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The Bloomberg Terminal and Decreasing Marginal Costs of Data

23 Mar

Matt Turck offers a great take on the competitive marketplace for business data. Bloomberg has been the gold-standard for financial data and, obviously, deserves all the praise that is heaped upon it. As many people speak of the decreasing marginal costs of data and information, Bloomberg is still a thriving business with 315,000 subscribers and will likely continue to be one for the foreseeable future. As Turck notes, the network effects are indeed one of Bloomberg’s greatest strengths.

Legions of financial analysts are trained to use the terminal and until something comes along that improves efficiency and ease of us, Bloomberg’s preeminence as the leading financial data resource will continue. What’s more, financial companies are unlikely to cancel their subscriptions until a proven product is available. As Turck posits, extracting the signal from the noise is probably the most possible technological advancement that could cause some headaches for Bloomberg.

Of course, these companies are still confounding the reality of dealing with big data and how to properly translate their analytical assessments into positive returns. Meanwhile, Bloomberg’s infrastructure is already positioned to adapt to those changing trends. The future of data is indeed an exciting one.

matt turck

In the eye of some entrepreneurs and venture capitalists, the Bloomberg terminal is a bit of an anomaly, perhaps even an anachronism.  In the era of free information on the Internet and open source Big Data tools, here’s a business that makes billions every year charging its users to access data that it generally obtains from third parties, as well as the tools to analyze it.  You’ll hear the occasional jab at its interface as reminiscent of the 1980s.  And at a time of accelerating “unbundling” across many industries, including financial services, the Bloomberg terminal is the ultimate “bundling” play: one product, one price, which means that that the average user uses only a small percentage of the terminal’s 30,000+ functions.  Yet, 320,000 people around the world pay about $20,000 a year to use it.

If you think that this sounds like a perfect opportunity for disruption or “unbundling” at…

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Tesla, Local Regulations, and the New Normal for Innovators

14 Mar

Tesla’s latest spat on its direct-sales model with the state of New Jersey is dumb, but it’s nothing new for the company or other rising start-ups. The case is another piece in a growing trend of local regulations stifling innovative companies. As the sharing economy has grown and technological innovation has made products electric cars affordable and reliable, local governments and regulators have found ways to impede their ability to reach consumers. Some research has discounted the impact of local regulations on start-up companies and entrepreneurs, while others havehighlighted significant regulatory burdens facing small businesses.

You cannot discount the real world examples of cases where state and local governments issued regulations that impair business operations of growing companies. There are Uber’s feuds with city governments and taxicab monopolists in Chicago, DC, Denver, Miami, Nashville, and San Francisco. Airbnb is facing its share of problems in New York City. California’s Bureau for Private Postsecondary Education is leading a crack down on ‘learn to code’ bootcamps. Let’s not forget the culinary innovators in local food truck scenes that are constantly hopping over regulatory hurdles.

In the case of Tesla, auto dealers are worried that this case will set a strong precedent for automakers circumventing dealers to directly sell to consumers. This despite the fact that buying a car is one of the least enjoyable consumer experiences. Tesla has faced similar issues in Arizona, North Carolina, Texas, and other states. In fact, Cornell University’s Journal of Law and Public Policy notes, “the franchise laws of at least 48 states ban or limit Tesla sales—get this—to prevent unfair competition. Franchise lawsrequire automakers to sell their cars exclusively through dealership networks.” There will be plenty of more battles down the line. Overall, these restrictions will hurt Tesla’s long-term viability to offer an automobile that will be more affordable in the coming years due to economies of scale and product innovation.

The surprising nature of these regulatory battles is that the come at a time when state and local governments are devoting significant energy and resources to streamline regulations and promote technological advancements to aid the local permitting process. What’s even more startling is that nearly every major city is supporting entrepreneurial incubators and vying to attract important venture capital funding to foster vibrant start-up environments. Yet local governments are doing all they can to limit the ability of start-up companies to grow and provide citizens with access to new services. Isn’t that a pity?

Why Is Funding the Future So Hard?

9 Feb

Funding the future has been a difficult task in Washington. Historically, the Federal government spends resources on important things like education, basic research, and infrastructure. These investments, in some form or the other, serve as conduits for economic growth. Miles Kimball from the University of Michigan and Noah Smith from Stony Brook University have put-forth a not-so-radical idea that would help solve this problem: treat government investments differently from other kinds of government spending through a separate capital budget. Expenditures in the capital budget would be marked as “investment in the future” along with an established set of criteria:

1) If experts agree that an expenditure will raise future tax revenue by increasing GDP, then it belongs in the capital budget. If it can pay for itself out of extra tax revenue in the future then it should be 100% on the capital budget.

2) Even if an expenditure will not raise future tax revenue, it can count as a capital expenditure if it is a one-time expenditure—that is, if it makes sense to have a surge in spending followed by a much lower maintenance level of spending in that area.

Government funding brought a network of interstates, expansion of ports, and rail lines that improved the flow of commerce throughout the United States. Funding of basic research allowed for the discovery of the Internet, GPS, and basic compounds that served as the foundation for important medical breakthroughs. Kimball and Smith’s policy proposal could be accompanied by test cases of how government contracts can be improved and streamlined, establish requirements for hiring the long-term unemployed, and develop a data-driven analysis that can better assess outcomes of government spending.

There is a more important reason why Kimball and Smith’s policy proposal matters: the reality that Congress has cut non-defense discretionary spending by $1.5 trillion over the past 10 years. Check out a chart from the Center on Budget and Policy Priorities:

Screen Shot 2014-02-07 at 1.05.17 PM

The concept of capital investment for public goods is an important discussion to have. Government plays an important role in the private sector economy to supply these basic investments. In the past decade, there has a been a major squeeze on these resources. This comes as America’s infrastructure receives dismal ratings and the capital investment necessary to overcome this shortfall is sizable. The reality is that, as a nation, we are spending much more on the present than the future.

The New York Times’ David Leonhardt, in his Kindle bookHere’s the Deal, probes this important topic:

“Does the country have the right balance of spending on the present and spending on the future? It’s hard to argue that the future is faring particularly well right now. Not only are we leaving future generations, in all likelihood, with large debts to pay. We also don’t seem to be bequeathing them the maximum means to pay those debts.”

And New York Times’ columnist David Brooks has echoed similar thoughts:

“The future has no lobby, so there are inexorable pressures favoring present consumption over future investment. The crucial point is not whether a dollar is spent publicly or privately; it’s whether it is spent on the present or future.”

Kimball and Smith’s proposal of the separate capital budget is directly aligned with both the perspectives of Leonhardt and Brooks (hardly ideological soulmates). Otherwise, these investments in future stock require more creativity. And that’s why the Obama Administration’s plans for ConnectED is such a huge deal. ConnectED will have funding commitments totaling nearly $3 billion in investments in the future. First, the Federal Communications Commission (FCC) announced a $2 billion commitment over the next two years to provide high-speed broadband Internet access to 15,000 schools and 20 million students. These efforts will connect 99 percent of students to high-speed Internet. Beyond the funding through the FCC, the Obama administration worked with major technology and telecommunications companies including Apple, AT&T, Autodesk, Microsoft, O’Reilly Media, Sprint, and Verizon have committed more than $750 million in direct funds and in-kind product contributions directly to classrooms.

These efforts are a welcome step in making broadband a public good, much in the same way that highways and runways are. We have a seriously flawed and short-sighted approach to funding basic programs that the government invested in throughout history. There are absolutely viable policy alternatives that can appease both Democrats and Republicans to make these efforts work.

Is Cavs Owner Dan Gilbert The Next Sports Tech Visionary?

20 Jun

DG

Dan Gilbert is the entrepreneurship messiah for the Rust Belt. His latest endeavor through the start-up accelerator, Bizdom, could become a game-changer for the future of sports technology. Gilbert, majority owner of the Cleveland Cavaliers and lover of comic sans, launched Bizdom, a non-profit start-up accelerator for tech firms, in Detroit in 2007 and opened doors on a Cleveland office in 2011. His venture capital firm, Detroit Venture Partners, has investments in 50 companies. Capping it all off, he is also leading Detroit’s effort to attract the 2014 X-Games. Gilbert’s energies and investments aim to reinvigorate the city centers of both cities and transform each into high-tech hubs.

The Bizdom program requires applicants propose an idea for a technology-based start-up with the goal of a prototype or sales to a first customer within 90 days. Bizdom provides an initial investment of up to $25,000 in seed funding in exchange for an 8% equity stake in the venture. Since Bizdom is a non-profit, the returns on seed funding are used to fund future businesses in the cities of Detroit and Cleveland. As part of the Bizdom program, the start-up is provided with office space, mentors, and introductions to outside investors for further funding down the road.

Of course, Gilbert is as qualified as any for this venture. Before he bought the Cavaliers, he founded Quicken Loans. The accelerator has acquired a portfolio of 35 companies between the two offices, including 15 in Cleveland. One company, MascotSecret, who joined Bizdom in August 2012, blends Gilbert’s two passions–entrepreneurship and sports. The company is yet another player in the very competitive field of seat upgrade apps such as ExpApp and LetsMoveDown.

MSMascotSecret has partnerships with Gilbert’s Cleveland Cavaliers, Lake Erie Monsters (Colorado Avalanche’s AHL affiliate), and the Cleveland Gladiators of the Arena Football League. MascotSecret’s spokesman, Jake Goodman, talked about working through the Bizdom program: “At Bizdom, we have an open workspace where it is amazing to work with other entrepreneurs, share ideas, while all working towards the same goal.” The company has plans to rollout some new partnerships towards the end of the summer.

In addition to the great mentors at Bizdom, Gilbert himself frequently offers direct advice, feedback over social media, and consults the start-ups in the accelerator. Goodman says, “Dan Gilbert has been a really fantastic advocate and an amazing mentor for us, he knows how important it is for fans to have a good time in his arena and is very excited about the ability for fans to pick the best seats.  He is a great resource for us.  When fans give him suggestions via Twitter, he loves forwarding the feedback to us; we are very fortunate to have him.”

MascotSecret and their fan-facing experience platform is just the beginning for what we hope will be a full-scale effort to develop sports tech start-ups through the Bizdom accelerator. Athlete performance seems to exceed our expectations yearly at combines, on the field, and the new crop of phenoms that emerge each year. The way we experience live sporting events and cheer on the teams we love is ripe for disruption. Innovative ways to enhance fan engagement, new payment platforms, digital ticketing, improved customer service efforts, and data analytics are all making their way into the marketplace. The market is still emerging and visionaries like Dan Gilbert can help shape that future.

Final Four of Seat Upgrade Apps Bring Fierce Competition Away From The Court

20 Jun

The wave of technological innovation that has washed over the economy and society in the past five years has been remarkable. The Internet and mobile broadband have enabled an unprecedented level of novel technologies, new companies, and service platforms. Sure enough, technology is slowly changing the sports landscape as well. The ticketing business may soon be entirely digital, innovative algorithms have redefined statistics, and media giants are shifting their content to online and mobile platforms. Among all this, fans now have the ability to upgrade their seats during a game or concert directly from their smartphones.

Competition in the seat-upgrade market is as fierce as the current crop of NBA and NHL playoff matchups. Four apps are currently vying for market share and attention of professional and collegiate organizations across the country. Not only do they provide an extraordinary service for fans, but also an enormous boon for organizations and management. The combinations of social media and apps that connect organizations to fan bases have enabled them to obtain fresh new data collection on consumer behavior. These technologies provide direct analytics that will improve the overall fan experience.

Teams will use the new data to focus on generating revenue per-fan during games, optimize customer service, improve pricing, and tailor marketing strategies directly to the individual. Each business is competing in a marketplace that’s fast-paced and quickly evolving.  We’ve done our own market research to present the advantages and disadvantages between the seat moving and in-game experience apps available to fans of their local teams.

ExperienceExperience (ExpApp)

Debut: December 2011

Hometown: Atlanta, GA

Roster: Arizona Diamondbacks, Atlanta Braves, Atlanta Falcons, Atlanta Hawks, Boston Celtics, Chicago Fire, Colorado Avalanche, Colorado Mammoth, Denver Nuggets, Georgia Tech, Kansas City Royals, L.A. Clippers, L.A. Galaxy, Miami Marlins, Minnesota Twins, Oakland Athletics, Phoenix Suns, Portland Trail Blazers, San Jose Earthquakes, University of Southern California, and University of Tennessee.

What’s to Love: The start-up was first to launch in this competitive marketplace and their roster of organizations is reflective of that advantage. The company boasts business relationships with organizations in five major professional leagues and collegiate athletics. Their product is also the official upgrade partner of Major League Baseball’s ‘At The Ballpark’. ExpApp integrated with the organization’s native app, and is very user-friendly. The start-up has a well-defined brand and very strong relationship with its customer base judging from its social media accounts. ExpApp has built a fantastic bullpen of organizations to work with and is clearly the leader in the marketplace.

Needs Some Work: Doing initial research into the company, it took quite awhile (in Internet time) to find the company. Some basic SEO work should help fix that. Not having a presence in the app store as a mobile platform company could end up being an issue. Lastly, their product fails to offer discounts on concessions and merchandise. Giving fans the incentive to spend more inside the stadium will make for a better partnership down the line.

LSLeapSeats

Debut: December 2012

Hometown: Miami, FL

Roster: Miami Dolphins, Miami Hurricanes

What’s to Love: LeapSeats launched in December 2012 for Miami Dolphins home games. The start-up is developed under the RSE Ventures umbrella, owned by Dolphins owner Stephen Ross. The company’s backers certainly provide for funding sources and network to help scale its business with new partnerships. The company has received great press coverage and PR for its app.

Needs Some Work: LeapSeats has put a lot of effort into public relations to gain good press from Forbes and other outlets, but it’s lacking on the partnership side. Given its roots, it’s surprising that ExpApp snapped up the Miami Marlins as a partner. That’s not good news for LeapSeats. The ticket integration and partnership process takes significant work on the front-end, so hopefully LeapSeats will have some surprises in store for the 2013-14 seasons.

LMDLetsMoveDown

Debut: November 2012

Hometown: Washington, D.C.

Roster: Memphis Grizzlies, Brooklyn Nets, University of Maryland

What’s to Love: Launching in November 2012, LetsMoveDown developed a native app with unique integrated features such as the use of a phone’s camera to scan tickets, push notifications, and a user-friendly experience. LetsMoveDown is unique in respect to its ability to not only sell unused inventory, but also the ability for season ticket holders to sell unusable tickets to other fans at the game by using the LetsMoveDown Season Ticket Holder Portal. Fans that have the LetsMoveDown app are given special offers and rewards from the organization and can use the autopilot feature to be automatically upgraded. The platform also allows teams to reward specific fans with offers and upgrade tickets during the game directly through the app.

Needs Some Work: LetsMoveDown offers a slightly differentiated product, which might allow them to be more competitive in the future. However, the company’s web presence and marketing efforts lags well-behind PogoSeat’s. And LetsMoveDown can’t quite hang with the impressive roster of clients that ExpApp has acquired.

PGPogoSeat

Debut: 2012

Hometown: Santa Monica, CA

Roster: Golden State Warriors, Detroit Pistons, Stanford University, San Diego Broadway, Comcast Theater, Darien Lake

What’s to Love: PogoSeat debuted in 2012 and offers seat upgrades through diverse offering of iPhone, Android, and mobile web applications for its  user-friendly app. PogoSeat’s app also allows the user to sign in through its social media accounts, which is an added bonus for its partner organizations. The company has a robust marketing effort and the strongest web presence among its competitors. PogoSeat boasts a roster of strong NBA franchises and Stanford University compliments the company’s brand. PogoSeat is also the only company to have a partnership with an entertainment venue. The start-up’s access to Silicon Valley also has important value.

Needs Some Work: There’s a lot to love about PogoSeat, but there are a few down-falls. The company doesn’t offer in-game rewards for fans on merchandise, concessions, and other inside purchases. PogoSeat doesn’t do a great job explaining the differentiation between its sports product and live entertainment product—maybe there isn’t much difference.

While each of the apps have unique qualities and characteristics that will allow them to build a successful company, ExpApp has a clear head-start in this market. Being the first-mover doesn’t necessarily guarantee long-term viability, but they have a longer track record of success in comparison to PogoSeat and LetsMoveDown. PogoSeat and LetsMoveDown are charging from behind, both offering fantastic, unique services. LeapSeats has the financial backing and network potential to surprise users. It’s fair to say that when the 2013-14 professional and collegiate leagues get going, these companies will be on a first name basis with many sports fans.

This article originally appeared on SportTechie on May 27.

Video

Friday Tunes :: Wilco – Sunloathe

10 May

“Sunloathe” from Wilco’s “The Whole Love” (2011) on dBpm Records. Directed by Peter Glantz. Art by Nathaniel Murphy.

More Thoughts on Patent Reform & Building a Pro-Innovation Economy

30 Apr

I wrote about the introduction of the SHIELD Act a few weeks ago and the pressing need for further reform of the U.S. patent system. The bill from Rep. Peter DeFazio (D-OR) and Rep. Jason Chaffetz (R-UT) won’t see the House take action with immigration reform and restructuring of the tax code coming down the pike, but support for the bill is gaining steam. Presently, the Federal Trade Commission (FTC) and Department of Justice (DOJ) are taking public comments on the issue of patent trolls. Groklaw highlights one of the more compelling briefs from Barnes & Noble that sheds light on just how abusive patent trolls are on companies:

The patent system is broken. Barnes & Noble alone has been sued by “non practicing entities”—a/k/a patent trolls—well over twenty-five times and received an additional twenty-plus patent claims in the last five years. The claimants do not have products and are not competitors. They assert claims for the sole purpose of extorting money. Companies like Barnes & Noble have to choose between paying extortionate ransoms and settling the claim, or fighting in a judicial system ill equipped to handle baseless patent claims at costs that frequently reach millions of dollars.

B&N is asserting that the trolls’ litigation free-for-all is something akin to “death by a thousand cuts”. The company is spending tens of millions defending against a tidal wave of litigation and enduring a litany of claims that are without merit. While there are rules permitting groups to seek sanctions and recover attorneys’ fees, these awards are almost always limited to more extreme cases. These tens of millions spend on legal fees could be spent on developing new products, marketing, and other operating expenditures. Further, Mike Masnick at TechDirt highlights a key section of the brief stating that the abusive practice of the trolls directly violates the original intent of patents in the Constitution whose purpose is to promote the progress of useful arts.  B&N contends that since the legal rights afforded to the patent is not used in manner set forth by the Constitution, then it should be seen as unconstitutional:

The Patent and Copyright Clause grants Congress the power “[t]o…promote the Progress of Science and useful Arts,” not science fiction and litigious arts. (Article 1, Section 8, Clause 8 (emphasis added)). But the current system allows trolls to pursue fantastic allegations—claims that would be laughed out of the room in actual scientific or technical circles—in endless litigation that taxes and taxes true innovators while making no meaningful contribution to society.

The B&N filing is worth a read for anyone interested in fixing our innovation system over the long-haul. Further food for thought on the innovation front, the Mercatus Center’s Jerry Brito had George Mason University’s Professor Alex Tabarrok on his ‘Surprisingly Free’ podcast to talk about Tabarrok’s book, Launching the Innovation Renaissance: A New Path to Bring Smart Ideas to Market Fast, and his ideas on how to fix our innovation system.  Tabarrok discusses America’s declining growth rate in total factor productivity, what this means for the future of innovation, and what can be done to improve our long-term economic prospects:

According to Tabarrok, patents, which were designed to promote the progress of science and the useful arts, have instead become weapons in a war for competitive advantage with innovation as collateral damage. College, once a foundation for innovation, has been oversold. And regulations, passed with the best of intentions, have spread like kudzu and now impede progress to everyone’s detriment. Tabarrok outs forth simple reforms in each of these areas and also explains the role immigration plays in innovation and national productivity.

The future of the American innovative economy could be decided in 2013. Passing immigration reform, restructuring the tax code that encourages investment in innovation, the adoption of crowdfunding rules,  and stopping abusive lawsuits that tax our tech companies are four very huge steps towards that reality.