google glass: vc investment thesis

Google Glass

OPPORTUNITIES & CHALLENGES FOR VENTURE INVESTORS

ALLEN MILLERCOLUMBIA BUSINESS SCHOOL

MBA INTERN, GOTHAM VENTURES

On the Brink of the Next Wave of InnovationPattern Recognition: Hardware Platforms Produce Software Innovation

Hardware Platform Software Innovation

AgendaDeck Overview

1) Trends in Wearable Technology

2) An Overview of Glass• Glass Products & Features• User Feedback & Adoption

3) Investment Opportunities• High-level Use Cases• Industries • Example Companies

4) A Case for Mass Adoption

5) Sources & References

Wearable technology

Google Glass

Industries & Use Cases

Companies

Historical Evolution of WearablesWEARABLE TECHNOLOGY

Single Function, Unconnected

Multi-function, Unconnected

Multi-function, Sometimes Connected

Multi-function, Always

Connected

1970s 1990s 2000s Today

Ex: digital or analog

watches

Ex: digital watches with enhanced

features like the G-Shock watch

Ex: iPod Applications

and the Nike+

Sensor

Ex: Nike fuel band, Google Glass

Wearable Technology Landscape Today WEARABLE TECHNOLOGY

Wristbands Smart Watches Smart Glasses Smart Clothes

…and much, much more.

Growth ForecastsWearable Technology

2010 2011 2012 2013 2014 2015 2016 2017 2018 $-

$2,000.00

$4,000.00

$6,000.00

$8,000.00

$10,000.00

$12,000.00

$14,000.00

Wearable Device Market Value

Year (2010-2018)

Source: Business Insider

$2.5B market, expected to grow to $12.2B by 2018.

2013 VC investing in Wearable TechWearable Technology

In 2013, investors put $458M into wearable companies across 49 deals.

Source: CB Insights

AgendaDeck Overview

Wearable technology

Google Glass

Companies

Hardware OverviewGlass Products and Features

Source: Techlife

Display:• The main function is based on a mini projector, which projects onto a prism.• The prism then reflects a layer over “reality” directly onto the retina.• Equivalent of a 25 inch high definition screen from 8 feet away

Audio: Bone conduction transducer.Storage: 12 GB of usable memory, synced with Google cloud storage. Mobile Compatibility: MyGlass for Android and iOS.

Product SelectionGlass Products and Features

ThinBold

CurvedSplit

Frames Twist on Shades

Earbuds

Source: Google

Glass Growth ForecastsUser Feedback and Adoption

*The forecast for 2014 starts in the second quarter.Source: Business Insider

22 million represents ~7% of the U.S. Population.

2014* 2015 2016 2017 2018 -

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

Forecast: Annual Sales from 2014-2018

Demographics of “Glass Gravitators”User Feedback and Adoption

Base: 657 US online adults (18+) who replied that they would be willing to wear Glass*Base: 4,657 US online adults (18+)Source: North American Technographics Consumer Technology Survey, 2013

Glass Gravitators US Online Adults*

Female 44% 51%

Gen Z (18-24) 23% 13%

Gen Y (25-33) 26% 18%

Gen X (34-48) 22% 25%

Young Boomers (48-57) 13% 18%

Household Income (mean) $83,300 $78,700

Technology Optimist 66% 48%

Own iPhone 32% 24%

Own Android phone 35% 27%

Some Challenges: Survey DataUser Feedback and Adoption

Source: YouGov, May 2013

The majority (59%) weren’t interested a year ago.

Yes (28%)

No (59%)

Not Sure (16%)

Would you consider buying and wearing Google Glasses?

YesNoNot Sure

Some Challenges: Survey DataUser Feedback and Adoption

Source: Surveycrest, 2013

Yes; 24%

No; 30%

Maybe; 46%

Would Google Glass Invade Privacy?

Poor,53%

Av-er-

age,24%

Excel-lent,23%

How comfortable can you be viewing things on google glass?

Source: Surveycrest, 2013

AgendaDeck Overview

Wearable technology

Google Glass

Companies

Investment OpportunitiesIndustry Overview

Investment Timeline

Short Run

Healthcare

Fitness

Platforms

GamingLong Run

Consumer Digital Media

Advertising

Payments

Recruiting

Travel

Sports & Entertainment

Transportation

Education

Commerce

Will begin with a few very specific use cases—mostly “enterprise” in nature.

Once mass adoption occurs, continued permeated diffusion of mobile connectivity.

Investment OpportunitiesIndustry Overview (Current Landscape)

Source: Compiled from Google

Of the 110 current apps, these 4 spaces are the most promising in the short run.

Healthca

Fitness

Gaming

Platform &

structu

re Development

Photo & Video

Financial S

ervices &

Commerce

News Aggregation

Food & Beverage

10152025303540

Number of Google Approved Apps by Industry (as of April 2014)

Investment OpportunitiesExample Companies

Healthcare Sample Company: Prisine.ioCEO: Kyle SamaniLocation: Austin, Texas (pristine.io) Currently Funded: No (angel financed)

Emergency responders are using Pristine to beam in specialists in 1st person into the field and the ambulance.

Surgeons are using Pristine to livestream cases in 1st person to residents, fellows, and surgeons at medical centers across the world.

Fitness Sample Company: LynxFit (Byte an Atom)CEO: Noble AckersonLocation: Washington D.C. (http://www.lynxfit.com) Currently Funded: No (angel financed)

1) Subscribe: Choose from carefully curated categories

of workout routines.

2) Schedule: Users can securely schedule routines

by location or by time.

3) Share: View, aggregate and share data gathered from exercise activities.

Gaming Sample Company: Mind Pirate CEO: Shawn HardinLocation: Silicon Valley (http://mindpirate.com/) Currently Funded: Seed (Bessemer Venture Partners, Signia Venture Partners)

Developed games include: Little Bandits, Shard & Singularity.

Investment OpportunitiesIndustry Overview

Platform & Infrastructure Sample Company: OnTheGo PlatformsCEO: Ryan FinkLocation: Portland, Oregon (https://www.otgplatforms.com/)Currently Funded: Seed (Rogue Venture Partners, Foundry Group)

OnTheGo is developing gesture recognition technology to build a platform layer that sits in between the glass hardware and Glass apps.

AgendaDeck Overview

Wearable technology

Google Glass

Companies

A Case for Mass AdoptionThree Possible Challenges to Adoption

Product Functionality Price Point Social Norms

• Clunky, awkward feel• Weak Visual display• Wifi antena is spotty • Battery Life is too low

Missing several critical pieces of core functionality.

At $1,500, Price Point is too high for the average would-be consumer

Glass also violates a number of current social & cultural norms that could prevent broad adoption including:

• Threats to privacy• “Glasshole” perception• No established etiquette for

obtaining the consent of those being recorded.

As with most new products, successive iterations will become more aesthetically pleasing and higher in quality. As the cost of production lowers, so too will the price point.

The bigger challenge to adoption centers around social norms. I will make the case that social norms will continue changing to make Glass usage more socially acceptable.

A Case for Mass AdoptionIn the Short Run: Product & Price (Not an Issue)

Historical Example: The Mobile Phone

Source: ASYMCO

Price Evolution Product Evolution

A Case for Mass AdoptionIn the Short Run: Core Functionality (Possibly an Issue)

Historical Example: The Palm Pilot

Palm Had Functional Challenges The iPhone added Critical Functionality• Inability to seamlessly sync all

existing contacts, music, etc., into the device w/o manually entering

• Primitive Operating System• Poor web browsing capability

• Ability to sync iPhone contacts, songs, etc., to Mac computer with the click of a mouse

• Best-in-class OS (iOS)• Apps greatly enhance web

experience

A Case for Mass AdoptionIn the Long Run: Social Norms (The Bigger Issue)

The more important question is whether Glass will overcome key challenges from a social perspective. Many products in the recent past have failed the “social test.”

Segway Sony Aibo Facebook Home

A Case for Mass AdoptionSocial Norms – Historical Parallels: The Mobile Phone

Back then…• In 2000, only 28% of U.S. respondents owned a cell phone• In 2007, 82% of cell phone users expressed concerns over location tracking• Concerns over: privacy violations, waning attention spans, location tracking, etc.,

Source: American Association for Public Opinion Research, Journal for Interactive Advertising

But now…

A Case for Mass AdoptionSocial Norms—Historical Parallels: Facebook News Feed

Back then...When News Feed launched in 2006, there was a tremendous backlash among users: • Users petition for FB to remove News Feed due to

privacy concerns• CEO Mark Zuckerberg issued a public apology and

increases pricacy controls

Share of Time Spent on FB, 2011

But now…

A Case for Mass AdoptionSocial Norms: A 3-pronged Argument

1) Social Norms are already changing. We are moving away from privacy and towards open information and continued mobility. Anyone on the Internet can already information through a number of avenues:

2) Google is poised to focus on the 2 social norms that matter most:• Control: Provide users with complete control over their personal information• Privacy: Protect privacy through an “op-in” fully secured operating system

3) Historical Parallels (Phone & Newsfeed) lean very strongly in Google’s Favor

Google is already taking steps to avoid a major flop by taking feedback from users (Explorer Program), expanding aesthetics & functionality (frames, prescription lenses, ear buds, etc.,) , opening its platform to developers (MyGlass) and investing heavily in quality supply chain partners (like Himax).

AgendaDeck Overview

Wearable technolog

Companies

Sources & ReferencesWorks Cited

Sources

AngelList

Business Insider

CB Insights

CrunchBase

Forbes

Fortune

Google

LynxFit

Mind Pirate

NY TimesOnTheGo Platforms

Pristine

SurveyCrest

TechLife

VentureBeat

YouGov

Interviews

Glass Explorers/Entrepreneurs

Dave Cho: COO, Soko Glam

Katy Kasmai: CEO, Xocracy (Founder of Glass NYC Meetup)

Ryan Fink: CEO, OnTheGo Platforms

Tom Emrich: Co-Founder, Wearable App Review & Glass Eats

Kyle Samani: CEO, Pristine

Lindsay Macvean: COO, Facial Network

Venture Capitalists

John Burke: Founder and Partner, True Ventures

Micah Rosenblum: Partner, Founder Collective

Amit Mukherjee: Associate, New Enterprise Associates

Zak Schwarzman: Associate, Gotham Ventures

Lucas Nelson: Principal, Gotham Ventures

Special thanks to Lucas Nelson and Professor R.A. Farrokhnia (Columbia Business School).

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