Areas of Investment Interest

I'm regularly asked what kinds of investment areas I think are of interest.  I find that to be a generally broad question, since overall I'm interested in fast growing innovative, transformative, and defensible businesses. Those kinds of companies could be in almost any industry and come up from left field.  So, I wish I could be more specific about the next Google or Cisco or Crocs, but if I knew exactly what those were I would go start them instead of seeking to partner with entrepreneurs smarter than me.

Given that, here are some themes that I think make sense today (this post has somehow gotten out of hand lengthwise).

• Internet business that broadly address the female demographic, both content-wise and commerce-wise. Women spend $0.85 of every dollar spent in the United States, yet a mere fraction of the web is devoted to them, both from a media perspective and commerce perspective. Glam, CafeMom, iVillage, BlogHer, and SheKnows have all built impressive businesses, but something is still lacking in this category.
• Web based software & services focused on local businesses and/or small businesses that become deeply integrated into the business process.  Both small and local businesses are in dire need of easy-to-use enterprise-grade software solutions that can help them run more efficiently, acquire customers more cost effectively, streamline their supply-chain, manage employees, etc. Obviously, Salesforce is the big kahuna but businesses like Intacct, OpenTable, ZocDoc, Carbonite, SeamlessWeb, Angie's List, and MindBody are examples of concepts with this focus.
• The migration of enterprise software to leverage web integration; the shift to SaaS/xSP, and delivery, license pricing to term for instance.  Most of the incumbents in software are seemingly incapable of evolving their product suite, recreating pricing models, and adapting to a different sales process.  Across dozens of vertical and horizontal plays, new startups like SuccessFactors, Xero, xactly, Less Software, Accept, or Zendesk seem to be making headway.
• Companies that think differently about advertising (not just banner ads) and view digital media as an evolving opportunity in out-of-home advertising, business-to-business media, mobile location based services, etc.  The vast majority of ad dollars need a high quality home in large buy formats and most of the existing alternatives to television do not yet suffice, yet almost everything around is now networked, capable of reaching consumers 24/7 (not just in front of the PC or the TV).  Businesses such as AdSpace Networks, JumpTap, FourSquare, Paxfire, etc are working on big ideas.
• Big opportunities lie in the localization of ecommerce, of the internet, where companies bridge the gap from the internet being pervasive & global to consumers being local.  Such opportunities tie heavily in to the broader theme of personalization of the web where web-enabled traditional brick & mortar businesses can thrive.  The thinking behind Milo, BlackboardEats, Et.sy, HomeAway, H.Bloom, SeamlessWeb, and FishBowl are some great examples.
• Vertically focused software solutions such as targeted business software products addressing a particular vertical/niche need are of interest. Within many industries, there exist specific applications that improve the industry by leveraging the internet to deliver novel business services.  Companies like LiveOps in the call center business, FitLinxx in the health segment, Black Arrow & Visible World in the television space, Tablet Hotels in the hospitality arena, The Active Network in sports & events, or ThreeStage Media in the conference industry.
• Online education presents an enormous opportunity for further innovation.  With the digitalization of content and the democratization of publishing, traditional businesses catering the education sector are in dire need of visionary change.  Hybrid businesses that leverage & combine both online tools and offline physical attributes to improve curricula are poised to succeed.  Likewise, opportunities exist in the areas of collaboration and the broken down geographic borders that once separated education. Companies like Tutor.com, Lynda, Knewton, Sangari, Udemy, Chegg, 2tor, TenMarks, Revolution Prep, and Flat World Knowledge are all interesting, but there is way more to go.
• Business that are global in nature, leveraging the internet, can now reach & serve several billion end users without needing more than one office. Companies like OLX, Spring Wireless, and Skype are impressive businesses, but there should be room for more globe-flattening ideas. Obviously, outsourcing is a well established trend, but an emerging middle class in the BRIC countries will continue to be a great source of potential monetization.
• Growing data sets within the enterprise or on the web have created opportunities for business intelligence, analytics, information organization, and real-time web businesses. Companies that create businesses around the management and extraction of value from enormous data sets are very compelling.  Some examples are Gracenote, WeShop, or IDAnalytics.
• Broadly speaking, the entire healthcare industry is ripe for innovation.  From medical software to data management to enterprise applications to consumer empowerment tools, there are great businesses driving value to the entire industry.  Web based tools like ZocDoc, networking monitoring solutions like WellAware & Living Independently, and business services technology companies like AirStrip, Castlight, AwarePoint, & Epic Sofware are all working on great opportunities.
• Technology companies servicing the financial services industry, specifically within the areas of payments, web-enabled customer tools, and fraud & security, can solve & address real pain-points and needs.  Interesting companies like VenMo, Andera, Square, and PrivaSys are all working on big ideas.
• The growing shifts in cloud computing, SaaS, or xSP represent broad opportunities to invest in innovative infrastructure companies.  Enterprise focused storage companies like Nirvanix, end-user tools like Dropbox, application vendors like PivotLink, management services like Okta, hosted service providers like AppRiver, security services like Panda Software, or authentication applications like Ping Identity all address massive needs within the hosted universe.

There are a couple of other tectonic shifts that are early in the making, but will likely spawn some interest businesses.

• Online video is a massive whitespace driving tremendous change within the television industry, however regulation, piracy, copyrights, and quality are all mostly unclear for the time being.
• A shifting communications infrastructure, led by the migration to VoIP is only getting started.  The integration of communications tools into every aspect of business is potentially far reaching.

Generally speaking, I'm a fan of companies that aim to be big, industry changing plays, by leveraging software and the interweb to be disruptive.  I'm also partial to businesses models/products that are elegantly simple. In other words, their products/solutions need to be low in friction, easy to use, understand, sell, implement, execute, etc.  And, accordingly, a reasonably high gross margin that can be defended over time.  Obviously, long-lasting content, repeatable products/services, and recurring or subscription revenues are all compelling business model features.

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