Special thanks to Ron Adams,CPA, CVA, ABV, CFF & Mark Shifrin, ASA for providing a valuation analysis of Groupon in support of this post. Ron and Mark run the Valuation Services group of mid market investment bank Capstone Partners. The Valuation Services group provides valuation services in support of tax, legal and equity events.
Late last week, Groupon filed for an IPO that will certainly value the company well above the $6 billion the company reportedly turned down from Google last November and could place a value on the company as high as $20 billion if some estimates are to be believed.
So should you buy Groupon on the IPO? With revenues estimated to reach $2.6 billion this year following revenues of $713 in 2010 and just $30 million in 2009, the company’s growth has been nothing short of miraculous – exceeding even that of Google. As a point of comparison, at the close of its first day of trading, Google was valued at $34 billion and if you had bought its stock then (based on the assumption that you were not an insider and couldn’t have gotten the IPO price) your investment would have grown by 493% as of June 3, 2011 – a pretty good return by any measure.
BUT, companies like TIVO, MySpace and Netscape offer cautionary tales: Not every high flying tech company makes it. Some come crashing down almost as quickly as they rise. TIVO went public in late 1999 with a market cap of $4.4 billion. Today, the company, still public, is worth about 1/4 of that amount. MySpace was acquired in 2005 for $770 million and at the time, people thought they had given the company away. Today, the decision to sell looks a lot better. And Netscape, whose IPO in 2005 was a cultural phenomenon, was dismembered by AOL and Sun Microsystems just 3 years later.
To help decide whether you should buy Groupon, we turned to Ron Adams, CPA, CVA, ABV, CFF and Mark Shifrin, ASA, who lead the valuation practice at Capstone Partners LLC, a boutique investment bank, to help explain what a $20 billion valuation means.
"If you put aside the extreme valuations that come from excessive exuberance, the best way to value a stock is to value its future cash flows,” says Ron. “To get to a valuation of $20 billion, you’d need to believe that there is a good chance Groupon can reach revenues of over $50 billion by 2018 and $90 billion by 2025 with an Operating Margin (before interest and taxes) of 20%. For a business where half the revenue or more goes right out the door to the merchants, 20% seems like the upper limit of what Groupon could hope to achieve. For comparison, Apple had revenues of $65 billion and an operating margin of 28% in 2010, Amazon.com $34 billion and 4.1%, and Google $29 billion and 35%.” (click here to download a PDF of Capstone’s Groupon valuation model)
So, will Groupon be the next Google or will it follow in the footsteps of TIVO, MySpace, and Netscape? To answer this question, first, let’s look at what brought down TIVO, MySpace and Netscape.
To some extent, the issues that led to the undoing of TIVO, Netscape and MySpace are all present for Groupon.
Like TIVO, Groupon does not appear to have a disruptive technology. Typically disruptive technologies are either based on a technology breakthrough, like Google or Salesforce.com, that isn’t easily duplicated or, their business is based on a network effect model, like Ebay or LinkedIn, where the more users a business has, the more value users get from it. Neither of these obviously apply to Groupon.
Like Netscape, Groupon has exploded so quickly that it has triggered an enormous competitive response. In the case of Groupon, there isn’t just one competitor who is responding, but hundreds or thousands, depending on the source, including Google and Facebook. A recent NPR story on Groupon reported “Businesses report getting calls every day from another Groupon clone wanting to do a deal”
Finally, like MySpace, Groupon may have a fundamental business problem that is being masked by its rapid rise. The company’s model is to offer discounts of greater than 50% and take 50% of what the consumer pays. That means that merchant gets at best 25% of their regular price. While consumers will probably never get tired of getting huge discounts, there are already signs that merchants may be getting tired of giving them.
A recent Groupon deal for glasses is a great example of how the site is now offering discounts far below its stated goal of 50% or more off. The deal offered a $150 coupon for the purchase of a pair of eye glasses for just $50. While that may seem like a 67% discount, the Groupon only covered a portion of the purchase price of a pair of glasses. Buying the least expensive pair at $300 would only yield a 33% discount (it would cost the buyer $200 - $150 + $50 for the Groupon - instead of $300). If Groupon is unable to offer a continued stream of deep discounts for products and services consumers want, it may have a fundamental problem with its offering on its hands.
So, going back to the original question: Should you buy Groupon on the IPO? As Capstone’s analysis shows, the company will need to be unbelievably successful to provide any kind of return on a $20 billion valuation. While it is too early to count Groupon out, this is one IPO we’ll be passing on.
Special thanks to Compete.com who provided web traffic information on the NY Times for this post. Compete.com helps the world's top brands improve their marketing through the information they provide on the online behavior of millions of consumers.
On March 28, 2011, the NY Times instituted a Paywall on its site to do what has historically proven all but impossible – getting readers to pay for content online. With its circulation plunging (down 17% between 2006 and 2010) and traditional sources of revenue like classified ads stolen by Internet competitors like Autotrader and Hotjobs, the company had to do something. So, was instituting a Paywall a last ditch attempt by a desperate company or a stroke of genius? Can this strategy save the Times?
The NY Times faces a trend that has become extremely common in digital era – the proliferation of free competitors. Beyond publishing, the phenomenon of free competitors extends to software (through Open Source), online services (through free email marketing tools, invitations, greeting cards, etc) and more.
In a market filled with free competitors, companies essentially have 3 alternatives:
In the case of the NY Times, they were left with no other option other than trying a Freemium model. Online advertising alone could never support the business. Looking out to the future where the paper is only available digitally, it would still cost somewhere between $500 million and $800 million a year to run The Times. Currently, the paper generates just $140 million in online advertising revenue, and given that digital newspapers are already a maturing category, it‘s hard to see, how online ad revenue could increase enough to cover operating costs and earn a reasonable profit.
Is the NY Times Paywall an Act of Desperation?
So was the decision to go Freemium an act of desperation from a company whose business was collapsing or is it a legitimate strategy with a real chance of success? Creating any successful Freemium is very difficult. It requires:
A Brilliant Strategy with Brilliant Execution
In our analysis, the NY Times has done a brilliant job of setting up its Paywall and has a real chance to make it work. The company needs somewhere between 1 million and 2 million total subscribers (print + digital) to make the business a success. Most of these subscribers will come from ~1.5 million who are currently print subscribers. With digital subscription prices of $15 to $35 per month, not too much less than the cost of a print subscription:
The rest of the subscribers will come from the pool of ~2 million digital readers who are currently above the paywall threshold of 20 articles per month but are not print subscribers. Given that the company sold 100,000 subscriptions in just the first few weeks, it seems likely they could increase this number by a factor of 2, 3 or even more.
Finally, the company does not count any traffic that comes in via a search engine or referral from another site like HuffingtonPost.com toward a user’s 20 articles per month limit. This segment – for whom the NY Times was not the destination but simply a link – would be unlikely to pay for the site so blocking them access would not increase subscriptions. But, leaving this door open enables the company to profit from this incidental traffic (worth $10 million to $30 million in revenue per year) while exposing potential future subscribers to the site.
What Does the NY Times Experience Mean for Other Businesses?
The strategic challenge that the NY Times faced – deciding among Ad-supported, Freemium, and Pay Outright models – is one that most companies who play in markets where there’s effectively no cost to adding an incremental customer will have to deal with. Although it hasn't received much attention, the high-flying email marketing company ConstantContact is currently facing this exact problem. Up-and-comer MailChimp is undercutting ConstantContact's Pay Outright model with a Freemium model. As the NY Times experience shows, it’s hard to get this right. Success requires a combination of great strategic thinking and a deep understanding of customers and the market.
In the next 10 days or so, Apple will announce its first earnings since Steve Jobs stepped down from his role as CEO of Apple on January 15, 2011 due to health reasons. So far, the market has taken a wait and see attitude as to what it means for the company. After a relentless rise where the stock has more than tripled over the last 2 years, it has been trading in a narrow range for the last 2 months. The market is undoubtedly waiting for the next earnings report and the future guidance that comes with it to reassure them that Apple will be okay without him. Or, to confirm their fears that it won’t.
Often the market overreacts to news like this. In the end, one person rarely makes a critical difference in a company as large as Apple. But this case may be an exception.
To understand Steve Jobs and his unique position, first, let’s consider the cases of some of the other technology visionaries. Starting a world-changing company is a very, very difficult feat and in our view, Bill Gates, Sergey Brin, Larry Page, Mark Zuckerberg, Larry Ellison, Michael Dell, Jeff Bezos and a few more deserve the billions that they have earned.
Yet, without diminishing their accomplishments in any way, greatness does not come from genius alone. In his book Outliers, Malcolm Gladwell makes a compelling case that timing is equally as critical to creating mega-success. Bill Gates was fortunate to have been ready when the PC was born, Jeff Bezos when the Internet first took off, and Sergey Brin and Larry Page as the Internet’s growth was making it too unwieldy for first generation search technologies to handle.
Strengthening Gladwell’s case is the fact that there are very, very few cases where companies, despite the presence of the same visionary founders, are able to replicate their initial success within an order of magnitude (or maybe even two orders).
Google is a great example. Google has probably tried harder than any other company to create new transformational innovations outside of its core business. Yet despite all the investment they’ve made in Google Mail, Google Docs, Google Books, Android, and countless other products, Google is still a one product company. Over 96% of their revenue in 2010 came from Internet advertising. The only part of the business where they have achieved leadership outside of search is YouTube, which they bought.
Microsoft is a similar story. Practically all of the company’s success can still be tied to having DOS chosen as OS of the IBM PC. In 2010, the company earned over 73% of its operating profit from the sales of the Windows OS and Office Suite. If you include the contribution of the Backoffice tools (SQL Server, Sharepoint, Exchange, etc.), which could easily be considered extensions of the Windows Server OS, that percentage goes up to 93%. Everything else – Xbox, Windows Live, Bing, MSN, etc. – contributes just 7% of the operating profit.
This brings us back to Steve Jobs and Apple. What makes Steve Jobs truly unique is that he has done it more than once on a grand scale – In 1984 with the Mac, 1995 with Pixar, 2005 with iTunes, and 2007 with the iPhone. My belief is that there are many individuals who can take what Steve Jobs has already created and take it forward. Assuming the company picks the right CEO to replace him, Apple should continue to soar on the strength of what Steve Jobs has already done. What is at risk is the next innovation that could take the company to new heights.
So what lesson should you take from Steve Jobs, Google, and Microsoft? The answer: Unless you have a Steve Jobs on your staff (not just a Bill Gates or Sergey Brin) you can't count on 'The Next Big Idea' to fuel your growth. Even if you do everything right, there is just too much uncertainty. Instead, what you should focus on is maximizing the opportunity you have. While Microsoft and Google may not have created a second transformational innovation, they made the most of the businesses they were in. They deeply understood their markets and competitors. Strategically expanded into adjacent areas. Made smart acquisitions. Found new channels. Expanded globally. Capitalized on new technologies.
In our Corporate Growth Planning practice, we work with executive teams on creating strategies to grow revenue 3x, 5x or more. While there are rarely shortages of good ideas, where companies often struggle is in sorting through and priortizing them. In our experience, there seems to be a natural human reaction to pursue the 'Next Big Thing', especially in entrepreneurial companies. The real challenge is creating a disciplined and fact-based process that leverages all of the growth avenues available, not just the brightest shiniest objects.
Earlier this month, Watson, a computer built by IBM, faced off against Ken Jennings and Brad Rutter, the two greatest Jeopardy players of all time and trounced them. In a two day match, Watson earned $77,174 to Ken Jennings' $24,000 and Brad Rutter's $21,600. While the results seem to show that the human race's crown as Jeopardy masters has been passed, a deeper analysis of the facts tell a different story. I have no doubt that one day a computer will be Jeopardy champion, but that day isn't today. What you saw wasn't a fair match among opponents but rather something that was closer to an infomercial demonstration where the product produces "too good to be true" results based on a tilted playing field.
We'll get to how the game was rigged in Watson's favor in a moment, but first we'll look at the Watson backstory. When the project was approved, management explicitly required that the technology could be commercialized. Back in the 1990's IBM invested heavily in a project that resulted in Deep Blue, a chess playing phenomenon that went on to beat the best human player, Gary Kasparov. While the company won bragging rights, it turned out that there were no commercial applications for the technology. IBM didn't want to make that mistake again. When Watson was approved, it was done so with the belief that its question answering technology could be applied to many fields including healthcare, as an expert diagnostic assistant to help doctors, and retail, as a next-generation recommendation engine.
Over the years, I have seen many mind blowing demonstrations of gee-whiz technologies that never achieved commercial success. Each time investors got frustrated with the progress of the business, the management team would cook up another demo which promised that a breakthrough was just around the corner...and in the process, relieved the investors of several million more dollars. The most egregious cases are the ones that have created some of the most high profile public flops (think the Apple Newton). My analysis is that IBM execs just witnessed one of the best gee-whiz demos of all time and before they sink in any more money, they should have independent market and technology due diligence performed on Watson’s commercial prospects. The critical question they need to answer is: Can this generalized question-answering technology actually provide enough value over the purpose-build expert systems that already exist in fields like medicine to justify its cost? It’s a question that the Watson team cannot answer. They have too much personally invested in the program to come up with any answer other than ‘Yes’.
Now back to the game...In Jeopardy, you're not allowed to push the buzzer right away. You have to wait until Alex finishes reading the question. At that point, a light goes off and then you can ring in to answer. If you try and anticipate the light and ring in too early, you are locked out for a quarter second, meaning that there is next to no chance to win the buzzer race. This is where Watson's unfair advantage comes in. If during the period Alex is reading the question, Watson comes up with an answer that it thinks is right (based on my observation, that would be an answer that it has scored as having an 80% or more probability), it can ring in just 10 milliseconds after the light goes off - enabling it beat the human contestants, with their mere mortal reflexes, to the buzzer every time. So, even when the human contestants know the answers, Watson gets all of the points. The Jeopardy results didn't accurately reflect Watson's question answering ability, they reflected the combination of its question-answering ability plus its superhuman reflexes.
So how would Watson have fared if it had to rely on just its question-answering ability? To answer that question, we analyzed the results of Game 2 of the two-game series (Ideally we would have analyzed both games, but since we only TIVO'ed Game 2 and the match isn't available online, it'll have to do). In Game 2, the three contestants scored as follows:
- Watson: $41,413
- Ken Jennings: $19,200
- Brad Rutter: $11,200
However, final scores aren't necessarily a good measure of how each player fared. They are highly dependent on how players bet in the Final Jeopardy, who gets Daily Doubles and how much they bet on Daily Doubles. Taking out Final Jeopardy and Daily Doubles, the players scored as follows:
- Watson: $25,200
- Ken Jennings: $14,600
- Brad Rutter: $5,600
In watching the game, it was pretty easy to tell when Ken Jennings wanted to ring in but was beaten to the buzzer by Watson. He held the buzzer chest high and you could see when he pressed the trigger and lost. Since Brad Rutter kept his buzzer below the podium, it wasn't possible to tell when he tried to ring in. But, the data from Ken Jennings is enough to figure out the impact of reflexes. Of Watson's $25,200, $19,200, all but $6,000 worth, was won on questions where Ken Jennings tried to ring in. Had Watson and Ken had equal reflexes, it stands to reason that Ken would have buzzed in first in half those cases. Adjusting for reflexes (including the possibility that Ken would have rung in first and gotten it wrong, hurting him instead of helping him) would add $9,088 to Ken's score and taken off $9,344 from Watson, giving revised scores for those two players of:
- Watson: $15,856
- Ken Jennings: $23,688
Since both Watson and Ken Jennings got the Final Jeopardy question right, instead of losing, Ken would have had a sizable victory over Watson. In conclusion, we’ll end this post with our own game of Jeopardy.
Category: Man vs. Machine
$1,000 Clue: As of February 16, 2011, although not the fastest to the buzzer, these biological beings were still the best at answering Jeopardy questions.
Question: What are Humans?
APPENDIX
I expect that there are many folks out there who will challenge our analysis. I’ve anticipated some of the objections and have addressed what I think are the three major ones below.
1. Shouldn't some of the points that we reallocated from Watson to Ken have gone to Brad, lowering Ken's revised total? While that is true, Brad would have also taken additional points from Watson. If we had data from Brad, we expect that the gap between Watson and Ken would be narrower, but that Ken would still enjoy a solid lead.
2. What about Game 1? Watson did even better in Game 1 than it did in Game 2. Wouldn't that have kept Watson the winner? Probably not. The reason Watson racked up such a huge total on Game 1 was that it answered 29 of 32 questions correctly in Double Jeopardy. I didn't have a tape, but I believe Ken and Brad also knew many of those answers and were shut out by the buzzer. Allocating those responses across players would have put one or both players within striking distance when they got to Final Jeopardy. Watson blew Final Jeopardy with a comically bad answer to an easy question. So, what would likely have happened is it would have been in second if not third place heading into Game 2
3. What about the humans' own "unfair advantage". Humans tend to ring in before they know the answer and then have several seconds to figure it out. If they had to answer right away like Watson, wouldn't Watson cream them? While this is true, I take exception to the notion that this represents an advantage for the humans. Instead, this represents a fundamental difference in how computers and humans process information. While it can take humans a few seconds to work out the right answer, we can intuit nearly instantaneously whether or not we will be able answer the question. Great Jeopardy players have great intuition and rarely get questions wrong after they ring in, as Ken Jennings demonstrated by getting just 1 question wrong in Game 2. Watson on the other hand seemed to either come to an answer very quickly or never got there. It doesn't have intuition and more time didn't appear to help it significantly. Changing the rules to take out the intuition factor would shift the advantage to Watson but would be counter the goal of the contest - figuring who is better at answering questions.
On Monday, Topline Strategy be releasing our new report on the trends in Cleantech venture investing. When I first started on this report, I was expecting to find the dotcom bubble 2.0. With all of the hype and reports of phenomenal growth in Cleantech, I didn't see any reason to suspect anything different.
What I found was quite surprising - Quarter over quarter, Cleantech investing for the last four quarters, Q2 2006 to Q1 2007 was basically flat. Furthermore, with just a couple of exceptions, the leading VC firms have been just dipping their collective toes in the water.
What does this mean? From a venture capital perspective, we have barely left the starting gate of a 30 year project to build a sustainable economy and that this project is so different than what VCs have become accustom to in high tech and life sciences that it is going to take a while for them to figure it out.
If you haven't heard of Verde Energy, you should get to know them. Verde is solving one of the most difficult components of buying a renewable energy system - searching for a reliable, trustworthy installer.
Putting in a renewable energy system, from wind to PV to solar thermal, is like renovating a house - only worse. Like renovating a house, installing a renewable energy system involves finding a contractor who will do good work, on time, and at a fair price. This is never an easy task, but is even harder when with renewable energy projects because the purchaser:
Even Google is of little help. I searched for "Solar Power Installers in Massachusetts" and there was only one solar power installer in Massachusetts in the results. I did get links to the Sun Microsystems website, a non-profit providing solar power in Ethiopia, and an article on a recently installed solar power system in Cambridge, MA.
Verde Energy makes this process a whole lot simpler. The company uses the Lending Tree model to help you find a contractor - you fill out a form describing your project and they refer you to several prescreened, qualified contractors in your area. (For the record, they were also the top search result in my Google search).
In our recent study, What the Solar Industry can Learn from Google and Salesforce.com we identified lowering search costs as one of the key ways that the solar power industry can accelerate adoption. Verde Energy is a critical piece of making that a reality.
A few months ago, I seriously investigated installing a 2 kilowatt solar electricity system. I chose 2 kilowatts since that is the size system that would fit on my roof. We have a limited amount of space with the right orientation and access to direct sunlight. Here are vital statistics on the system that I was considering...
The 2 kilowatt system would have cost approximately $19,000 installed and have covered a 10' by 15' section of my roof. I would have received $2,000 back from the federal government when I filed my taxes and assuming I could get them, another $5,500 in rebates from the state. That would have put my out of pocket costs at $11,500. If I financed that amount using a home equity loan, my annual payments, net of taxes, would have run approximately $500 per year, almost exactly washing with the $500 in annual electricity cost savings I would have realized (2,900 kilowatt-hours generated x 17.2 cents/kilowatt hour at Massachusetts's prevailing rates).
On the global warming front, for my effort, I would have eliminated 5,800 pounds of carbon dioxide emissions per year, or 2.6 metric tons. That sounds like a lot, but Carbon Offsets currently run approximately $5 per ton, making the total cost of achieving the same amount of carbon reduction about $13 per year.
This analysis isn't meant as a condemnation of solar electricity. I think it is an important technology that will be increasingly critical as prices fall and it delivers real electricity cost savings. However, a home solar panel project is not easy to do. That is why today, as a way to help the environment, it doesn't hold a candle to Carbon Offsets. In our new report, we take a look at the current state of the market for Carbon Offsets and discuss what it will take to take them to the mainstream. To download the report, click here.
In a recent post on Sandhill.com, I argued that as the current wave of SaaS, Open Source, and Vertical Market start ups mature, it will take a major breakthrough on the order of client/server computing or web technology to keep the business software start up engine humming.
Your probably thinking that you've heard this all before. Back in 2001 and 2002, people were predicting the end of business software only to have the sector come roaring back as SaaS, Open Source, and vertical market companies filled the gap. Here is why this time is different.
Consider what happens to technology markets as they mature. In the early stages, the market is dominated by horizontal products that are customized to a specific customer's needs through professional services. As the market starts to mature, the dimensions of competition change to meet the needs of the late adopters. To maintain growth, companies must lower costs to be able to profitably serve this price-sensitive customer group and they must tailor their solution to meet the unique needs of smaller and smaller unserved niches (simplification and specialization).
When viewed through this perspective, the SaaS, Open Source, and vertical market investing wave can be seen as the mature phase of the business automation boom that started in the early 1990's with companies like Siebel, Documentum, and Remedy. When this current wave slows down, there is no obvious successor on the horizon (What comes after the mature phase?). Therefore, short of a major breakthrough, business software investing will slow.
By how much? Our prediction is that business software investing could slow by as much as 30%. Topline Strategy's analysis of business software investments from Q3 2006 found that 59% of all business software investments were SaaS/Open Source/Vertical Market companies offering simplification and specialization as their primary benefits while 41% were companies were offering solutions based on new technologies (such as video over IP and mobile computing). We expect, short of a major breakthrough, that investing in companies based on new innovations will remain steady. However, investing in simplification/specialization plays could fall by half. To get a closer look at the data, you can download a list of all the Q3 business software investments here.
If this post seems like all doom and gloom, it isn't. While we expect business software investing to fall, we expect consumer and mobile investing to continue to soar, more than picking up the slack.
If you want to gain real insight into a start up company, ask someone to tell you the story of how the company was founded. Start ups have precious little history and culture and therefore, since these stories may be all they have to bind the company together, they are elevated to the status of myth.
In The Hero with a Thousand Faces, Joseph Campbell deconstructed classic myths and identified a recipe for myth creation that spans cultures. (For those of you who are not aware, George Lucas borrowed heavily from Joseph Campbell's recipe when he wrote Star Wars). Founding myths also have a common recipe:
Founding myths are incredibly powerful. They are critical recruiting tools for start ups, who in absence of more tangible factors like rapidly accelerating revenue, use them to sell the promise of the company to prospective employees. Internally, they provide a common vision that everyone can hold on to - especially important as companies are finding their way in the market. Founding myths actually grow more powerful over time. Companies use them as a lens that sees every success as a reinforcement of the myth's validity and setbacks as caused by other factors.
However, founding myths also have a downside. If (actually when) the founding myth collides with market reality, it takes a very long time for a company to adapt. The myth is so interwoven with the fabric of organization that it takes a major negative event before companies are willing to let go.
Documentum, where I worked in the mid 1990s, is a company whose founding myth cut both ways. Documentum was founded to be the Oracle of Content. Buried into this myth was the vision that like Oracle, Documentum would have one repository into which all types of content would be stored. Initially, the myth led to the creation of the most scalable, feature rich, and flexible content management system on the market (it had to store everything). This enabled Documentum to easily tailor its solution to meet the needs of its customers. However, the myth ran aground when the Internet and HTML came along. Unwilling to part with the idea of a single repository, the company tried to force fit HTML into a system that was never designed to support it. As a result, the company opened the door to Vignette, Interwoven, and other web content management companies. Only much later did the company abandon the one-repository vision.
While failing to challenge the founding myth ended up costing Documentum a major opportunity, it can be fatal for companies whose founding myth runs into market reality earlier in their lives. Therefore, we recommend that challenging the founding myth be an integral part of all strategy development work. Start by listing the core beliefs about the company (one repository for all content, we are Open Source, etc.) and consider the following three questions:
If you are short on supporting facts and you can come up with a few good things that would happen if you tossed it out, it may be time to let go.
Tomorrow, we will be releasing our Q3 Follow the Money report. Follow the Money is Topline Strategy’s quarterly analysis of venture capital investment in information technology. As opposed to the traditional venture trend analysis that categorizes companies based on technology (software, computers, etc.), our analysis is organized around the customers companies are looking to serve (businesses, consumers, OEMs, carriers), business models (Open Source, SaaS, advertising, transactions) and go to market strategies. By understanding investments on these new dimensions, we are able to quantify collective decisions, identify investment patterns, and discover insights in ways never before possible.
The major finding of this quarter’s report is the continued growth in the funding of consumer-oriented businesses and the strong leading indicators that point to the segment continuing to gather steam in the coming quarters – the surge in first round investments, the durability of the market even as investment in social networking cools, and the continued growth in Internet advertising.
The strength of the consumer segment comes as the signs point to a softening in the investment climate for business technology products, the largest segment of IT investing.
You can download the entire report at http://followthemoney.toplinestrategy.com.