As a super angel fund, our primary objective is to identify companies poised for extraordinary growth in markets that have huge potential headroom to fuel that growth. The three core markets I see for 2011 are: mobile, e-commerce and enterprise.
Mobile is the way to go
The dizzying explosion of mobile usage reminds me of the heady days of the internet in the early ‘90s. In roughly 12 quarters since their launch, the combined unit shipments of the iPhone, iPod touch and iPad alone have approached 120 million, easily eclipsing the 27 million unit reach of the Netscape browser in the same time period. By 2012, smartphone shipments are expected to exceed the sum of desktop and notebook PCs, according to Morgan Stanley research.
One just needs to take a look at Japan (which leads the U.S. in mobile penetration and usage by a year or two) and analyze the fascinating case of Mixi, the largest social network there. By 2006, only 17% of its page views were generated by mobile phones. Fast forward four years to 2010, the ratio of mobile to desktop page views is reversed to 84% mobile versus 16% for desktop. Given that our smartphones are with us all the time, it’s not that difficult to fathom the tremendous potential here.
Consider the case of Angry Birds, the game was released for iPhone and iPod touch devices in December 2009. With hockey-stick-like sales results, it sold 12 million copies on top of 30 million free downloads and a staggering 42 million units in just a year. Not surprisingly, one mobile investment, NGMoco, had returned more than Kleiner Perkins’ whole iFund. I think 2011 will showcase the emergence of stronger business models such as subscriptions and more pervasive use of digital goods sales within the leading mobile applications.
Next gen E-commerce
E-commerce presents an even more compelling case for tremendous value creation. Groupon, the poster child of next generation e-commerce, reached $1 billion in revenue in three years, versus six years for Google. The combined impact of group buying, flash sales and collaborative consumption is likely to be even greater than mobile. There are plenty of signs: online e-commerce still represents merely 4.5% of U.S. retail sales. When it comes to collaborative consumption, the rapid jump in the revenues of companies like AirBnB, and stellar growth of newcomers like Crowdflower, and Relay Rides will unlock new, incremental value in lodging, labor and transportation markets.
SaaS and the ‘cloud’ remain hot
The enterprise market is going through its own seismic shifts. Expect excellent growth opportunities for companies focusing on services in the cloud as well as those that don’t just go after big data but turn it into actionable intelligence. I anticipate cloud services to become much more pervasive and move higher up in the value chain.
Not surprisingly, software-as-service and infrastructure-as-service plays are maturing. We now start to see some interesting M&A activity in this space as evidenced Salesforce’s $212 million acquisition of Heroku, and increasing specialization around key functions like billing in the case of Zuora, and next generation business intelligence as in the case of Cloudera. Expect more proliferation in this segment. It would not be surprising to see more compelling productivity applications. One of the limiting factors for “real-time” analysis has been the lack of true “real-time” data. If new companies were to address this in a compelling way, significant value could be created on top of potential new platforms.
Aydin Senkut is founder and managing director of Felicis Ventures, a super angel fund based in Silicon Valley. The opinions expressed here are his own. Senkut has been an angel investor in start-ups since 2006 with a portfolio that encompasses over 50 companies. Follow Aydin on Twitter at http://twitter.com/asenkut.