24 January 2013
Today I spent watching the final pitches of the 2012 Pipeline Fellows in front of three national judges: Scott Case, Dr. Magda Marquet, and Thom Ruhe. Below is my analysis of the 9 candidates, from whom the judges will pick the Innovator of the Year award. The winner will be announced tonight at the Pipeline Gala.
Heroku of Mobile Apps
Pierre Barbeau provided the first pitch of the day for his company, Moblico. Moblico provides a back-end API framework for mobile application developers. Creating a successful mobile application requires more than just writing an iPhone app - it requires writing a whole serverside program that handles data, which mobile applications communicate with through an API.
The Moblico team, veterans of Sprint who worked on phone apps long pre-dating smartphones, identified a need to provide an easy way to build that server-side half of mobile applications. Moblico provides that API as a Platform as a Service. They already have significant revenue, and are raising a $1.5 Million round. In addition to providing this back-end framework, they have started providing notifications through push notifications and SMS.
This platform strikes me as brilliant because it parallels the rapid development framework of Heroku that made it a standard for web applications. After a developer starts using the platform, it takes significant effort to move away, thus creating low churn. The Pipeline judges questioned the rationality of revenue streams outside the base subscription, but providing access to other features, such as SMS notifications, also parallels the Heroku application add-ons, which have been quite successful.
What concerns me about Moblico is their ability to provide adequate support for developers. Namely, making the use of their platform easy, and keeping it updated and relevant, are the keys to their growth. In order to do this, I hope that they maintain a strong engineering department.
20th Century Billboards
Brandon Shuey shared his vision of bringing digital advertising efficiency to the ubiquitous billboard. His company, Fliphound, matches advertisers with owners of digitized billboards, and it allows companies to purchase advertising time on these boards in the form of "flips." Unfortunately, the brand faces difficulties both in user acquisition and in targeting, and is currently pre-revenue (i.e. no-revenue).
Connecting billboard operators with advertisers digitally is difficult because both the billboard owners and advertisers must be educated to understand the benefits of the business. This means that rapid expansion is slow, and it could become a "land grab" for billboard space. To complicate it, Fliphound's pricing strategy is overly-complicated.
While this company may seem inline with modern digital marketing trends, the plan currently lacks the personalized targeting that other ad networks bring. Specifically, what makes Adwords so successful is its ability to follow a specific person as they move around the internet. Until Fliphound is able to geographically track specific users, their flips can only be targeted to large populations.
Overall, the market Fliphound targets is too broad, requires too much education of customers, and will become a "land grab" should it prove at all lucarative.
Lead-gen and CRM for small sport endorsement deals
Blake Lawrence, a former college athlete, shared his platform Opendorse for bringing digital efficiency to athlete endorsement deals. The idea is cool, but currently is not a full business.
What Opendorse currently has is a basic lead generation tool with a CRM for deal flow. This is not new, and attempting to build a product for such a specific industry could hurt their expansion. Furthermore, the idea is not yet market-validated.
The biggest danger to Opendorse comes from sports incumbants, such as Lockerdome. Opendorse will have little difficulty acquiring small atheletes for small endorsement deals, but the business that will make them lucarative is targeting large players. Furthermore, such high-profile deals are unlikely to be fully digitized.
Mix warehouse management, point of sale, and digital retail, then sprinkle in some social media, and you have Invenquery. Nathan Benjamin presented the company, which he describes as Match.com for unique items. By placing unique QR codes on objects, then using their mobile app to enter it into a company's database, Invenquery allows tracking of inventory. It then provides a platform for digital or brick-and-mortar sale of this inventory. Invenquery already has an open Series B round and a cabinet full of awards. However, I foresee them encountering data validity and tracking problems.
After associating a unique item with a unique code, basic data such as price, title, and description are entered, plus the price may be entered. The problem here is that not enough actionable data is collected to make the overall database useful. When comparing Invenquery to Match.com, the latter collects extensive data on a person to make matches a sophisticated, data-based process. Any corporate inventory system has extensive data on origin, dimensions, mass, and more. I do not think that the Invenquery system yet collects enough data to be much more useful than a spreadsheet.
The problem comes when Invenquery attempts to add these data points - it will be cumbersome for companies to adopt the software due to the manual labor required to label and input data on every single inventory item.
The decision to use QR codes is puzzling, as RFID seems to be the choice for large corporations. Overall, Invenquery's traction is exciting, but I question their ability to continue wild expansion.
Xandra Sifuentes, President of Metactive Medical, shared her company's medical products for treating aneurisms. The company's main product, a ball stent, is on track to enter the US market in 2019. The founders of the company have an impressive history - together, they built and exited on Proteon Theraputics for $550 million.
Metactive Medical is clearly a long-term play, as their main product has not yet entered clinical trials - currently only animal data is available. However, the $12 million round they currently raise seems high for such a far-off launch.
What concerns me about Metactive Medical is that the founders seem to have built themselves out of the company. With Xandra at the helm, the founders seem disconnected from day-to-day operations. Furthermore, Novita Theraputics serves as the parent organization, which troubles me in light of the prior financial success of the founders.
In the end, Metactive Medical stands to be a profitable business if clinical trials go well. However, the management shell running its path causes me concern, and with no human data their current funding round seems hefty.
Big Data meets Social Media
Justin Graves shared the tool Social Radar from his company Infegy. Social Radar is a social media analysis tool. Already at $1.2 million in revenue with no investments, their traction shows much desire for data-driven consumer insight.
My original concern was the technology behind the business. Correct analysis of social media requires extensive crawlers, huge databases, and sophisticated algorithms. I was surprised to see Infegy approaching the industry correctly with hundreds of processors and a fifth of a petabyte of data covering the last 6 years.
Having this much raw data is quite useful, and my second concern was whether consumers could run their own algorithms on the dataset. It turns out that they can. Though the API you can run custom queries using their custom query language.
Overall, Infegy sells data in a data-driven world, and I forsee success.
Zynga for the younger crowd
Ben Vu shares his company that provides, "[. . .] comedic violence that's safe enough for people of all ages." SkyVu provides video games for children across mobile platforms. With minimal funding, they have 35 employees and had $3.5 million in revenue last year. This resulted from 23 million downloads and 2 million active monthly users. In addition, they license heavily, selling merchandise and producing videos.
SkyVu was a crowd favorite during presentations. It definitely represents a good lifestyle business, but I do not know if the company is investable right now. After the Zynga IPO, I believe that investors will be skeptical of the long-term success of a video game company that aims for an IPO.
Regardless, it is making money, and with expansion plans for foreign countries, I think it was one of the most solid businesses from the Pipeline 2012 class.
Just another social media company - for financial institutions
Ben Pankonin shared Social Assurance, a company that provides social media tools built on compliance protocols for banks. With quantitative social media, specifically ROI, becoming a trend for 2013, Social Assurance hopes to lead in the banking sector.
I've seen compliance built into social media, and unfortunately the road leads downhill. Social Assurance possesses little to no intellectual property. In addition, creating an internal social media platform with built-in compliance tools should prove a trivial task for most large institutions.
A $6 Million pre-money valuation on this company is insane, and their revenues are near-zero. A possibly sustainable lifestyle business, but it is not an investable and scalable business.
Better surgical mesh
Matthew MacEwan, a few requirements hsy of being an M.D./Ph.D., presented his company RETECTIX. The company has an exclusive patent license on nanotechnology-based surgical meshes from Washington University in St. Louis. With it, they plan to produce a line of biocompatible synthetic surgical meshes. Used in clinics around the world to internally regrow cells after surgery, the market for such technology is ripe.
This company indudably has the ability to be quite successful. The risk comes in clinical tests and adoptions, meaning that most of the risk is speculative. However, it is quite likely that Retectix could be acquired prior to profitability. With their projections predicting a cashflow-positive business in 2015, it seems less speculative than Metactive Medical.
Tonight the Innovator of the Year award will be announced, with the winner being one of the above companies. My personal favorites are Moblico, SkyVu, and RETECTIX. I like Moblico because I feel that it is positioned for powering the increasing market of mobile app growth, and I foresee it following in Heroku's footsteps. SkyVu is taking the trouble to build a brand, not just video grames. RETECTIX' polymer-based clinical product avoids many of the complications of biological surgical meshes.
However, I think the three companies that stand the best chance to win are Infegy, Invenquery, and SkyVu. Only one of the judges had extensive medical background, so I think that RETECTIX and Metaactive are at a disadvantage. Infegy appeals to the big data trend. Invenquery is the only company from the class that already has high revenue and an open Series B round. SkyVu has built a business with a tangible product - after playing one of their games, a judge would feel a connection to the business.
The results will be announced tonight, and we will see how my predictions turn out! I will update this post with the winner, once they are known.
Update: SkyVu won the 2013 Innovator of the Year Award!