Where should VCs invest?

If you are a VC and you are unclear where to invest then this post might be of interest to you.

Some Disruptive Technologies and ideas that startups might be working on or for which you might want to assemble a team:

Alternative networks

WiFi and 3/4/5G have their limitations. Any alternative networking technology that can change complete industries is probably a good pick. An example would be LiFi.
Networks as a Service – Software-Defined Networks – Openflow

This area is very hot at the moment. Today’s network are very hard to configure and manage, they are very tightly-coupled with hardware, they can not be extended easily.

Anything that makes Software-Defined Networks/Openflow easy for mass adoption is going to be a winner.

Anything that allows enterprises to buy a box once and get the network software later based on day-to-day business requirements, e.g. think about appstore for Openflow.

Anything that links Openflow to the Cloud.

M2M Disruptive Technologies
Printing electronics to make sensors cheaper.

Battery-free electronics to make sensors more mobile and less expensive to maintain.

Auto-discovery sensor mesh networks to avoid paying expensive 3/4G subscriptions.

M2M appstores to allow people to reuse the work others did.

Super-easy M2M APIs/PaaS. Look at Pachube as a model to beat.

Cloud Disruptive Technologies

Niche SaaSification in which applications that are only used in small niches can be offered as SaaS subscriptions in a global way.

Plug-and-Cloud Equipment for Hybrid Cloud & Exposure (Single Sign-on, Internal data sources, Internal integrations) – on-site equipment that allows enterprises in an easy and secure way to expose their internal assets to the Cloud e.g. employee single sign-on, secure exposure of company data, secure exposure and easy integration of company applications

Plug-and-Play SaaS integrations that allow multiple SaaS offerings to be easily integrated without programming.
Mobile

Mobile PaaS = mobile GUI drag-and-drop designer + no-programming back-end systems like Usergrid + plug-and-play integration with external and enterprise APIs + enterprise mobile app / SaaS stores + BYOD made easy solutions (some elements are optional)

Big Data / Data Analytics

Visual data miner as a service

Big Data PaaS (easy tools/APIs for complex big data operations like mood analysis, natural language processing, etc.)

Gamification/Crowdsourcing

Kaggle type of services but for other domains e.g. competition to create the easiest/best mobile interface or API

Kaggle + Kickstarter => competition together with crowdfunding. Who can build the best solution for this problem, gets their venture funded.

Nail-it-then-scale-it/Lean Startup type of crowdsourcing in which ideas get tested (e.g. paper prototypes, business model discovery, etc. before actual prototype) and funding is delivered bit by bit. Ideally with stock options of the funders in the new venture.
Enterprise/Consumer Telecom

Managed enterprise software-defined networks or BYOD – services that help enterprises to maintain their networks or devices that employees bring along in a managed way hence no experts need to be hired and the service is pay-as-you-go instead of CAPEX.

Cloud + Set-up Boxes – Appstores for ADSL/Cable Modem set-up boxes, SDKs to manage large sets of consumer’s set-up boxes, etc.

Conclusion

These are just a handful of ideas. If you want more or need more detail, let me know at maarten at telruptive dot com. Also if you are in need of an external adviser or executive in a new venture, let me now…

10 ways telecom can make money in the future a.k.a. telecom revenue 2.0

LTE roll-outs are taking place in America and Europe. Over-the-top-players are likely to start offering large-scale and free HD mobile VoIP over the next 6-18 months. Steeply declining ARPU will be the result. The telecom industry needs new revenue: telecom revenue 2.0. How can they do it?

1. Become a Telecom Venture Capitalist

Buying the number 2 o 3 player in a new market or creating a copy-cat solution has not worked. Think about Terra/Lycos/Vivendi portals, Keteque, etc. So the better option is to make sure innovative startups get partly funded by telecom operators. This assures that operators will be able to launch innovative solutions in the future. Just being a VC will not be enough. Also investment in quickly launching the new startup services and incorporating them into the existing product catalog are necessary.

2. SaaSification & Monetization

SaaS monetization is not reselling SaaS and keeping a 30-50% revenue share. SaaS monetization means offering others the development/hosting tools, sales channels, support facilities, etc. to quickly launch new SaaS solutions that are targeted at new niche or long tail segments. SaaSification means that existing license-based on-site applications can be quickly converted into subscription-based SaaS offerings. The operator is a SaaS enabler and brings together SaaS creators with SaaS customers.

3. Enterprise Mobilization, BPaaS and BYOD

There are millions of small, medium and large enterprises that have employees which bring smartphones and tablets to work [a.k.a. BYOD – bring-your-own-device]. Managing these solutions (security, provisioning, etc.) as well as mobilizing applications and internal processes [a.k.a. BPaaS – business processes as a service] will be a big opportunity. Corporate mobile app and mobile SaaS stores will be an important starting point. Solutions to quickly mobilize existing solutions, ideally without programming should come next.

4. M2M Monetization Solutions

At the moment M2M is not having big industry standards yet. Operators are ideally positioned to bring standards to quickly connect millions of devices and sensors to value added services. Most of these solutions will not be SIM-based so a pure-SIM strategy is likely to fail. Operators should think about enabling others to take advantage of the M2M revolution instead of building services themselves. Be the restaurant, tool shop and clothing store and not the gold digger during a gold rush.

5. Big Data and Data Intelligence as a Service

Operators are used to manage peta-bytes of data. However converting this data into information and knowledge is the next step towards monetizing data. At the moment big data solutions focus on storing, manipulating and reporting large volume of data. However the Big Data revolution is only just starting. We need big data apps, big data app stores, “big datafication” tools, etc.

6. All-you-can-eat HD Video-on-Demand

Global content distribution can be better done with the help of operators then without. Exporting Netflix-like business models to Europe, Asia, Africa, Latin-America, etc. is urgently necessary if Hollywood wants to avoid the next generation believing “content = free”. All-you-can-eat movies, series and music for €15/month is what should be aimed for.

7. NFC, micro-subscriptions, nano-payments, anonymous digital cash, etc.

Payment solutions are hot. Look at Paypal, Square, Dwolla, etc. Operators could play it nice and ask Visa, Mastercard, etc. how they can assist. However going a more disruptive route and helping Square and Dwolla serve a global marketplace are probably more lucrative. Except for NFC solutions also micro-subscriptions (e.g. €0.05/month) or nano-payments (e.g. €0.001/transaction) should be looked at.

Don’t forget that people will still want to buy things in a digital world which they do not want others to know about or from people or companies they do not trust. Anonymous digital cash solutions are needed when physical cash is no longer available. Unless of course you expect people to buy books about getting a divorce with the family’s credit card…

8. Build your own VAS for consumers and enterprises – iVAS.

Conference calls, PBX, etc. were the most advanced communication solutions offered by operators until recently. However creating visual drag-and-drop environments in which non-technical users can combine telecom and web assets to create new value-added-services can result in a new generation of VAS: iVAS. The VAS in which personal solutions are resolved by the people who suffer them. Especially in emerging countries where wide-spread smartphones and LTE are still some years off, iVAS can still have some good 3-5 years ahead. Examples would be personalized numbering schemas for my family & friends, distorting voices when I call somebody, etc. Let consumers and small enterprises be the creators by offering them visual  do-it-yourself tools. Combine solutions like Invox, OpenVBX, Google’s App Inventor, etc.

9. Software-defined networking solutions & Network as a Service

Networks are changing from hardware to software. This means network virtualization, outsourcing of network solutions (e.g. virtualized firewalls), etc. Operators are in a good position to offer a new generation of complex network solutions that can be very easily managed via a browser. Enterprises could substitute expensive on-site hardware for cheap monthly subscriptions of virtualized network solutions.

10. Long-Tail Solutions

Operators could be offering a large catalog of long-tail solutions that are targeted at specific industries or problem domains. Thousands of companies are building multi-device solutions. Mobile &  SmartTV virtualization and automated testing solutions would be of interest to them. Low-latency solutions could be of interest to the financial sector, e.g. automated trading. Call center and customer support services on-demand and via a subscription model. Many possible services in the collective intelligence, crowd-sourcing, gamification, computer vision, natural language processing, etc. domains.

Basically operators should create new departments that are financially and structurally independent from the main business and that look at new disruptive technologies/business ideas and how either directly or via partners new revenue can be generated with them.

What not to do?

Waste any more time. Do not focus on small or late-to-market solutions, e.g. reselling Microsoft 365, RCS like Joyn, etc. Focus on industry-changers, disruptive innovations, etc.

Yes LTE roll-out is important but without any solutions for telecom revenue 2.0, LTE will just kill ARPU. So action is required now. Action needs to be quick [forget about RFQs], agile [forget about standards – the iPhone / AppStore is a proprietary solution], well subsidized [no supplier will invest big R&D budgets to get a 15% revenue share] and independent [of red tape and corporate control so risk taking is rewarded, unless of course you predicted 5 years ago that Facebook and Angry Bird would be changing industries]…

Disruptive Innovations that can Kill the Telecom Industry

Killing the mobile broadband oligopoly

For years operators have paid billions for spectrum. Millions of man-years have been spent on building standards like GSM, GPRS, CDMA, 3G, LTE, etc. Can disruptive innovation kill this in a few years?

Yes, it can. The FCC is finding out that large parts of the USA are still not covered by mobile broadband. After years of lobbying by groups like the New American Foundation, the FCC has finally decided to start with White Spaces. White Spaces are also being rolled out in the UK.  White Spaces allows spectrum to be opened for public usage, which was previously used by analog television or to separate different adjacent channels. White Spaces have been referred to as “WiFi on Steroids”.

Another disruptive technology is software-radio networks in which mobile devices use software-driven radio technology instead of hardware-driven radio technology. This allows a mobile device to be compatible with different standards and to switch and evolve quickly. Putting software-radio in a mobile phone will make it possible to use dynamic white spaces, in-door networks, etc.

A final disruptive technology is Openflow. Openflow, is part of software-driven networks, in which routers, bridges, firewalls, loadbalancers, etc. are implemented on software-level. Networks can be virtualized and used with different QoS and configurations at the same time.

Google and Microsoft are major backers of the White Spaces initiative. They also control two important mobile operating systems. Google is also running pilots with fiber-to-the-home. Google has its own routers and other network technology.

Google could easily be the first White Space operator and use a Fon-like way to roll out their network.

Killing ARPU

SMS is already death, and it will be just a matter of months before operators will see deep dives in revenue. Apple could make the iMessage protocol public and Android could come with a standard iMessage-enabled solution and people would no longer send SMSes but would not even realize it.

Next one on the list are calls. Roaming is already seriously being challenged for years by Skype and others. Operators are planning for VoLTE, or voice over LTE, only by 2013-2014. However most will start rolling out LTE in 2012. This is the ideal situation for Voxtrot, and others, to use the vacuum to get people accustomed to free calls. By the time VoLTE will be available there might just be one market price for it: FREE.

Other value-added services, are already being substituted. MMS is called Twitter & Facebook mobile app now. PBX are now on the Cloud. Call centers are now offered as a service.

Killing ROI

Operators are pushed by the market to invest in LTE roll-outs. However why would you need LTE? There is not a single operator service at this moment that will make people queue up in front of their stores to get an LTE subscription. There are a million and one reasons in the form of mobile apps, mobile video streaming, social networks, HD Video-calls, etc. that can push customers towards the over-the-top-players.

So network investment is only going to rise and revenues from the new technologies will be meager at best, if not cannibalizing high-ARPU services.

With Mega Upload and other sharing sites being disabled, illegal file-sharing is not going to go away. P2P is likely to come back with a vengeance. It is easy to shut down large sites. However what if special encrypted P2P apps are used to distribute the location of content and botnets for distribution. There are a lot of computers that are connected to the Internet but are badly secured. Instead of using them for spamming, Mega Upload 2.0 services can use them to store and distribute content. As long as these “hacked” computers use HTTP(S), it will be very hard for operators to distinguish regular do-it-your-self websites from illegal content hubs.

Killing the operator’s established business model

Operators have educated subscribers that everything that comes from them has to be paid for. Disruptive operators like Free.fr are undoing this education by giving a lot of services for free when you pay the monthly subscription fee.

The Freemium business model is likely to find its way into the telecom industry. The model in which 90-98% of the users get the service for free and 2-10% generate the revenue by purchasing premium services. Combined with advertisement, this is the model of big successes like Zynga, Linkedin, etc. Disruptive players that adopt Freemium are likely to start offering services outside of their country borders since the more people participate, the better. With a winner-takes-it-all business model expect roll-outs to be very aggressive.

What can the telecom industry do?

The first thing operators should do it to tell their providers that their top problem is the lack of new revenues that will sustain the industry. Not LTE roll-outs, not fiber-to-the-home, not customer experience management, etc.

Telling telecom providers that new revenue solutions will be a top priority for 2012 will shift R&D budgets into the right direction.

The second thing operators should do is to stop using their existing purchasing techniques to try to generate new revenues. Nobody will be able to invest 5 months into an innovative solution, spend 3 months doing business development, pass 3 months on filling out RFIs, pass another 4 months filling out RFPs, 2 months on contract negotiations and 6-8 months on delivery. The industry can not wait 2 years to launch the first solution. Especially the herding nature of operators is making any introduction of new innovative services difficult because everybody wants a market leading solution but nobody is willing to be the early adopter.

The response should be different. Joint innovation teams that are able to break the “established rules”; that are able to launch “beta-quality” services to early adopters; that are able to innovate with both technology, business model and go-to-market strategy, etc. Operators should be embracing innovation and learn from the IT industry and even better the dotcom industry on how innovation is done quickly, efficiently and successfully…

Network as a Service or NWaaS, Cisco beware…

The Internet would not exist today if it were not for Cisco Routers. However there is a revolution going on in the network. No longer are routers and switches the masters of the universe. Their virtual brothers and sisters are ready for war.

In the old days a network router would mean a complex hardware box that needs certified experts to get it working. I am the proud owner of a Cisco Aironet Wireless Access Point and man are those things hard to configure!!!

Two new technologies are here to change things: OpenFlow and Virtual Switches.

Both are part of a new domain that I call Network as a Service or NWaaS. NWaaS means networks at last have become cool and elastic again. Routers and switches are no longer independently taking decisions. Instead they will be submitted to “über”-controllers in the form of OpenFlow.

Virtual Switches are software switches that use software instead of hardware. A good example is Open vSwitch.  Virtual machines no longer connect with physical hardware. They connect with virtual switches.

The revolution has just started but having virtual switches and OpenFlow enabled hardware will make network designing and management a totally different activity. Combine this with the Cloud, Big Data and Computer Learning and tomorrow’s networks will need a lot less management and will be able to optimize themselves and completely reconfigure themselves multiple times a day or even more frequently…