Majority World Report 2013
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Transcript of Majority World Report 2013
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Majority World Report 2013
Risks & Rewards
@capeDublin Web Summit, 2013
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Some home truths about business of innovation
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10k business ideas1k firms started
100 VC funded
20 IPO
2 market leaders
Nobel Prize in
Economics2006
ProfessorEdmund Phelps
Less than 10% of business ideas even get started
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55% of US venture capital investments are written off
x<0.5 0.5<=x<1 x=1 1<x<2 2<=x<5 x>=50
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% Cost % Value
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62% of EU investments are written off
x<0.5 0.5<=x<1 x=1 1<x<2 2<=x<5 x>=50
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% Cost % Value
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But the capital which survives, backs businesses accounting for 21% of US GDP…..
1978 1981 1987 1995 1995 1997 1999 1999 2005
and $1.4tn in new market value
creating 440k new jobs
with $545bn in new annual revenue
serving >1bn customers
Source: HIS Global Insight
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And in Europe we are starting to build waves of similar dimensions
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So are venture capitalists just bad at assessing risk or do they really understand
innovation economics?
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Aren’t accelerators just applying logic of venture economics even more
aggressively….?
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And marketplaces adding further scale to open up risk adjusted and scaleable funding to new sectors…..
Creative & Consumer Electronics Startups
Microfinance SMEs
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We’ve had almost 60 years of evidence on how innovation economics can drive explosive social and economic value
creation…..
Semis
Hardware
SoftwareInternet
Mobile CloudNetworking
Crowd
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But can venture’s real legacy be a broader understanding and application of innovation
economics?
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Extreme risk of 62% write-offs is definitely not for everyone, including many entrepreneurs and venture
investors…...
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In fact a 2% loss ratio for banks lending to SMEs is already pushing the
boundaries.
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But there is so much cash out there….
$266bn FTSE100($5k per UK citizen)
$85tn global AUM($12k per human)
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Can’t we be more adventurous on how we allocate and manage it?
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We know 7% of small companies create >50% of new jobs
.
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We know innovation creates priceless economic and political capital
.
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So given the evidence, shouldn’t we be prepared to risk more on radical
innovation?.
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Even in the US we are still falling short
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Which is a shame, as radical risks create biggest rewards….
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.
There is a huge area between 2% and 62% loss, surely we can loosen our view of risk a little?
2%Corporate
Finance
62%Venture Capital
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Look at the facts again
x<0.5 0.5<=x<1 x=1 1<x<2 2<=x<5 x>=50
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Power laws mean you have spectacular losses or wins
x<0.5 0.5<=x<1 x=1 1<x<2 2<=x<5 x>=50
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% Cost % Value
£10bnIT write
off£200bn mkt cap
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If you feel comfortable managing risk, you might as well shoot for the moon
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And in Europe we have a generation with nothing to lose….
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.
But how can we expect people to embrace risk when large corporates, governments and educators won’t?2%
Corporate 62%
Venture
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We have grown up in cultures with relative excellence in health, education, security and
political stability
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But what skills have we developed to navigate this new chaotic and risky
environment?
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Almost none
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Europe is ahead of US and Japan despite itself
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1.2bn can like
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> 1bn can search
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>500m can pay
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>750m can Tweet, Skype, Whatsapp or Snapchat
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But growth is somewhere else
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And it’s a big world out there
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So how we can get more value from $4tn we spend annually on educating and preparing people for their
future
x<0.5 0.5<=x<1 x=1 1<x<2 2<=x<5 x>=50
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$570 per person
???
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So how can you help yourself?
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Learn to work on the network
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Get out there and explore
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No short cut to being a grandmaster
“achievement is talent plus preparation.”- Malcolm Gladwell
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Learn by doing
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Use your time – do tasks
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Use your expertise in almost any field you can imagine – curate, contribute, consult,
teach
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Use your talent – write, make music, take pictures, make movies, make stuff
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Invest and share your major assets – savings, car, house
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If you have something to offer there are now 3bn people connected to you – already 10x world’s most efficient
market EVER
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Some advice for your trip
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You have to learn take risks
Time Emotions Money
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Understand Markets
Watch for Demand Signals Study People
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Self-awareness & honestyIntrinsic Motivation & social capital
Determination & humility
Creativity & ability to inspire
….. Are they lucky?
Emotional intelligence
You can never de-risk people element, so look for…
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Take your losses as early and cheaply as you can and move on
x<0.5 0.5<=x<1 x=1 1<x<2 2<=x<5 x>=50
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% Cost % Value
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Impossible to know where success will come fromJust try stuff out
Be open, not closed
Embrace the network – its your greatest untapped resource and now it can talk back
Spread your risks
Always reinvest some of your winnings
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But if you find the wave and you know what you’re doing, you can climb the power curve, and win – spectacularly
and globally
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So aim too high. The prize is huge and we all have an
amazing start just by being here
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Embrace your 62%
@cape♯risk62
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