torsdag 28. januar 2010

An investor’s take on the iPad — how to parse the hype

Paul Grim is a General Partner at venture capital firm SunBridge Partners and blogs on wireless issues at Grim Times.

As an investor, whenever a major consumer electronics launch creates a fuss (especially when it’s from the master himself), I try to step back and see the bigger picture. Is this a game changer in any way? Does it create real investment opportunities that didn’t exist before? What companies or technologies will be impacted by this? Can I make a buck here or not?
The other challenge is to try to minimize your own personal bias, and remind yourself that “I am not the market” (something VCs often have a hard time doing). Being a gadget-hound myself, this can sometimes be hard. So let me get my personal bias out of the way first:
I like it, I might buy it (if my wife lets me), the $499 price will get me into purchase mode, but of course I will buy the model with 3G. I might go for the cheap data plan at first, but will blow through it and move to the unlimited plan. I will certainly no longer be watching movies on cross-country flights on my puny iPod Touch. I will ditch my girly-man HP netbook that my friends tease me about. I will never again try to review a spreadsheet on a smartphone. I will use this on the couch while watching TV instead of getting up and walking over to my Mac (I will not use it in the loo, and if I did, I certainly wouldn’t admit it).
Whew. Glad to get that out of the way. So what’s the iPad’s impact on my investment thesis?
TechCrunch’s MG Siegler is right that the installed base of iPhone/iPod users will naturally migrate to this platform; hopefully that customer base is sufficiently large to attract the developers to create new and heretofore unimagined applications that take advantage of it.
I don’t think this will significantly impact the Kindle’s prospects, but I do think it bifurcates the e-reader market. Other e-readers are going to struggle mightily against two incredibly strong alternatives — one, the leading, lower-cost, elegant e-ink book platform, and two, the leading, higher-cost, aesthetically gorgeous, multifunction tablet platform. The only tablet/reader that has a chance of breaking into this market now will be the long-imagined magic scroll (and let’s face it, Apple will be releasing that at Macworld 2011). People have been predicting the outcome for months. But now it’s here, and no nooks or crannies can hide the painful truth that the duopoly is upon us.
This is another giant leap toward the new human-machine interface paradigm. It sounds obvious, but that makes it no less important. Apple is leading the charge on touch, Microsoft is doing the same on gesture with Natal, and Google and others (including one of our portfolio companies, Yap) are driving the bus on voice. All three are critical interface elements in my view, and there may be room for new ones.
Although I do believe there will be many successful apps on the iPad, I don’t believe they are generally venture-backed material. As with most of the iPhone apps, this will be a hits-driven business with little capital intensity; most of the successes will likely be angel or self-funded.
There are some obvious vertical segments that could be completely dominated by the iPad: healthcare, education, design, architecture, basically any field in which someone carries around a clipboard or simply has to move around a lot while working. Startups developing a holistic approach to such vertical solutions might indeed be worth investing in.
Of all the potential impacts, though, the evolution in the human-machine interface is the most intriguing, and the one I will be watching most closely.

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