Pando

Overview

Pando is a startup developing a new insurance like product focused around covering individuals in high volatility, winner take all careers.  Their product gives downside career protection for individuals in certain superstar careers such as professional sports or entrepreneurship where success is rare but the financial reward is often high.  To do this they take individuals early on in their high risk career and put them into groups or "pools" of people with other similar risk profiles and careers.  A portion of the future earnings (or equity for startup founders) above pre-defined thresholds of those who become the superstars are shared with the other members of the pool.  Basically they create a career safety net by allowing every member of the pool to invest in the success of every other pool member via a diversified portfolio.

An example that illustrates the underlying problem is the team's first market of professional baseball players.  A first round draft pick has an expected career earnings of $40M+ but has about a 50% chance of never playing a day in the MLB and earning nothing.  If this player is successful and doesn't suffer injuries they give up some of the $40M they could potentially make to other members of the pool.  On the flip side, if they aren't successful and earn nothing they would still receive income from other successful members of the pool they are in.  Basically, the winner super stars provide a safety net through a payout to everyone else in their pool who might not have had the same level or any success.

These pool sizes vary based on participant preference.  Individuals choose to pool for one of three reasons: lower career volatility, ability to invest in others, or a network of peers financially aligned with their success. Currently Pando Pooling is trying different pooling models where they either let pool members self select or use their proprietary predictive algorithms to offer optimal matching.

The team is currently less than 10 people and based in San Francisco, California.

Why I like Them

Pando Pooling's product idea is extremely innovative and one of those you wonder why no one had thought of decades ago.  In hindsight it seems obvious to give high volatility careers a safety net, but the devil is in the details with contract terms and the determination of who is in the pools of risk vital for their success.  The team has invented a novel solution for de-risking those with careers that face highly bifurcated outcomes.  Although extremely early they have several pools already running, and have found deep interest among customers with strong traction especially among professional baseball players.

Even more creative than their product itself is the firm's business model.  Unlike in traditional insurance, Pando Pooling will not be taking any premiums but instead will take a portion of a pool's payout, even if that may be years from when the policy is first created.  What this does is basically give the company a stream of cash generating assets (their pools or policies) that can be potentially borrowed against or even securitized and sold off to investors.  In the long term this might not just be a new form of insurance but a new type of securitization asset class similar to something like catastrophe bonds that are becoming more popular among institutional investors.

Overall, I love the innovation here and the creation of a new type of product, business model, and potentially a new financial asset class all in one.  However, there are extreme risks with the success of this business depending on accurately assessing career risks of members (having several pools where there are no payouts would likely affect popularity and sign up) as well as the lack of cashflow to the business itself, especially in the first few years before the pools start paying out.

Disclosure:  I have spoken to members of the team.

Some Predictions for 2018

With the end of the year 2017 fast approaching it’s time for some 2018 predictions.

• Crypto Mania Accelerates - However, Bitcoin’s ability as a money transfer platform will be questioned more and more due to its numerous scalability challenges.  Other cryptocurrencies will become the mainstream focus and front and center with leading candidates including Ether and Ripple.  Initial Coin Offerings will continue but we see will the first serious cryptocurrency regulation from world governments ranging from the US to South Korea.  This will cause a pullback even though I doubt it will stop the mania long term.  The number of crypto lawsuits will rise as more tokens are revealed to be scams.  Tezos is just the beginning of the legal mess that will emerge.  We certainly haven’t seen peak crypto yet.

• Voice Technology Continues to Emerge - We will see better and more accurate voice interfaces as the year goes on, with novel applications starting to emerge especially with Alexa.  However, it won’t go mainstream in 2018 and will likely be several more years before voice sees mass adoption and overshadows keyboards and touchscreens as the interface of choice for computing.

• The Juggernaut of Amazon Keeps Growing & Winning - Amazon will continue to expand into more markets and dominate them.  From hints in 2017 it seems like pharmacy and healthcare along with retail are the next major areas the company will push into.  Either way I’ll be betting on Amazon wherever they go.  If the stock market bonanza we saw in 2017 continues in 2018, we will very likely see Amazon as the first or second trillion dollar market cap company.  I give it a 30% chance that we see another notable acquisition such as Whole Foods that we saw in 2017.

• Augmented Reality (AR) Gains Some Steam but it Will be a Long Time Before it's Actually Usable - AR will continue to emerge but is certainly no where close to prime time.   Magic Leap's recent announcement of its glasses and developer offering will help this trajectory but the technology has a way to go.  Apple will potentially open the kimono with regards to what it's developing for AR in 2018 but I wouldn’t be surprised if it isn’t until 2019 that we get more solid product details.  The cell phone will continue to be the platform that promotes and grows AR usage by consumers.

• Softbank and Startups - Softbank’s buying spree and pumping up of startup prices will continue pushing up startup valuations, especially with their new Vision 2 fund rumored to be double its first fund at $200B.  This will make growth and later stage investing more competitive but will prove a boon to early stage investors by providing liquidity.  It will be a great time to be a startup founder who’s company has hit the growth stage.

• Uber - I think we’ve seen peak Uber in 2017 and the company will be on a slowly downward trajectory for the next several years.  It will stabilize its core business and do the long overdue house keeping, but won’t see the huge leaps in its valuation any more.  Unlikely to become a Groupon like story anytime soon but certainly could be in the next five to ten years.

• Self Driving Vehicles will Still be an Early Stage Technology - We will see the first self driving cars on the road as more than test vehicles.  My bet is it starts with the trucking industry and grows faster there before consumers really start any sort of adoption.  However, we are still years away from any sort of mainstream consumer offering and consumer trust and adoption.  

• Tesla - As much as I love this company and its products, the numbers and personnel changes reveal serious difficulties with the business model.  As long as capital remains cheap they will continue going but in the event of any sort of recession or pullback in the capital markets they will be severely pressed to continue as a going concern.

• Tech as a Whole - We will see the first notable regulatory crackdowns on big tech companies (long overdue) from both the US and Europe.  We will likely see this on multiple fronts from the monopoly’s of the big 4, the fake news of the media platforms, to the business practices of Uber.

• AI Hype will Cool Down (Just a Bit) - The big technology investing theme of 2017 has been AI with every company and startup suddenly having an AI strategy.  Of course most of these aren’t actual AI but more traditional statistical analysis and modeling repackaged for AI hungry investors.  I think investors will recognize that the pace of the technology isn’t as fast as they think right now and there is still a ton of work to be done before it has bottom line impacts on consumers and businesses.  

Either way I'm excited to see what 2018 brings.

Rapid Flow Technologies

Overview

Rapid Flow Technologies is an early stage infrastructure startup working on modernizing traffic systems.  Their flagship product is a smart traffic lighting system called Surtrac.  Current modern day traffic light systems are hard programmed around average traffic flow, but are not adaptive, making them extremely inefficient during most of the day.  Surtrac use AI and cameras that continuously study traffic patterns so they can adjust lighting systems on the fly.  For example, if cameras see a backlog of cars at one point of intersection it would automatically make the green light last longer to clear the backlog.  If no car was in the left turn lane, the system could skip the left turn arrow for that cycle.  The system also communicates its data to nearby traffic lights to help them anticipate when they will receive traffic.

The team was started out of Carnegie Mellon University and is based in Pittsburgh, Pennsylvania.  

Why I like Them

I like that they are an AI company building something that quickly adds tangible value and efficiency visible from day one.  Rapid Flow Technology's systems reduce travel time by 25%, reduce wait time at intersections by 40%, decrease stopping by 30%, and reduce overall vehicle emissions by 20%.  Intelligent Transportation Systems (ITS) and smart infrastructure is a high growth area over the next 2 decades driven by the adoption of autonomous vehicles.  Products like Rapid Flow's are the beginnings of a modern traffic management and vehicular system which will make transportation much more efficient than it is currently.

Disclosure:  All information is from publicly available sources, I have not had any contact with a member of the company or its investors.

Crypton Future Media

Overview

Crypton Future Media is a startup that does sound and music related software including sound synthesizers and music library manipulation.  The company licences its software to large and small companies across a number of industries including everyone from small music stores to Nintendo, Apple, government organizations, traditional media companies, etc.  In addition the company has an eCommerce business for mobile devices including ringtones.

Most noteworthy of their products is Hatsune Miku a software singing voice synthesizer that has morphed into a community constructed digital persona and cyber celebrity throwing sold out live concerts everywhere from Los Angeles to Tokyo.  To really grasp the concept see this amazing video of a packed concert as a piece of voice software attracts cheering legions of fans.  Hatsune Miku has over 100,000 unique songs, millions of social media fans, and hundreds of thousands of music videos all created by a global creative fanbase.  With the smashing success of turning a piece of software into a celebrity persona,  Crypton has created more cyber celebrities around their other voicebank products and software with similar results and fanbases being created.  Amazingly this allows Crypton to monetize not just by selling their software, but also through concert ticket sales and character licensing of their products.

The team is based in Sapporo, Japan.

Why I like Them

I like Crypton because they have a fascinating, almost science fiction like business by giving charaterization to software that has inadvertently become the first ever cyber celebrity.  The company has even gone as far as assigning a gender (female), an age (a perpetual 16), height, weight and blood type to make "her" more relatable to fans.  The idea of making a software product into a humanoid figure (a celebrity no less) with human traits boggles my mind every time I think about it.  The fact that it worked beyond their wildest expectations further blows my mind.  This humanization of a product (an intangible product like software no less) is brilliant and could very well be the next generation of marketing.  You aren't buying a product, you are buying a piece of and interaction with a celebrity.

The iPhone is the most successful consumer product in history and even it is not given a persona or celebrityhood status by its fans.  Crypton has broken innovative new ground on what could very much be a new type of product and marketing strategy - digital celebrities wholly owned by corporations but with their content created by a global fan community.  I can't wait to see what happens when this concept meets more traditional AI technologies!

Disclosure:  All information is from publicly available sources, I have not had any contact with a member of the company or its investors.

Hatsune Miku, Crypto Future Media's most successful product and the world's first digital celebrity.

SkySafe

Overview

SkySafe is a software startup that offers a solution for preventing drones from accessing restricted areas.  It uses radio wave technology to monitor airspace and tag drones as permitted to fly in that area or not.  They are then able to hijack the drone from its pilot and force the drone to land.  Their counter drone technology is of strong interest to the defense and public safety industries. 

Details on the actual technology itself are currently under wraps.  However, industry experts' best guess is that SkySafe hijacks the drone's radio communication channels and trick the drone into thinking SkySafe's control software is actually the pilot.  This is basically a physical version of the man in the middle style attack with SkySafe's antenna's being physically closer to the drone then the drone's pilot's transmitter and so able to overwhelm their signal.

The team is based in San Diego, California.

Why I like Them

I have often wondered as drones become more prevalent (~4M drones are expected to be sold this year), how agencies and law enforcement will control them - SkySafe has an answer.  As drones are used more frequently in every day life and become more common for tasks like package delivery, law enforcement needs an easy and safe way to control and restrict them.  This type of technology is especially needed as recently the first drone collision with a commercial airplane occurred in Canada.  Although extremely early stage, SkySafe is innovating to fulfill an unmet need in the market - and a need that will grow extremely rapidly in the coming years.  Once they prove out and test the technology commercially it is easy to see them being acquired by a large defense or cybersecurity company.

Disclosure:  All information is from publicly available sources, I have not had any contact with a member of the company or its investors.