deep impact2013 juliemeyer-slides

GOOD AFTERNOON!

Ariadne Capital Limited is authorised and regulated by the U.K. Financial Services Authority

The Face of Every Entrepreneur

They just may not show it to you!

Two Good Reasons

• They see the inevitable and advance the Future

• They are willing to live abnormal lives

Capital Follows Ideas Always Has, Always Will

Remember the New Economy? Turns out it’s latest version of “New”

Economic Growth since the end of the 18th Century has gone through 5 Distinct Stages, associated with 5 successive Technological Revolutions

Five Successive Technological Revolutions, 1770’s to 2000’s

Technological Revolution

Popular Name for the Period

Core Country or Countries

Big-bang initiating the revolution

Year

FIRST The Industrial Revolution

Britain Arkwright’s mill opens in Cromford

1771

SECOND Age of Steam and Railways

Britain (spreading to Continent and USA)

Test of the Rocket steam engine for the Liverpool-Manchester railway

1829

THIRD Age of Steel, Electricity and Heavy Engineering

US and Germany forging ahead and overtaking Britain

The Carnegie Bessemer stell plant opens in Pittsburgh, Pennsylvania

1875

FOURTH Age of Oil, the Automobile and Mass Production

USA (with Germany at fist vying for world leadership), later spreading to Europe

First Model-T comes out of the Ford plant in Detroit, Michigan

1908

FIFTH Age of Information and Telecommunications

USA (spreading to Europe and Asia)

The Intel microprocessor is announced in Santa Clara, CA

1971

© Proprietary & Confidential – Ariadne Capital

Lifecycle of a Technological Revolution

© Proprietary & Confidential – Ariadne Capital

Gestation period

Big-bang

Paradigm configuration

Introduction of successive new products, industries and technology systems, plus modernisation of

existing ones

Constriction of potential

Time

Period one Period two Period three Period four

Around half a century

De

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f te

chn

olo

gy

mat

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ty

and

mar

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t sa

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Early new products and industries. Explosive growth and fast innovations

Full constellation (new industries, technology systems and infrastructure)

Full expansion of innovation and market potential

Last new products and industries. Earlier ones approaching maturity and market saturation

AGE OF IT AND TELECOMMUNICATIONS 50 ISH YEAR CYCLE – 1971 TO 20...?

BIG BANG – NOVEMBER 1971 IN SANTA CLARA, CALIFORNIA

• Bob Noyce and Gordon Moore launched Intel’s first microprocessor, the precursor of the computer

on a chip

INSTALLATION – late 1970’s through to Noughties

• 1976 – Steve Jobs, Steve Wozniak found Apple Computer

• 1984 - Michael Dell founds PC’s Limited later named Dell Computer Corporation

• 1985 – Irwin Jacobs founds QualComm, pioneer in Wireless Communications

• 1990 – CERN / Tim Berners Lee

• 1994 – Yahoo founded

• 2003 – Skype – “free calls on web”

• 2004 - Facebook founded

THE TURNING POINT

© Proprietary & Confidential – Ariadne Capital

THE REVOLUTION STARTS AS A SMALL FACT WITH BIG PROMISE AND MOVES TO A SIGNIFICANT FORCE IN THE MARKET

© Proprietary & Confidential – Ariadne Capital

Big Bangs attract new investment: successful radical innovations receive and promise extraordinary profits in a mature industrial landscape

The Installation Period is one of tense co-existence of two paradigms

•Once a truly superior technology is available, with higher productivity and clear growth potential, the outcome in the medium term is practically inevitable.

•First 2 or 3 decades of creative destruction after the Big Bang are increasingly turbulent and the benefits of growth uneven.

•A new context is being created; a new common sense is emerging.

•The world of computers and the Internet is very different than the world of the car, mass production and the highway.

© Proprietary & Confidential – Ariadne Capital

Big-bang

Time

Next big-bang

INSTALLATION PERIOD

DEYPLOYMENT PERIOD

De

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f d

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f th

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n Turning

Point

The dynamics of the system: three spheres of change in constant reciprocal action

© Proprietary & Confidential – Ariadne Capital

Production capital

Financial capital

Technological revolutions

Techno-economic paradigms

Socio-political ideas & behaviour

Socio-institutional frameworks

ECONOMIC CHANGE

TECHNOLOGICAL CHANGE

INSTITUTIONAL CHANGE

Technological Revolutions

• 1999 – David with his

slingshot wants to kill Goliath

The Economy & Social Institutions Respond

• 1999 to 2013 – Broadband and Mobile Technologies continue to invade our lives

• 2013 -David and Goliath must

dance

Consumerisation of Technology

Ariadne advised Skype on business development activity in 2003 and 2004

The consumer's adoption of services is driving everything, reversing how new products and services used to come to market through the enterprise.

User

Developer

Supplier

Client

Raymond Kurzweil The Singularity is Near

• Technology operates exponentially while our minds operate linearly

• It took 89 years for the fixed line telephone to achieve an adoption of 150 million users, but only 38 years for the television to get to the same point. The mobile phone achieved this in 14 years, the iPod in 7, and Facebook in 5.

• 20,000 years of progress this century.

• At a certain point, we have to leverage technology or artificial intelligence to continue to model or predict the future

The David / Goliath Grid Model

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Strategic Value

Financial Value

Network Effects

Vulnerability

“D

avid

” -

Dig

ital

En

able

r

“Goliath” - Distribution

Ecosystem EconomicsTM – shifting industry players Consumer – Data sets become prevalent Network – Orientation at heart of the consumer insight

When partnering with, 1)Brings new digital revenues 2)Brings lean operating system

When acquired, 1)Can become 2)Can reinforce or gain a position as Industry Architect

Renting Not Licensing

Operating System to the industry

Copyright - Ariadne Capital

Examples of Corporates engaging with Digital Enablers

Large corporates which are partnering and/or acquiring digital technology firms include:

Software is Eating the World

- Marc Andreessen

© Proprietary & Confidential – Ariadne Capital

GIVEN ALL THAT! WHAT IS THE INVESTMENT OPPORTUNITY?

WE HAVE A CUNNING PLAN

© Proprietary & Confidential – Ariadne Capital

Innovation is about Economics Not Technology

Otherwise we’d all be flying the Concorde

But we’re packed into Jumbo Jets

Network-orientation to business

and Ecosystem Economics

• Google says that they organise the world’s information

• They actually organise the economics of the world’s information

• I, as a consumer of their search, am not given any economic upside in the search

transaction.

• They have built a multi-billion pound business using – albeit anonymously – my personal

data – aggregated with that of others, but releasing none of the economic value to me

• Their biggest Achilles Heel is if someone in the search space were to cut a different set of

economics for the consumer

• Ariadne Capital found that entrepreneur – John Paleomylites – founder of

BeatThatQuote, and sold his business to Google on the 4th of March 2011 for a 122 EBITDA

multiple for these reasons

© 2003 – 2012 Monitise plc. All Rights Reserved.

Monitise – The De Facto Leader 84

17m Registered

customers

300+ FIs & Partners

1.6 bn+ transactions pa

$20bn Value of

payments &

transactions pa

700+ Mobile Money Experts

FIs

World leading partnerships

Mobile Operators

has created The Mobile Money Ecosystem over the past 9 years

Bank Platforms

Core

Banking

Other eg • CRM • Database

Wealth

Enabler

Use of standard Interfaces

3rd Party Providers

• Sharedealing • Insurance

Payments • Domestic

• International

Shopping &

Loyalty

National Services • Transit • Utility

Cards Processor

Mobile TopUp

© 2003 – 2012 Monitise Group Limited. All Rights Reserved. Confidential. 86

What is Mobile Money? The opportunity is to meet a range of key consumer needs through their mobile

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Underpinned by bank grade technology & security

Convergent Commerce

Retail Transport Ticketing

• Mobile Checkout

• NFC/ Proximity

• BarCode/ Text Purch

• Offers/ Promotions

• Shopping Apps/ Mobile

Web

• Banking/ Alerts

• NFC/ Remote

• Offers

• Remittance

Financial Institutions

• Mobile Prepaid

• Remittances

• App Markets

• NFC/ Private Label

• Remote Direct Bill

Mobile

• Mobile OS

• Marketing Apps

• LBS Services

•Networking

•Offers

Social Media and online advertising

Five Stages of Company Development

Idea Product Validate Business Model; Operating Model Set to Scale

Scale on the back of the Enterprise

Platforms and Corporate Partners

High Growth Sustainable Business

© Proprietary & Confidential – Ariadne Capital

Phase 1 Phase 2 Phase 3 Phase 4 Phase 5

ACE Fund investment

focus

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In 2013, “Network Benefits” accrue to those Firms who understand their role in their ecosystem and organise the economics for it This in turn leads to exceptional returns for their shareholders

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Individual Capitalism is the Force for the 21st Century

“Capitalism was about empowered authority which didn’t necessarily activate the citizenry; the Internet stands that on its

head, and shifts the power to the Individual

– making Individual Capitalism the force of the 21st Century”.

So I say it’s really very simple....

Follow The Entrepreneur

• He/She has the Market Insight

• He/She is the Creator of Value

• He/She is the Hero

© Proprietary & Confidential – Ariadne Capital

Thank you ....

julie@ariadnecapital.com

www.entrepreneurcountry.com

http://www.entrepreneurcountryforum.com

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