Why Your Startup Also Needs a BizOps Team

The title of “Business Operations” (or “BizOps”) has become one of the more buzz-y Silicon Valley terms as of late. At IVP, we saw an increasing number of growth-stage startups (many of which are in our own portfolio) recruit for and build out a BizOps team — Slack, Dropbox, CloudFlare, Stripe, Counsyl, NerdWallet, and ZipRecruiter, just to name a few. While this may seem like a new trend, large tech incumbents have long ago pioneered the role of Business Operations; companies like Yahoo, Google, and LinkedIn currently have upwards of hundreds of people on their BizOps team.

What is BizOps?

BizOps teams are generally an internal-facing group and broadly aim to create more value for the company and to improve the profitability of the business.Tech startups are already familiar with the role of Product Managers — people who drive product development by setting feature priorities and collaboratingwith a team of engineers and designers to ship these features. By the same token, shouldn’t other areas of your business have designated “managers” as well?

BizOps is PM for your Business Model

BizOps teams have a “get shit done” mentality and are often tasked with translating business goals (strategy) into tactical operations (execution). For example:

  • We are going international. What are the first markets we should tackle and how will we penetrate those markets?
  • We need to further monetize our user base. What are the most effective and sustainable ways to increase monetization? What are the different levers we can control and what is the expected impact of those changes?
  • We’re looking to accelerate growth. What are the key factors in our growth rate and how can we move the needle?

While BizOps responsibilities are similar across companies, BizOps teams can be structured in different ways. For some, the BizOps team is like Seal Team 6 — internal consultants deployed for specific and shorter-term projects. Because they act as a neutral third party, BizOps teams in this structure don’t interact closely with other business units regularly.

More commonly, BizOps teams are flat structures that are horizontally tied to other functional groups, such as:

  • Sales, where a business operations associate helps the sales team figure out a go-to-market strategy, perfect their conversion funnel, and track their sales efficiency
  • Product, where a business operations associate helps drive product strategy decisions, figure out a launch strategy, and track important user stats as the product launches
  • Finance, where a business operations associate works closely with the FP&A team to determine the key drivers of the financial model
  • People, where a business operations associate works closely with recruiting and HR to accelerate hiring or increase retention

BizOps Evolves as Your Company Scales

For early-stage startups, BizOps allows for a flexible, dynamic, scrappy team to work on a multitude of different types of business problems that otherwise may not fall anywhere else in the company (eg. starting a new office, doing sales hiring, owning the company financial model, etc.) As the company grows, BizOps can prioritize key issues (e.g., growth, monetization) and help balance strategy with execution. And for larger and more mature startups, BizOps provides a cross-functional layer of communication, structure, and organization across the greater company.

Depending on the stage of your startup, here are examples of a few inflection points where a BizOps team may make sense:

  • Accelerating growth: Once a startup has achieved product/market fit, you’ll probably want a dedicated BizOps team to help accelerate your early growth.
  • Starting geographic expansion: As startups go abroad, each new location you enter can behave similarly or differently from your existing geographic footprint — a BizOps team can help figure out your international strategy.
  • Avoiding functional silos: As startups and team sizes grow, it becomes more difficult to get transparency across the organization. A BizOps team can act as a cross-functional layer that keeps your startup’s different departments on the same page.

There are many approaches to BizOps, and it’s really up to founders and CEOs to decide how to utilize BizOps most effectively for their company. Ultimately, the key question is not be whether your startup needs a BizOps team, but when.

This article was originally published on Business Daily.

The Bear Case on Fitbit

It came as a surprise to most when Fitbit finally unveiled their financial numbers in their S-1. The company did over $700M in revenue last year (that’s over 10M devices sold!) and maintained an EBITDA margin of close to 26%. It was even more surprising how well FIT was received by public market investors. Fitbit’s  stock surged almost 60% on its opening day and has continued to outperform until its first earnings call. On August 5th, the company lowered revenue guidance and indicated that margins will decline in the next quarter, sending the stock down ~16% in after-hours trading.

Since I’ve been fairly bearish on FIT ever since its IPO, this bleak financial forecast did not come as a surprise. It seemed as if investors were so impressed by headline financial figures that they didn’t look further into Fitbit’s business metrics. FIT’s cumulative device sales track closely with registered users, which indicates that users rarely buy more than one device (despite Fitbit’s wide array of offerings). 

And, although 1 in 10 Americans owns a fitness tracker, research show that ~50% of them wind up in a drawer somewhere within six months. This kind of high user drop-off and low purchase repeat rate is a leading indicator of slowed growth down the line.

I’ve also always been skeptical of the product itself. Already, we have seen several startups, like Misfit and Moov, approach the wearables from the low end. In fact, you can buy a pretty decent activity tracker on mi.com (by Xiaomi) for $15! With Fitbit also victim of product recalls (the latest for the Fitbit Force in October 2014), it becomes clear that FIT will be subject to margin compression.

While Apple has indeed created general lift for wearables with the release of the Apple Watch, it has also set a price ceiling for these devices. For $350, you can get the lowest-end Apple Watch that does activity tracking on top of all its watch-specific apps… so why would you pay more than $300 or even $250 for a Fitbit?

Given these dynamics, Fitbit really runs the risk of becoming the Samsung of Wearables. While Samsung was able to grab a large share of the Android phone market a few years ago, the company has been slowly losing its footing to the likes of Apple and Xiaomi. Formerly the top mobile device maker in China and India, Samsung lost its footing in both crucial markets in the second quarter of 2014. How can it avoid this fate? Here are some suggestions:

  • Go Niche: Sometimes the right answer is a counter-intuitive one. Samsung failed in some cases because it flooded the market with a slew of low-end models – none of which appealed to the average consumer. Instead of trying to please everyone, Fitbit should take some of SoulCycle’s ethos and target a small and passionate niche. This may mean creating a Fitbit targeting fashion-forward women (a la Ringly), or creating a Fitbit for hardcore athletes (a la Athos). The wearables market will be large, but not necessarily homogeneous
  • Application and Service Integration: Samsung failed to build usable software and useful services on top of its hardware component. Samsung’s proprietary OS, Tizen, also never took off. I know Fitbit is incredibly focused on their consumer mobile app, which is performing well in the iOS and Google Play stores. The company has already made headway in this area by integrating more social and smartwatch-like functions to their fitness trackers, and should building the software and services layers.
  • Put Health First: Fitbit has proven its ability to make an activity tracker with a few bells and whistles. With the acquisition of FitStar, the challenge becomes making the app and wearable integration increasingly valuable to the user from a health-first perspective. In order to increase its unique value proposition and user retention, the Fitbit app should not only track activity, but find ways to increase and promote well-being.

Six Things Technology Has Made Insanely Cheap

I believe that technology and democratization goes hand-in-hand. If you examine the now-commoditized products listed in this article (PC, software, TV, trading commissions, camera, cell phone plan), you can also follow how such technologies became much more widespread and accessible to the masses as prices dropped.

The subtitle of the article boldly proclaims, “behold the power of American progress”! And it’s interesting to me that the author (Aki Ito) states:

For anyone bearish on the progress made by the U.S. economy, consider this: Computers are now one-1,100th of their price 35 years ago.

On the contrary, I believe that much of this price deflation actually comes from international manufacturers (read: China, India, etc.) who are able to produce virtually the same item at a fraction of the cost. 

With those two factors in mind, tech advancements and cost-efficient copycats, here are few things that I believe will face the same deflationary pressures over the next decade:

  • Mobile phones: This is a no-brainer and has already happened with the likes of cheaper Android handsets, courtesy of Xiaomi.
  • Automobiles and trucks: Asian manufacturers, such as Hyundai, are innovating quickly and will be able to rival Western brands soon in terms of quality. Furthermore, if Uber’s expansion continues world wide, demand for cheaper and more efficient cars will rise as drivers proliferate and riders opt to forgo car ownership. 
  • Education: With the current status of rising student debt, something’s gotta give. Disruptive Education Technology startups, such as General Assembly, Codecademy, and Coursera will begin to offer non-accredited alternatives to higher education. For profit education companies, like Minerva Project, will offer degrees at a fraction of what it costs today.
  • Food: I have high hopes for companies like Beyond Meat, who are looking to product petri dish-grown meat in a more cost-effective and environmentally sustainable way. Before that becomes mainstream, however, farmers will continue to lobby for government subsidies which hopefully will be passed through to consumers. 

On the other hand, there are a couple of things I wish would drop in prices, but I think unfortunately will continue to rise:

  • Healthcare:Healthcare is notoriously a laggard vertical when it comes to tech adoption, and the burden of outdated IT/infrastructure is eventually passed through to the consumer. An aging population, the impending shortage of doctors/nurses, and America’s sedentary lifestyle will all pose to be challenging to the current healthcare system. Without the right incentives for health systems and individual consumers to change their behavior, healthcare looks like it will only increase in the years to come. 
  • Housing: While this is a particularly stressful topic for those of us living in the Bay Area, I think it’s a pain point that all young adults will face sooner or later. Given high student debt and low employment, young adults will find it much more challenging to become home owners than the generation before did. 

What do you think will become cheaper or more expensive over the next decade?

Six Things Technology Has Made Insanely Cheap

Is 2015 The Year Legal Weed Changes The Future Of The American Economy?

I wrote an article on VC investing in the marijuana industry… a fun topic given how big and common weed is in the valley. Also an interesting topic to consider for all investors, in light of Neumann’s most recent blog post, where he claims, 

the only thing VCs can control that will improve their outcomes is having enough guts to bet on markets that don’t yet exist. Everything else is noise.

Is 2015 The Year Legal Weed Changes The Future Of The American Economy?

Robotics: the inevitable future

image

Seen by its makers “more R2D2 than RoboCop,” the autonomous policing robot Knightscope K5 promises to patrol geo-fenced beats in hopes of reducing crime by 50 percent.

As a late-stage investor, I’m often waiting on the edge of my seat for technologies to mature to a point when IVP would typically get involved. For me, robotics is one of those exciting areas where I have to unfortunately sit on the sidelines, for now. 

Some quick thoughts on how robotics will develop over the next couple of years:

  • Forget the consumer angle (see: the Jetsons), as with other next-gen devices such as Google Glass, robotics will first find their plateau of productivity in the enterprise. (see: AMZN / Kiva Systems)
  • The future is friendly – robots should be made to look as innocuous as possible. (see: Eve from Wall-E)
  • Robots will not only replace human functions, but enhance them too. In the example of Knightscope, the robot can analyze data, such as hundreds of license plates, in a way much faster than a human can. In other words, go for a revenue-generating sales pitch, not just a cost-saving one. 

I have to admit that my understanding of robotics is still elementary Any suggested readings for me?

(PS. Speaking of Wall-E, this cruise ship is just missing those personal hovercrafts…)

Robotics: the inevitable future

Fundraising Acceleration as a Flawed Paradigm

For the last 12 to 18 months, the private technology market has seen sky high valuations and a significant disconnect from the public markets. Recently, much talked-about startup Slack raised $120M at a $1.12B valuation with just $1M in monthly revenue. My friend, Danny Crichton, wrote a really insightful piece on TechCrunch regarding this new trend of “fundraising acceleration”.

Crichton outlines the factors that have created such a fundraising strategy and also carefully points out the disadvantages of raising too much at too high a price. Namely, he highlights the increasing bifurcation of the have’s and have-not’s (high and low-growth companies, respectively), as well as consequences with equity compensation for employees.

Here are some pitfalls I see with this kind of investment strategy:

  • High risk of a down round: Macro conditions are nearly impossible to predict. Unless the mega round is meant to fully fund a company from one bull cycle to another, it’s likely that the next funding round will be a difficult one.
  • Capital inefficiency: This type of fundraising strategy is also counter-intuitive to the lean startup philosophy. Raising such a large amount of capital creates negative incentives to be capital efficient, and in the hands of an un-experienced team, can lead to higher burn rates.
  • Increased execution pressure: With a valuation so far beyond fundamentals, management teams will and should feel an increased pressure to perform. It’s no longer enough strive to deliver on a vision you’ve sold because you’ve already committed to deliver it. Traditional “Plan B” options, such as acqui-hires, will become harder to sell to the board.
  • Diminishing returns: The reason that market leaders are often rewarded by an order of magnitude is that idea that in a networked world, winners take most (if not all). With funding acceleration, VC’s are not only increasing the risk of betting on the right horse, but also driving down their own gains. As the adage goes, capital flows into an asset class until returns revert to the mean. When that happens for the VC asset class, it’ll be a painful day for those holding such over-valued assets in their portfolios.

Crichton also writes, 

The person who most popularized this notion of investing was Marc Andreessen (who ironically also happens to be one of the earlier investors in Slack), as well as Peter Thiel, whose experience with Facebook’s growth encouraged his investment thesis for Founders Fund.

While I’m a big fan of both, we should also consider the fact that neither of these two investors have long enough tenures as VC’s to have experienced a downturn in the markets, and more specifically, a downturn within the technology sector.

First Thoughts on Meeker’s Internet Trends

[slideshare id=35210772&w=427&h=356&sc=no]

I’ll always remember how excited I was every time Mary Meeker’s report came out – especially when I was still a banker at Barclays. It not only contained tons of useful market data (a gold mine for analysts), but it also marked the steady passage of time. You could always count on a new Meeker presentation every 6 months, or so, and the topics she discussed often had a nice continuity. Today, these reports are a pleasant reminder of how lucky and excited I am to work with companies that will shape our future.

Some of my initials thoughts:

  • Slide 8: Very surprising that PC users are still lagging global TV users. This data shows that technology platform shifts can leapfrog each other. The “next big thing” (in this case, PC’s) may not be as big as the “next next big thing” (mobile phones). 
  • Slide 9: It’s no longer enough to be the “largest in the U.S.” – companies need to think globally. It’s disappointing that those of us in the Valley still tend of think of tech as being very US-centric. For example, most people can name tons of early-stage startups in SF, but haven’t heard of companies like Alibaba or Baidu. Meeker goes long on China later in the presentation (slides 127 – 136).
  • Slide 10: If it wasn’t clear enough already, platform wars are over and Android is a clear leader (though not without its problems).
  • Slide 15: Meeker has underlined the disconnect between “time spent” and “ad spent” for years now. The hold that print advertising has comes from the strength of traditional advertiser/publisher relationships and the traditional budget split between branding and performance campaigns. 
  • Slide 55: Meeker positions the “Internet Trifecta” as getting a critical mass of content, community, and commerce. I believe these criteria mainly fit e-commerce companies. Other consumer web startups, such as Dropbox or Uber, have focused instead on delivering unparalleled value to the user, without the 3 C’s.
  • Slide 161: This slide is probably the most valuable to founders & entrepreneurs. Particularly this piece of advice: great companies grow revenue, make profits, and invest for the future. 

I’m an investor, and since most of Meeker’s analysis is backward looking (historical trends and “re-imagined” use cases), I try synthesize some of her forward-looking takeaways. Most prominently, Meeker’s presentation sheds light on three major markets: Online Video, Healthcare, and Education. Some of our most recent IVP investments tie directly to these themes, such as ZEFR and General Assembly, and I’m excited to discover other great startups in these verticals.

What the @Facebook @Oculus acquisition tells me about the future

`

Both the Internet and my own circle of friends have debated this issue to death (so price. much social.) And as Fred Wilson puts it, 

It isn’t clear if the next thing is virtual reality, the internet of things, drones, machine learning, or something else. Larry doesn’t know. Zuck doesn’t know. I don’t know. But the race is on to figure it out. 

What we can expect, however, is increased VC interest in companies that could potentially bring us a new future. This is true for companies who are both competitive and complimentary to products by Nest or Oculus. Competitive companies stand to gain from these acquisitions because VC’s know that it’s rarely a one-horse race. Complimentary companies stand to gain even more as many tech incumbents have already signaled that this is where the future is going. 

I’m bullish on VR, and FB/Oculus’ upcoming challenges will prove whether the Oculus Rift is more of a Segway or an iPhone. The best step that the iPhone took was to create an ecosystem that was both open and controlled – any third party could build on top of the iPhone, but the quality of the apps were held to a high bar.

There are startups that are already building technologies that would be a great fit for the Oculus Rift. Thalmic Labs, based in Canada, has created the Myo armband for accurate and granular gesture control. Nymi and InteraXon are two bio-sensing startups – they measure heartbeat and brain activity, respectively, to control a connected device. And the quantified fitness space continues to grow with startups like Push and Hexoskin.

As I look at the new crop of hardware startups that will help create the next platform, it’s easy to see two things:

  1. As Chris Dixon said, the next big thing will start out looking like a toy
  2. Many of these next-generation hardware startups are based in Canada, where cost of living is cheaper, recruiting is less competitive, and the government has been supportive of startups by offering R&D tax incentives and offering a start-up visa

From where I stand, the future is both fun (toy!) and friendly (Canada!). I, for one, cannot wait. 

Learned Behavior: how the best products eventually change their users

When I evaluate product, either at the early or late stage of a startup, I’m always looking to see if the product has the potential to permanently modify user behavior outside of the product itself

A few examples of this:

  • Instagram : double-tap
    Apple designer Bill Atkinson devised the double-click, and soon it became the de-facto way to open files across all desktop GUI’s (Windows, Linux). The clever folks at Instagram appropriated it for their Mobile application to “like” a post. I’ve found myself mindlessly double-tapping photos in other applications. (NB: In light of this, I’m not sure I agree with secret’s choice to make the “like post” gesture as a left-to-right swipe.)
  • Netflix : binge consumption
    The way today’s content travels is much more binary – you’ll either never see the light of day or go viral (think: YouTube videos, 2048, any Upworthy article). To put it differently, today’s content distribution models enable and encourage binge consumption. Netflix is one of the first large tech companies to realize and capitalize on it by releasing traditional content in a way that enables binge consumption. Will that eventually put pressure on other content distributors?
  • Uber : pay through app
    It has become so easy to take an Uber that I’ve found myself walking out of regular cabs without paying. Embarrassment aside, it comes to show that Uber is creating a new behavior of seamless payment, something that Square and other startups have been attempting to do. 

The best products eventually change user behavior because they simplify those existing user behaviors; making it so natural that users have incorporated the habits into their regular lives. 

Quick Thoughts on @YCombinator’s First #FemaleFounders Conference

YC’s FFC was one of the more enjoyable conferences I’ve been to in a while. The attendees were great, the format was brisk, and the content shared was by and large very helpful. 

image

At one point, there was a panel of founders discussing the topic of fundraising. Two things hit me:

  • It was weird. I have never seen an all-female panel before, especially not at any previous tech conferences. The fact that seeing an all-female panel seemed strange surprised me in and of itself – even I, as a female technologist of sorts, had become used to and complacent of the male-dominated nature of my field.
  • It was enlightening. As a VC, I rarely hear such candid tales of fundraising from the entrepreneur’s point of view. Since I learned so much from this short session, I would definitely encourage any entrepreneur, aspiring or otherwise, to sit in on a couple VC-focused events. After all, EdTech vendors often attend Educator conferences and likewise, many industry conferences include both vendors & customers as attendees. In a way, VC’s and entrepreneurs are simultaneously each other’s customers – so why not get to know your customer better?
  • It was inspiring. All of the female founders speaking at the conference were extremely humble – they had a “if I could do it, so could you” attitude, and many went at length to highlight their failures and inadequacies. It was a great reminder that I should probably be building, too.

With PG in the spotlight, many people forget that Jessica Livingston was also a co-founder. She shared her story her responsibilities as the sole nontechnical co-founder (delivering AC units to YC companies!) and juggling being a founder and a mom. She also highlighted that YC has been trying to fund more female founders over the years. 

image