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TRANSCRIPT
GOOD AFTERNOON!
Ariadne Capital Limited is authorised and regulated by the U.K. Financial Services Authority
The Face of Every EntrepreneurThey 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 IdeasAlways 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
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Lifecycle of a Technological Revolution
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Gestationperiod
Big-bang
Paradigmconfiguration
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
Deg
ree o
f te
ch
nolo
gy m
atu
rity
an
d m
ark
et
satu
rati
on
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 TELECOMMUNICATIONS50 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
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Capital
THE REVOLUTION STARTS AS A SMALL FACT WITH BIG PROMISEAND MOVES TO A SIGNIFICANT FORCE IN THE MARKET
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The dynamics of the system: three spheres of change in constant reciprocal action
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Production
capitalFinancial
capital
Technological
revolutionsTechno-
economic paradigms
Socio-political ideas &
behaviourSocio-
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
Raymond KurzweilThe 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
“David
” -
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
RentingNot Licensing
Operating System to the industry
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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
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GIVEN ALL THAT!WHAT IS THE INVESTMENT OPPORTUNITY?
We have a cunning plan
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Innovation is about EconomicsNot Technology
Otherwise we’d all be flying the ConcordeBut 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
Five Stages of Company Development
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Phase 1 Phase 2 Phase 3 Phase 4 Phase 5
ACE Fund investment
focus
24
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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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
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