Quarterly Newsletter from Talis Capital. This issue focuses on the digital space of On Demand Economy, Digital-Out-of-Home and Logistics/fulfilment.
On Demand Economy is the wrong name….
In one of our previous newsletters we had a short paragraph noting the rapid growth in the ‘Uberisation’ of services and ODE (“On Demand” economy) and have seen multiple new starts-ups defeating the old dinosaurs in this game.
On Demand Economy is not the new economy – it is the just the Modern Economy – and in 3-5 years will be the only one out there. We have already seen this disruption happen across many sectors that were considered low hanging fruit:
Transportation (Uber, Hailo, ZipCar etc) and Travel (AirBnB)
Home services (Homejoy, Handybook, Hassle)
Dining (OpenTable, Cover) and Food & Beverages (JustEat, Hungry House)
These were the most obvious sectors for disruption due to their size, readiness of the buyers and the fulfilment infrastructure that is primed to support them.
The hospitality sector in particular has already been disrupted with start-ups like YPlan and IfOnly. Healthcare is also a big monster that needs a shake-up and we see that M2M technology alongside On Demand Services will reduce costs and provide better services. With a US market valued at c.$10bn and c.$1bn in the UK, the Laundry and Dry Cleaning sector is another sector that is geared up for disruption. There have already been numerous entrants into this market, with Washio leading in terms of fundraising, but the diversity between services keeps expanding with offerings such as ‘per kg’ washing, introductory discount codes, time definite turnarounds and integration into employee perks. There are still some steep learning and adaptation curves for the start-ups in this field but as the value of “free time” is becoming ever more expensive, the development of these services will undoubtedly accelerate to meet the demand.
Following on from this, we strongly believe that almost every sector will be disrupted in the next 12-24 months in one way or another. Even in the more resistant sectors such as Logistics, companies like Zipments, Doorman, Luna, and Shyp are already hitting the ground running.
Now is the period of amazing opportunities where new start-ups are being launched every day across the sectors and niches: from Dog Walkers to Massages and Fitness on Demand, and from Private Jet hires to Scooter hire on demand. Rather than a short term trend or ‘bubble’, we see this as a new REALITY that we need to accept and adopt as fast as possible in order for businesses to thrive.
Next time you read this newsletter we should be able to report some done deals in this new reality of On Demand Economy. As in the current fast paced digital environment if you have not done a deal in 6 months you already have missed it ;)
Unlike São Paulo which famously banned all outdoor advertisements in 2006, leading global cities are undergoing a transformation in the format and reach of out-of-home (OOH) advertising. Advertising spending is forecast to grow by 5.5% in 2014, reaching $537bn according to ZenithOptimedia. While mobile and television advertising remain the main driver of global advertising growth, outdoor remains an important sector, accounting for approximately 7% of total spending, or almost $38bn:
Across sectors, not just advertising, we find the crossover between online – offline a fascinating source of innovation and opportunity. Whether it be the physical logistics of an ecommerce transaction or the provision of a service such as Uber, the moment of online – offline in a transaction is changing. With consumers today connected more than ever before, the evolution from traditional OOH advertising transaction (static display; posters, billboards, bus/taxi wraps) to digital OOH advertising is here.
Smartphone penetration will exceed 75% in the UK this year. Our consumption of media, goods and services has shifted to the mobile device, and advertisers now know more than ever about the customers they are targeting. The opportunity presented by the crossover between mobile internet and digital OOH is to further enhance the customer data set; valuable information for the advertising agencies. Static display can provide brands access to the millions of people passing through Waterloo station or Heathrow Terminal 5, but does not allow brands the possibility to granularly target advertising spend on reaching the key demographic.
Real-time, highly targeted advertising is the ultimate prize offered to agencies by the unique combination of mobile devices and digital OOH formats. The technology providers and content platforms that support the agencies in providing these targeted solutions are likely to be the main beneficiaries.
Logistics / fulfilment
One of our main focuses on both Private Equity and Venture Capital side today is e-commerce logistics and fulfillment. The growth and disruption of the Pick, Pack & Posteconomy is huge. According to the latest Barclay’s Transport & Logistics and Retail teams research 92% of logistics companies see e-commerce as their main growth factor.
However, with the number of deliveries set to increase by 40% to 1.35bn by 2018, delivering items to customers is a big challenge – and the way this happens is changing dramatically.
This summer, we led the investment round in ParcelBright www.parcelbright.com which helps small and medium retailers get access to (and manage) cheaper delivery options. Their customers, some of them nationwide retailers, get exclusive discounted rates, convenient and fast tools to manage the shipments alongside impeccable customer service.
Both logistics companies and retailers are working very hard on standardizing the size of packaging – which will reduce costs, improve deliveries and increase growth in the industry.
There is a rise of ‘click and collect’ schemes but it’s interesting to note that consumers see this as an imperfect solution, as Fiona Briggs writes in Data Time research- “78% would prefer goods to be delivered direct to their homes instead. With 45% of consumers stating they would order more products online if delivery services were improved, the opportunity for growth is clear.” We agree that deliveries will prevail – especially when the service will improve.
We believe that one of the key pieces in the customer satisfaction is a superb ‘last mile’ delivery. Consumers want to know live where their parcel is, when exactly it will be delivered (including on weekends and outside working hours) and want their parcels delivered fast, same day or next day. They also want to have the flexibility to change the delivery time/date – and they want to do it from their mobile devices fast and conveniently.
One of our portfolio companies - http://navmii.com - is a leader in B2C and bespoke B2B navigation solutions. Their consumer app has been downloaded more than 20m times but what is interesting is their B2B solutions which is helping the ‘last mile’ delivery companies (like Ocado in the UK) manage the most efficient routing.
We are actively looking for investments, in the developed and developing markets, on both physical and software solutions sides in:
Warehousing part of fulfillment including pick & pack
Last mile delivery
Other e-commerce support services
Aside from our base in London, Talis Capital would be pleased to meet potential business partners in:
Wednesday 5th and Thursday 6th November (Lloyd’s Maritime: Ship Finance and Investment Conference)
Monday 17th November (LendIt Europe 2014 Conference)
Wednesday 19th and Thursday 20th November (Digital Marketing Show 2014)
Monday 1st December to Wednesday 3rd December (Global AgInvesting Europe 2014)
Tuesday 9th and Wednesday 10th December (Ukraine Investment Summit)
Wednesday 12th November (Prestel & Partner Zurich Family Office summit)
Thursday 13th and Friday 14th November (Elite Family Office Summit)
To arrange an introductory meeting, please contact Jackie Henning on +44 203 542 6260 firstname.lastname@example.org