Yesterday, I had the pleasure of hopping on Zoom with betaworks’ John Borthwick and Matt Hartman to discuss the tech world’s adaptation to this new locked-down world, the future of new media and answer questions from the audience.
We discussed whether new media companies can raise capital right now, and touched on emerging trends around audio, voice, AR, live events, travel-related companies and many other topics.
It was a delight, and I’m excited to do more of these in the future.
For those of you who missed the Zoom, here’s a rundown of what we discussed (audio embed below).
How are you advising your portfolio companies as we deal with the coronavirus pandemic?
John Borthwick: The personality of founders is really coming to bear in a way that I haven’t seen before. Some founders are just frozen. They’re struggling to adapt their business. There was this thought that we would just pause for two weeks and everything would come back, and it’s now apparent that it’s going to be longer, and when things come back it’s going to be different.
Other founders are viewing this as an opportunity, adapting their businesses. Businesses that have had behavioral impediments to moving to be completely digital have an opportunity. For years, we’ve talked about digital cash. The reality is that here in the states, cash and checks worked pretty well. And so there has always been this behavioral impediment to going 100% to digital cash. But now that’s gone because using cash and checks is harder to do, and those things have a cost to them.
Lastly, I’ll just say that distribution has changed. I haven’t for 10 years seen anything like this distribution, with organic sharing of new and interesting things. People have shifted their communications channels into small, private groups in WhatsApp and WeChat, Telegram and Slack. Email, at least in my experience, has been de-prioritized. Sharing is happening in a different place and organic sharing is happening again. That’s really amazing and huge for startups right now.
Matt Hartman: You can split companies into a couple of different categories right now. There are companies that are primarily dealing with risk mitigation, whether their business relied on some real-life element or human behavior is changing away from their use cases. In the second category, there are companies that can be more opportunistic, where the shift in behavior towards their use cases, such as remote work.
In both cases, companies are asking how to manage cash and costs, but doing it for opposite reasons. One is to figure out how to grow and raise money. Do they wait right now? From a runway perspective, if they don’t have much time and were planning to go out in three months, do they go out now? The question I get is when to reach out. Is it right now, in two weeks?
The human beings who are making investments are shaping their lives around this. They are building a new stack as they work through this themselves, as they start homeschooling and working from home. I’ve advised companies to wait a beat while investors settle themselves.
Can new media companies raise capital right now?
John Borthwick: If your business is directly applicable to what is happening right now, then yes. If you are producing media that does local alerts, or local news, or local medical services or information around that, then I can say that, yes it’s the right time. But if your business is not directly applicable to what we’re going through right now, we’ve been counseling people to wait.
The first reason is that there is more uncertainty in the market right now than we’ve seen in generations. What the world is going to look like is so unclear that it’s very hard for people to make long-term bets right now. Secondly, people’s attention is so acutely focused right now. Everybody has somewhere between 10% and 90% anxiety in their life right now. It is present in every person on this planet to some degree. It’s just so challenging to bring an amazing idea to someone when their attention is so consumed by something else.
Attention is the initial gating factor here. Do I think valuations are going to come down? Yes. We’re going to see big changes in the market. It’s going to be a very different market for early-stage funding in six to 12 months.
There is typically a lag when these big things happen in the market. I remember in 2000 and in 2008, there was this lag between venture pricing and early-stage pricing and the cataclysmic event. In 2000, when some of the big, marquee tech companies got slammed, it took a while to go through the whole system. This time, there is no containment to this contagion. It’s affecting everyone up and down the value chain, so I think we’re going to see a reset much quicker on early-stage valuations.
What are some of the best tools for productivity and focus while working from home?
Matt Hartman: We have a portfolio company called FocusMate, which is pretty interesting. It’s a video chat where both parties are on mute. It was designed for people who want to block off time on their calendar to get a particular thing done. It’s not actually about communicating with other people, but you kind of lay out your goals for half an hour or an hour with the other person, go to mute and then catch up at the end on whether or not you accomplished your goals.
We are seeing this type of behavior in kids where they’ll be doing their homework with each other on Skype or Hangouts. Even if they’re not communicating, the feeling of being around friends and asking quick questions is a behavior people are experimenting with. It’s an interesting remote social tool that people are using for productivity, not to be social.
John Borthwick: In the recent data I’ve seen, I was really intrigued to see a spike in productivity apps usage. People are trying to replicate the office at home. They need all the tools to recreate an environment of productivity.
Are there any interesting trends happening right now in new media?
John Borthwick: We invest directly around the intersection of media and technology and so we’re particularly focused on new technologies to enable new kinds of media creation. We found a lot of work in the last couple of years around voice. And that’s started off in the era of podcasting. Now, it’s sort of fast-forwarded into the next-generation voice interfaces and thinking about voice as the primary interface to reaching your network. We have an accelerator program which is on deck right now for a set of voice companies that are all audio/voice-first. We definitely think that voice is a brilliant and underdeveloped, interesting channel for innovation.
Matt Hartman: Virtual reality has tended to focus on the consumer, and there are a bunch of interesting companies in the B2B space using VR in interesting ways. On the consumer side, we’re still waiting for that to really hit scale. If you break down VR to its parts, you have 3D models that copy the assets living inside of VR. Those same 3D models are what’s powering augmented reality. The technique used to create 3D models in an Oculus game is the same technique used to make a Snapchat filter. This is interesting because it means all the work that has been done on VR can get applied to the augmented reality space.
Another interesting piece: the camera is just starting to understand what it’s looking at. I think it was in July of 2017 Apple turned on its computer vision API and all of a sudden you had 300 million devices that are enabled for augmented reality. Now, I don’t know that holding your camera up to the world and being guided around is the actual use case we’ll see at scale. But the face filters are already at scale, and I think there are other cases that are starting to scale, as well.
And one other category I want to mention because I personally find it fascinating…
We’ve talked a lot about synthetic media and deep-fake detection and the rise of deep fakes. The underlying algorithms, that same technology, is now being applied to text, which sounds kind of trivial. An article written by a computer is not going to be as good. But that’s not actually what they’re doing. It’s able to understand. So you can now look at unstructured text as a software developer and use pretty easily available APIs, to be able to digest that and then come up with a way to create short-form text or longer-form content. It’s almost regurgitation. I think all of that is becoming really interesting.
When the pandemic is over, will live events go back to business as usual?
John Borthwick: Some massive live events have been canceled and paused. We’re seeing now the Olympics being delayed. But a ton of events are going on. At betaworks Studios, we’ve moved about 80% of our events to virtual and we’ve invented another 30% of events. And they range from five participants to 200.
I don’t think things are going to go back to normal entirely. We’ve opened the door and we can’t close it now.
Most events are going to have virtual channels to them from here on out. And because of that, many of them will have more permanence, where the community will grow over time. It’s a real opportunity to reinvent events.
Matt Hartman: There is a piece of serendipitous networking that’s missing. Whether you’re trying to network or because you want to find a like-minded person to help start your company or for friendship, that networking component has not been replicated in the virtual world. If, during this period, the technology gets invented and people are experimenting with virtual networking, I don’t think things go back to normal for live events.
What advice do you have for DMOs (destination marketing organizations) right now?
Matt Hartman: No one is looking at flight prices right now. My sense is, if I were to place a bet, people are going to be quite pent up after this quarantine period and really want to be able to go outside and travel and have experiences. There are a bunch of events, and some got canceled so those will be lost, but others are getting rescheduled. I think that’s a temporary decrease. And then in a month, or three months or five months, people will come back and travel again and demand will probably be higher.
I think this is temporary, not a structural change.
People talk on the investment side about flight to quality. For the last decade, investments have been focused on growth. Don’t worry about profitability. And then, when the economy turns, all of a sudden profitability becomes valuable to the investor as well. So you sort of have a double problem. If you’re a business with a sustainable model, it’s figuring out how to hunker down. But if it’s a company looking to do a land and expand strategy, that’s going to be a problem.
We also discussed the launch of Quibi at a time when people are bingeing hours and hours of content at a time, the long and short-term future of esports and whether or not there will rise an Eventbrite for digital experiences. You can check out the full audio recording in the embed below.
