega Genesis -

Some friends and I have been running a Meetup in NYC called “Startup Hockey” for a little over a year now. It’s an open event for folks in the startup and technology community in NYC to come together and socialize over drinks, pizza and a common bonding experience that is not forced “networking.” In our case the bonding comes over 8 & 16-bit video games but especially NHL’94 for Sega Genesis. It’s quirky and goofy but also a lot of fun and no athleticism or prior experience is required. We’ve even had the Daily News write a piece about us. 

People always ask though, “Why NHL ‘94? How did you come to end up picking that specific game?” My answer is often, “Because it’s a blast to play with friends! And I’ve been playing nearly non-stop since the game was released 20 years ago!” But it turns out there’s more to it. Now I have some justification.

According to this article published by the NHL yesterday “EA’s NHL ‘94 remains landmark game after 20 years” we’re clearly not alone in our love for this particular game! I’ve always known this of course, but it is really fantastic to hear both the NHL and Jeremy Roenick officially acknowledge it.

PS- One of my favorite parts of this article is the following quote:

“In those days, there weren’t big production teams. There was a sole programmer, me, and a graphics guy who I hired,” said Lesser, who spent hours trying to perfect the accuracy of one-timed shots in the game.

Oh, how times change. 

Has Pandora's Box in Payments been Opened? -

Excellent post once again by Tom Noyes:

The key “break” here is that JPM will no longer be paying transaction fees for on-us, and will have ability to create their own network with their own rules. You must parse Visa’s public statements very carefully to discern deal terms. Visa’s PR and IR teams gets A+ as they have proven to be masters at obfuscation here. My best guess on deal terms is that JPM has committed to “license” of VisaNet which has NO transactional component. Visa plans to treat this licensing fee as “transaction revenue”, but the revenue has no variable component (other than perhaps a very low tiered license). Publicly Visa states that transaction revenue will increase. Which is true, at least for next 2 years, as the license revenue will more than cover low 2014 JPM volumes to yield a premium,  and JPM is also converting non Visa volume (for a net volume increase at a lower per tran cost). However I have yet to see Visa project JPM’s “on us VisaNet” revenue as a percentage of JPM expected transaction volume. I have 90% confidence we will see a flat line.

Why am I so confident? If there was a 1:1 match of Visa Net transaction rate to JPM On-Us …. the other issuers wouldn’t be beating down the doors of Visa and MA over the last 2 weeks. Everyone in the industry knows what is going on this month.. and also knows what JPM received from Visa…  and they want it to.

The Visa Network just shattered. Hence my article yesterday on Visa- Golden Goose is Now on the Menu.  We are evolving from a “star network” to one of clusters. Clusters are Bank led (ie JPM, new US Bank Consortium, EU Bank Consortium, ..), Merchant led (MCX, Amazon, PayPal, Rakuten, ..), Platform led (ISIS, Google, Apple, Samsung, …). Each clustering strategy considers relationship w/ consumer, merchant and bank (or clearing). Each cluster performs “on us” transactions and routes selectively (see Least Cost Routing and Business Implications of Tokens, Wallet Strategies).

“The Visa Network just shattered.” Those are some weighty words. Payments are evolving rapidly for perhaps only the second time in 30 years (rise of debit was the other). 

Facebook Launches Lookalike Audiences -

Lookalike audiences builds off of a targeting feature we launched last fall called custom audiences. Custom audiences lets marketers take their current customer lists and show ads to those people on Facebook. Now with lookalike audiences, Facebook can use attributes like interests or demographics and show ads to people who share common attributes as their existing customers.  Advertisers can serve any type of Facebook ad to these new groups of people potential customers. 

This is a pretty big deal. To me this feels like much of the big picture promise and vision at FB from an advertiser perspective is finally coming to fruition. If you’re an e-commerce, B2BC or B2C company looking to reach consumers on a small or large scale I’d imagine this tool could be tremendously powerful. I’m sure customer acquisition marketing managers all over techland are pretty excited right now.

Mar 20

JPMorgan Chase Cracking Down on Payday Lender Fees -

JPMorgan Chase will make changes to protect consumers who have borrowed money from a rising power on the Internet — payday lenders offering short-term loans with interest rates that can exceed 500 percent.

This is the right move for JPMC and the banking industry. Payday loans are not “evil” but there are clearly a multitude of abuses and below board practices out there that need to be cleaned up both by private industry and government regulation. Unsecured, high interest rate lending to consumers is one of the industries that many people desire to ban altogether but is actually serving a very necessary function in the economy (otherwise consumers who need cash will resort to worse means such as local loan sharks). The key is that we need to regulate it far better than we’re doing today (despite the howling protests from the majority of payday lenders I am sure).

Mar 19

Last Year's 10 Largest VC Exits -

According to Pitchbook, last year’s 10 largest exits were:

Note: Of the 10, 2 are consumer companies, 5 enterprise software, 1 enterprise hardware and 2 are healthcare. That seems about right. I think that small selection is probably a representative sample for venture returns at large.

Mar 18

Amex Rolls out CLO (Card Linked Offers) -

Card-Linked Offers and loyalty is one of the fastest moving spaces in financial services and payments. There’s a lot of innovation happening and a lot of pasta slipping down the wall. Remains to be seen what sticks but Amex is an interesting place to watch innovation since they have a closed loop network and should be able to innovate faster than other incumbents.

Jan 27

Venture-Backed Board Chemistry

Board of Directors chemistry and alignment > Premium Price

It is hard for me to reinforce how important Board chemistry and especially alignment of interest are for facilitating startup success. Entrepreneurs have to do this up front by selecting investors based on chemistry and fit but entrepreneurs must also do this on an ongoing basis to the extent possible. Assuring this fit will sometimes require choosing between an investor willing to pay the premium price and an investor at a lower price but with a better fit or alignment of interests. I won’t claim this is a simple task, but don’t let your ego get in front of your better judgment.