Point Nine Capital 2017 Team Predictions

For the second year in a row we wanted to share with you the predictions of the whole team for the year to come.

As you’ll see, many different topics are covered in our list — from AI to SaaS business model, B2B marketplaces, (serious) finance & operations matters, the Blockchain and even telemedicine.

As usual we would also love to hear what you expect from 2017, so please leave us a comment at the bottom of the article!


Pawel Chudzinski

Partner

Year 2017 in 9 bullet points:

  1. We will invest in a B2B marketplace in an industry we have not invested in before
  2. We will invest in a SaaS company that will be all about automating certain processes
  3. The triangle of Berlin, London and Paris will cement its dominant European position, accounting for the lion’s share of European VC activity. Together they will account for 75%+ of EU’s VC funding volume
  4. More tech IPOs (say, at least 2x last year’s number)
  5. More tech M&A than in 2016, fuelled by corporates and financial buyers
  6. Fewer new European VC fund brands will enter the market than in the last two years
  7. Seed and Series A valuations will not increase or might even go down
  8. The price of Bitcoin will cross $2000, while Bitcoin will continue to account for the vast majority of the overall crypto-currency market cap
  9. Computers will make our lives even more complicated :-)

Karolin Geike

Executive Assistant / Event Manager

Bigger is not better!

Start-up & Tech events will shift to be way smaller (exclusive), niched and content driven.

While the conferences outgrowing cities with tens of thousands of attendees, dozens of stages, evolving to festival like happenings with trillions of side events will leave attendees looking for insightful and actionable take aways overwhelmed and disappointed we will see an increasing number of specialized meetups.

Attendees will strongly focus on value add, interactive knowledge sharing, qualified networking and an awesome experience before, while and after attending instead of business card bazaars, confusing and overloaded programs with shallow and repetitive content, nonspecific crowds in overrun and hence expensive locations.

Event organisers know their audience and will tie together tailored experiences to meet the growing expectations of an authentic and engaged community.

I also firmly believe in the rise of live streaming and AR/VR as this emphasizes the conscious spending of time and money and will be picture changing in the long run!

My bold prediction: Proper internet at the next PNC SaaS Founder Meetup ;)


Christoph Janz

Partner

In SaaS, $300M is the new $100M

In the last years, the bar has kept getting higher and higher in SaaS, and I don’t see a reversal of that trend coming any time soon. Companies like Slack, Twilio and Zendesk have shown what kind of growth is possible in SaaS. At the same time, more and more SaaS startups are being founded, the vast majority of which will never grow to tens of millions of ARR.

As far as VC financing is concerned, the “natural selection” will become more and more brutal, as VCs will do everything they can to invest in one of the few outliers while trying to avoid any of the “normal” SaaS companies. If you want to raise from a Tier 1 VC in 2017, better have a pretty damn good pitch that shows how you’ll get to $300M in ARR in about ten years.

Bold prediction: Amazon will become the most valuable company in the world, with Alphabet and Facebook taking the #2 and #3 spots.


Jenny Buch

Head of Talent

Learning will be the number one topic in HR SaaS

In 2017 we will see more and more SaaS solutions that help companies retain their talent by providing a never-ending learning experience. Whether it’s onboarding tools, e-learning solutions or Coaching and Mentoring programs supported by tech, the war for talent continues and learning will be the weapon that helps organisations win.

Learning will furthermore be experienced in a much broader scope and will be more specific to personal interests and the health of our employees. Tools such as headspace.com or yogaia.com will be commonly used and supported. The next generation will choose its working place according to whether or not it provides the learning opportunity that fits in their career path for the next 24 months.


Mathias Ockenfels

Principal

The rise of B2B marketplaces

Several of the most prominent late stage investors I’ve talked to in the last 12 months raised concerns about not finding any suitable marketplace deals anymore. They believe that all larger C2C and B2C categories that could provide a satisfactory VC outcome are already covered by players who have achieved critical mass and are too hard to disrupt. Hence, there is no more “blue ocean category” for a new B2C or C2C marketplace.

While I personally do not fully agree with this view, I have to admit that this graph about the “unbundling of Craigslist” looks more and more crowded. This, along with some internal discussions we had at Point Nine, motivated me to look for other exciting fields. Marketplaces might have eaten most of B2C/C2C categories but it’s far from the truth on the B2B-side where a huge potential remains with more and more founders seeming to realize it too.

Talking about B2B marketplaces, which are not at all a new phenomenon, most people immediately think of Alibaba. In my eyes, Alibaba just gives you an idea of what’s possible in any B2B segment — not just eCommerce or the manufacturing and distribution of goods. There are still many other categories which are not (yet) covered by Alibaba (or any other player like Amazon), where a marketplace in a B2B environment can make (a lot of) sense and generate significant efficiency gains e.g. taking into account data network effects. Here is a non-exhaustive list of interesting areas where I see one or more potential applications for a marketplace-centered approach:

  • Warehousing
  • Logistics (Freight & Transport)
  • Manufacturing of e.g. spare parts
  • Supply Chain Management & Supplier Relationship
  • Real Estate related services — commercial and private
  • Commercial Real Estate and Housing
  • Health — in particular related to aging society and supply chain
  • GovTech — Government related services
  • Robotics / Automation in production processes
  • Agriculture and Farming
  • Engineering & Machinery
  • Construction — in particular heavy machinery

My bold prediction: In 2017, Berlin as a tech-ecosystem will clearly outgrow any other European startup hub and double the size of invested capital compared to London (currently its closest “contestant”).


Savina van der Straten

Associate

Systems of Intelligence will eat Enterprise Software in 2017

A couple of years ago we experienced the transition from Systems of Record to Systems of Engagement. With the rise of artificial intelligence, we are now experiencing an evolution towards Systems of Intelligence.

Systems of Record are systems storing consistent data and “passively’’ informing employees (e.g old versions of SAP), Systems of Engagement are systems that are directly used by employees or other stakeholders with a nice user interface where the focus is on people (email, collaboration systems, social networks, etc.) rather than on processes (eg. Workday). Both are about automating and simplifying processes. Systems of Intelligence are going one step further by learning from users’ interactions and external observations to anticipate, influence and optimize actions to be taken (e.g Beamery). Just as Systems of Engagement did not replace Systems of Record, Systems of Intelligence are not drop-in replacements for previous systems. Rather, they form a new layer on top.

Incumbents such as IBM, Microsoft, Salesforce, Google and SAP are already moving to Systems of Intelligence. These companies have a big advantage as they own massive amounts of data, a key factor in training machine learning models. However, I believe that AI-first startups can compete by finding innovative ways of collecting data from day 1. Also, while incumbents like SAP are generalists I see an opportunity for startups to tackle more specific industries and needs.

My bold prediction: Nearly half of all German residents will be Amazon Prime customers.


Rodrigo Martinez

Principal

2017: ‘de-hyping year’, but developers will keep eating the world :)

2016 was a great year for deep tech lovers. AI everywhere, Blockchain’s disruption potential, experiencing first-hand AR&VR, scary drones & robots … Deep tech is attracting attention again — and hype — but also talent and funding.

In 2017, that hype will fade. And with that, we will go back-to-basics and check how these technologies improve our lives and businesses.

But even if these technologies don’t deliver (just yet!), software will keep eating industries. Developers will automate the world. See how logistics is becoming a software industry and is pushing all its players (including car manufacturers) to become software companies.

For 2017 keep an eye on the many industries that provide frustrating experiences that can be automated: professional services (legal, accounting, finance, etc.), government and bureaucracy, home ownership and renting, many financial services, healthcare…

Now, more than ever, it’s a good time for patient seed investors to back founders with the ambition to reshape the future through the right mix of technology, distribution channels and business models.


Aleksandra Zorylo

COO

Regulators will positively impact adoption of blockchain technology

With the SEC taking the lead, the engagement of regulators with blockchain technology will increase in 2017. A unified multi-jurisdictional regulatory framework will support an earlier adoption of blockchain within global financial industry. With regulatory certainty approaching, banks will accelerate their “blockchain projects” and start implementing a distributed ledger as a “single source of truth” for an improved, simplified and more efficient financial reporting, with KYC/AML processes likely to be impacted first.

Panama Papers will trigger corporate tax reforms

The Panama leak will impact the adoption of stricter tax reporting requirements globally. Some countries, especially the ones with relatively high corporate tax rate and overall high tax burden, including Germany, will implement the regulations faster, some others, like Ireland or the Netherlands are likely to take more time.

New regulations will impose an increasing burden of reporting requirements on both financial institutions and companies. Multi-location start-ups will face increasing tax reporting requirements (at headquarters but also at local offices) and potential challenges around patent box and/or IP regimes. VCs with international investors based in countries with low income tax rates are likely to encounter additional disclosure requirements.

Overall, it’s safe to say that activities in countries regarded as tax heaven will be observed by tax authorities worldwide with greater scrutiny.

My bold prediction: Substantial amounts of US money held offshore will come “home” due to a one-off tax relief


Louis Coppey

Associate

AI as a product > AI as a technology

2016 was probably THE year where deep learning moved from the academic to the business world. Meanwhile big tech companies released an increasing number of open source packages helping developers to build AI-based (esp. deep learning) products faster.

Interestingly, between these large companies and non-profit organisations such as OpenAI, AI has probably been one of the most open technological developments ever experienced. For investors, the negative side effect is that we often end up concluding that the value proposition of some AI companies will be commoditized in the near future. That said, with algorithms needing less data to be trained, and more algorithms available out of the shelves, a new generation of AI startups requiring less capital could also emerge.

My prediction for 2017 is that investors will still be bullish on industry-specific AI solutions (or “Vertical AI” companies), which comply with some of the following criteria:

  • They can build data defensibility: as they add more customers, they add more industry-specific data to train the algorithms. More data means an increased accuracy in the algorithm’s prediction and, subsequently, an increased appeal of the product to potential customers.
  • They have access to a unique dataset from day one or easily generate user data to train their algorithms.
  • The data required to increase the prediction’s accuracy is not widely available in large quantities (see graph below).
  • They have a standalone SaaS product which is almost as good as existing SaaS solutions without AI. It means that the value for customers (and acquirers) is in the product as a whole, not only in the AI layer.

Two examples are Tractable in the UK which focus on fraud detection in the car insurance industry, or Cardiologs in Paris which analyzes electrocardiograms to help physicians in their diagnosis.

Interestingly for VCs, these startups might very well grow and become larger than the vertical AI companies of the previous generation, which have almost all been acqui-hired. My candid bet is that because their value will rather lie in the improvements they bring to their industries’ processes than only in their core technological innovation, acquirers might wait for these companies to significantly grow their customer base before buying them.

Bold prediction: BTC will grow 2–3X, but ETH will grow even faster (let’s say 4–5x to make it quantifiable and prove me wrong in one year) as people realize its value as a trust building technology rather than as a storage of value. ETC will die.


Paula Pastor-Castaño

Legal Assistant

Contract Management Tools: the end of Law Firms Junior Associates?

What is characteristic of Junior Associates in Law Firms? Long shifts, endless contract reviews and signature-chasing marathons.

The amount of paperwork and templates they deal with is what probably leads so many people with a legal background to create tools that enable businesses to create, sign and manage contracts.

Indeed, software eases our lives but for me an open question still remains: what makes a Junior Associate become a Partner or an Assistant to become a Counsel? The answer is simple: reading and managing tons of contracts no matter how repetitive the task is.


Robin Dechant

Associate

Product and Branding will win the Customer

The mobile-native generation takes a user-centric product experience for granted. These expectations have continuously entered the B2B space and will set the bar fairly high for new SaaS companies in 2017. In this perspective, product managers will play a greater role in companies since they are the ones who generally have a deep understanding of the users’ needs and we will see more designers in the founding team.

Following design, it strikes me that especially the younger generation values authentic brands. Zendesk, Slack or Typeform for example did a fantastic job in creating unique B2B SaaS brands. In addition to an increased user-centric focus, I think that SaaS companies will invest more into branding to attract new customers and benefit from loyal customers who value that brand.

Lastly, I believe voice will be an enabler for a new breed of user-centric SaaS solutions, especially for mobile. First applications are being created from incumbents to run an analysis in their systems of record via search, e.g. “how many customers have churned this month” and your favorite SaaS tools show you the answer. However, there is also a lot of room for founders to create SaaS companies around voice control.

My bold prediction: An identity verification solution will be the first killer blockchain application.


Dominik Zalewski

Finance Director

AI will take its share in business operations

The trend of bringing AI to take over simple operational and repetitive tasks in business back-office departments is going to mark itself stronger in 2017.

Fukoku Mutual experimenting with replacement of a human brain with IBM’s Watson Explorer early this year is a fresh example of what advanced AI can offer to this vast market. From simple calculations and automated reporting to a dynamically developing area of accounting automation — there are many tasks which machines will do faster and better than a human, freeing time for more creative and advanced thinking.

Smart people will strengthen the established European tech hubs

The unstable political situation in some European countries will accelerate the talent transfer to the best tech hubs across Europe. Smart and dynamic people will keep looking for the best life quality offer and in search for either capital for their startups or just knowledge, challenging projects etc. they will keep choosing hubs like Berlin.

Finance & Ops people in tech scene will get to know each other:)

With dozens of events and meetups on tech, sales and growth hacking happening across Europe every week the people working at the engine of startups and VCs (finance and accounting, operations, legal) tend to remain in the shadow. This changed slowly over the last couple of years and will keep doing so in 2017. Knowledge sharing not only accelerates learning but also enables us to anticipate issues and make our ecosystem grow. And it’s also fun:)


Clement Vouillon

Research Analyst

The on-premise model will make its great comeback

In software also the pendulum is swaying back and forth and I think in 2017 we’ll see the big comeback of the on-premise model. As “container technologies” are getting mature (Docker, CoreOs…) we’re seeing the rise of infrastructure startups that enable SaaS companies to package their solutions as on-premise products.

In that regard I see two growing trends. First more and more existing SaaS will use infrastructure services like Replicated to easily offer an on-premise version of their SaaS product to the enterprise segment. Second more and more software startups will adopt the hybrid “in-app” agent model, e.g: Sqreen.io, where the user installs the software on its own self contained virtual machine (and not on the software provider’s servers) and this model is not only relevant for enterprise customers but also for smaller ones which want more control of their data. The future of software is not SaaS or on-premise but a mix of both.

My bold prediction: Facebook will buy Slack for $15B — $20B


Michael Wolfe

Advisor

Artificial Intelligence will be the next Big Data

The best startups arise organically as an outgrowth of the founding team’s passions and experiences. They don’t happen because a would-be founder hears that “X is hot right now” and decides to start a company doing “X.”

The “X” of today is artificial intelligence, so we see a glut of artificial intelligence companies being founded. We saw the same thing 2013/14 when many “Big Data” companies were launched.

And like Big Data, there is solid reason for the hype. Artificial Intelligence is an important, foundational technology that gets more important every year and will be used to solve more and more problems going forward. Many large companies will be built.

But leveraging a powerful technology, even one that is “hot,” is not enough for a successful startup. Startups only succeed when the right founding team takes on a customer problem that lots of people have and will pay for.

By the end of 2017, we will be reading stories claiming, “The A.I. Bubble has Burst!” The irony will be that A.I. technology will be more powerful and widely used than ever, but only a minority of the AI-centric companies today will have what any startup needs to succeed: a compelling problem to solve, and the right founding team to solve it.

My bold prediction: The trickle of Silicon Valley based investors entering Berlin and other European Markets will become a torrent, as competition for the best investments at home continues to grow, and as successful exits of European companies continue to grab headlines.


Piotr Kulesza

Advisor

Disillusionment with telemedicine

2016 brought the first signs that telemedicine solutions were struggling to get meaningful adoption rates (e.g. Meedoc closing their service). Teladoc, a US public company, facilitated 202,566 remote visits in Q3’2016, which annualised was equivalent to less than … 0.1% of total US physician office visits. Teladoc most likely aimed at a much bigger market share when they founded the company back in 2002.

I think 2017 will bring public disillusionment with telemedicine as a mere solution connecting a patient and a physician using video and audio. We need 10x better software which is interaction-centric and focused on improving vastly providers’ workflow. Here are some examples:

  • conversational and intelligent patient intake form (or symptom checker) that can be built into any software using Infermedica API
  • structuring and summarizing patient data for physicians using Lexigram API
  • integrated scheduling, payment and communication solution by Orchestra One.

We need those to pave the way for the future of remote care.

My bold prediction: Trumpcare will replace Obamacare (what a surprise!).