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June 30, 2016

30 Jun 2016

Five Lessons From Some Of Today’s Hottest, Billion-Dollar Startups.

What makes the billion dollar startups so unique? The answer is distribution. They either create a whole new market, like Uber and Airbnb did with the sharing economy, or they massively disrupt existing markets, such as healthcare and finance. Here are five companies that made it into the “billion dollar club” and my analysis of what set them apart.

SoFi

The financial market has been going though many changes thanks to the growth of the digital economy and availability of app-based mobile devices. Mobile payments are one obvious area in which the financial industry is evolving. Square is a clear leader in the U.S., Canada, Japan and Australia, while companies, such as Ezetap in India, are cornering the market in developing nations.

Another emerging sector turning traditional banking on its head is online financing. San Francisco-based SoFi (which stands for Social Finance) is set to disrupt the banking sector through its unique approach to lending and wealth management. What launched in 2011 as a financial services company to refinance student loans has expanded to mortgages, mortgage refinancing, personal loans and wealth management. The company touts its proprietary technology, customer service and products, while marketing itself as a “non-bank.” Instead of going to a local bank branch to obtain a loan, SoFi allows members to apply online or over a mobile device—making it particularly appealing to Millennials.

What Sets SoFi Apart? There are other companies that offer online financing and wealth management, but SoFi’s management team and their ability to partner with major financial institutions give them strength and credibility. Japan-based SoftBank Group was so impressed with SoFi that they provided $1 billion in funding to help the company charge lower rates on student, personal and home loans, as well as help fund plans to expand into wealth management and deposits.

23andMe

I recently went to my doctor for a yearly physical. As part of the process, I underwent several blood tests and had a heart stress test. What if, in addition to these tests, my doctor could also analyze my DNA to better understand my genetic mix and its relationship with my health? He might be able to predict and help prevent certain hereditary diseases. That is the potential behind 23andMe.

ICT Driving Africa’s Innovation, Entrepreneurship & Economic Growth

Africa’s Information and Communications Technology (ICT) sector has seen unprecedented growth in recent years. The private sector has invested close to $50 billion in the last decade, with a focus on mobile and related applications, and more recently in international submarine cables. Mobile density in the continent jumped from 20% (in terms of the number of SIM cards sold per 100 inhabitants) in 2005 to around 65% in 2011. Recent completion of undersea cables has tripled available bandwidth. However, the rollout of ICT infrastructure, in particular access to the Internet is uneven (Internet penetration is about 11.5% in 2011) and many underserved countries and areas remain. In addition the lack of regional and national backbone infrastructure is a stumbling block towards the development of broadband Internet. The promotion of ICT in Africa still requires investing billions of dollars.

The ICT sector has proven to be a strong driver of Gross Domestic Product (GDP) growth in nations across the world. From developing countries to developed nations – the ICT sector has played a part in the success of each of these nation’s economies, the advancement of its people’s skill-sets, capabilities and positioning the nations as a place for global firms to move efficiently conduct business.

Over the past decade – ICT has been a major economic driver to boost the social and economic landscape of the African continent. The ICT sector is better positioned to leverage businesses and the continent to some impressive growth of economies. The ICT sector witnessed double digit growth and if this trend continues upwardly – ICT expenditure in Africa could exceed $150 billion by 2016. The ICT expenditure would continue to include computer hardware and software, computer services (computer and network systems integration, data processing services) and communications services (voice and data communications services) and wired and wireless communication equipment. African countries have made positive progress on access to ICT services – however there is still work to be done in terms of ICT readiness. According to the International Telecommunications Union (ITU) Development Index – it indicated that the African region has made slower progress when compared to other regions in the past two years – with roughly half the improvement on an aggregate basis. Access to ICT still remains a huge challenge for most African countries.

Impact Entrepreneurship

Paul Graham sparked a furious debate over the last few days about inequality with his blog post, Economic Inequality. He points out that the focus of the dialog should shift from inequality to combating poverty and providing more economic opportunity. The power of entrepreneurship, mixed with technological disruption, is creating an “acceleration of productivity” that is leading to rapid, massive wealth creation. Paul’s essay argues that we should celebrate this, not seek to suppress it, and instead focus on inequality and social mobility.

I like that Graham is sparking dialog on this important topic. He puts himself “out there”, even if it means being exposed to some withering critiques.

His essay caused me to step back and reflect on the fact that I am seeing more entrepreneurs inspired to harness the power of some of the forces he describes – entrepreneurship, technology, innovation and shockingly fast productivity – to make a positive societal impact. I would like to see this trend continue. I’d like to see more Impact Entrepreneurs (a concept I first saw coined in an article in Wired Magazine by Adam Levene) not just wealth-creating entrepreneurs. Impact entrepreneurs are inspired to direct their entrepreneurial energy and skill to make a difference, help a group in society, right a wrong or turn around an injustice. Not just build the next Candy Crush Saga.

Don’t get me wrong – I love wealth-focused entrepreneurs, too. As a venture capitalist, investing in and supporting entrepreneurs focused on turning Flybridge’s seed and Series A investments into something very valuable is my day job. But if we want to unleash the full power of entrepreneurship and technological innovation to better society, more entrepreneurs need to direct their energy to truly making an impact. This effort can take a few forms. Some examples and trends are:

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Five Lessons From Some Of Today’s Hottest, Billion-Dollar Startups.

ICT Driving Africa’s Innovation, Entrepreneurship & Economic Growth

Impact Entrepreneurship

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