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HED An Opportune Time for Innovators
Ashu Garg
General Partner-Foundation Capital
Monday, December 1, 2014
There has never been a better time to be an entrepreneur in Silicon Valley. I have invested in -and built -startups in many different economic cycles. I have seen the boom and the bust, and I can confidently say that it's easier and cheaper today than it ever has been to launch a startup. People can debate ad nauseum whether that's good for the valley or not. But it definitely means that opportunities abound in the here and now.
The low cost of capital has made it relatively easy to raise money. And you don't even need as much capital as you used to. Start up costs have decreased significantly, thanks to the combination of ubiquitous smart phones and cloud computing platforms like Amazon Web Services (AWS). Think of all the infrastructure that a startup doesn't need to invest in anymore, thanks to AWS. If you're a startup with less than 100 employees, the buy vs. build argument doesn't even come into play because of available tools in the market. Add to that today's always-on consumers and the many touch-points for you to reach them, and you can count on a drop in the marketing costs as well.
As costs go down, there are new revenue streams to tap into. New budgets have emerged for startups to go after. Noticeable at this time is marketing spend, which amounts to more than $500 billion globally and has been steadily rising for the past few years. According to Gartner, 67% of marketing departments plan to increase their spending on technology over the next two years. Tech and data providers with marketing-oriented services and solutions addressing the needs of today's CMOs can win big. Some of our portfolio companies, such as FreeWheel and Localytics, understood this early on. Both startups have fared well. Comcast acquired FreeWheel earlier this year;Localytics has 5000 customers, many of which are global brands like eBay, Microsoft, and The New York Times.
We, at Foundation Capital, are seeing a lot of diverse and innovative startups across the board -in marketing technology, big data and analytics, online financial services and education, to name a few of the sectors we follow.

One trend that has caught our attention has been the disintermediation of middlemen. It is happening across industries - and countries. We invested in a company called IndiaHomes that is changing how property is transacted in India. In the world of financial services, my colleague and fellow GP here at Foundation Capital, Charles Moldow, predicts that marketplace lending will be a $1 trillion market by 2025. Our portfolio companies like Motif are pulling customers away from traditional establishments and grabbing headlines in the process.

Underlying much of this innovation, across sectors, is the advancement in predictive analytics, often with machine learning as the underlying approach. A couple of years ago, Harvard Business Review had a headline: Data scientist: The Sexiest Job of the 21st Century. The headline is proving to be true today.

We invested in a data believer named Reed Hastings when we backed Netflix. He saw a pain point, and addressed it. In the process, he shook up the traditional media establishment, and created a new content production paradigm.

We're always looking for entrepreneurs to bring on "the next generation of innovation" - founders who can deal with the challenges of today's market. Recruiting in this market is one of those challenges, because roles are getting more complex. We're seeing the need for more hybrids, such as marketers who can understand IT and developers who have studied design.
Another challenge I see many CEOs grapple with is finding the balance between the time to market and building for scale.

These challenges are not formidable, and as the clich goes, fortune favors the brave. So if you've been sitting on a great idea, make this favorable environment work for you. It's never been easier.

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