New Venture Partners LLC. The Spin Out. Keeping you in touch with New Venture Partners

Introduction

New Venture Partners and Barack Obama have something in common:  we are both focused on innovation. In his State of the Union address in January, President Obama told the nation "The first step in winning the future is encouraging American innovation." We'd agree that innovators create opportunities to win. As the global venture capital firm dedicated to finding, forming, and funding new ventures based on innovations created in companies and institutional labs, we are looking for and investing in those innovation-driven opportunities all around the world.

This begs an essential question for all of us:
"How healthy is corporate innovation today?"
The answer may be better than you expect.

We frequently talk to people who believe that the two recessions in the last decade have caused companies to slash research and development. With customers on strike, growth hard to find, bottom lines under pressure, and companies cutting payrolls, it is tempting to jump to the conclusion that companies must also be paring back R&D.

However, the truth is that institutional R&D is alive and well. A recent Booz & Company study found the top 1000 global R&D spenders invested over $500 billion in 2009 – more than twice the total for the top 1000 spenders a dozen years earlier. R&D spending did drop slightly by 3.5% in 2009 from 2008. However, when you take into account that revenues plunged by 11% at those 1000 companies, R&D intensity actually increased. This suggests that even in face of recessionary headwinds companies remained committed to innovation. From working closely with many global technology companies, that is our sense as well.

In this issue of our newsletter, you'll read about our take on the opportunities for innovation in mobile data -- one of our key investment themes. You'll be introduced to new spinouts we've led recently and updated on investments we have previously introduced to you. We've catalogued some of our thought leadership in public speaking and published articles, and we've added a new section with announcements of exits and M&A activity in our portfolio.

We'll return later this year with another edition of our newsletter. Until then, we'd love to hear from you.

 
 
Trend Tracker

Mobile Data: Catching the Wave

Over the last few years, we have witnessed the leading edge of a wave of wireless broadband data driven by smartphones and their cloud-enabled applications and services. We believe this transition from the 'wired' Internet to the 'mobile' Internet will play out over the next fifteen years, providing a wide range of investment opportunities in mobile devices, infrastructure, services, and applications.

Table I below shows the projected growth in wireless data traffic by application through 2014. Given this explosive growth, one of the key challenges wireless operators face is matching the rapid increase in expected traffic with additional network capacity – and doing so without massive investments in additional spectrum.

Table I

In an earlier fund, we had spun Flarion out of Lucent's Bell Labs to develop a broadband mobile data platform that would enable 4G networks. Although Flarion's equipment performed as promised and provided almost ten times the bandwidth that had previously been available to consumers – and ended up being acquired by Qualcomm for $800M – that was only part of the story. The deeper learning from Flarion was how quickly mobile users were able to consume all that newly available mobile capacity.

The Flarion experience gave us the key insights, which we have applied since we raised our current fund in 2006, that technology would enable a mobile experience that could compete with any fixed broadband offering and that mobile consumer and business users would find ways to consume that bandwidth.

Table II below shows the quarterly wireless traffic growth experienced by AT&T since Q3 2006 when we closed our current fund.

Table II

At the beginning of the evolution of the mobile Internet, the first generation of smartphone devices enabled users to receive email and perform some limited web browsing functions. With the introduction of the iPhone and its App Store, user behavior began to change with the availability of social networking applications and premium content. Next, entertainment applications such as streaming music and video services began to enhance the overall user experience. Consumer adoption of tablet computers, triggered initially by the iPad and more recently by the wave of Android powered devices, layers even more demand for media onto mobile networks. In fact, carriers now indicate that half the data traffic on their mobile networks is video. There are now 42 million applications that can be downloaded in the iPhone App Store, and the competing platforms such as Android, RIM, and Windows are also developing huge libraries. Enterprises are catching the mobility wave as well with many traditional and new applications being extended or developed for mobility.

Carriers are investing billions of dollars in new technologies to upgrade their networks to support this demand, and they are still struggling to keep up. Despite $8.4B in wireless capital expenditures last year, AT&T continues to receive criticism for its network performance in support of iPhones and iPads. Verizon is doing its best to avoid those issues as it rolls out its LTE (4G) network and doubles the capacity of its existing 3G network. Innovation is key as the carriers look to startups to help them cope with the mobile data wave, for example by creating novel application-aware services that reduce the torrential demand that video streaming places on their networks. To underscore its interest in startup activities, Verizon launched a 4G Venture Forum with which several of our partners have been working closely.

Looking beyond the current carrier obsession with 4G bragging rights, we at New Venture Partners see the mobile opportunity playing out over a sustained period of time and a broad range of investment opportunities. The combination of broadband wireless, smartphones and cloud computing has set the stage for the same sort of once-in-a-generation transition we witnessed during the mainframe to PC transition. Given the speed with which mobile broadband is evolving, it is entirely possible that many consumers and SMB's will completely cut their ISP cord – not just for telephony, but for all of their Internet access. We are only at the earliest stages of this transition, and the future major players in the post-PC ecosystem (e.g., the future Ciscos, Microsofts, and Oracles) have yet to emerge. Looked at from this broader and longer-term perspective, it is our belief that, on average, the venture capital community is under-invested in this space.

Several of the investments we have made in our current fund are riding – and driving – this wave of mobile transition:

  • Infrastructure (hardware and software for managing mobile networks) – BLiNQ Networks, VPI Systems
  • Enabling semiconductors – GainSpan, Intelleflex, Silicon Hive
  • Enterprise and consumer applications – Airclic, Alverix, ShopWell

Intel recently acquired Silicon Hive. This was a spinout we had led from Philips, which provided semiconductor IP (circuitry) that enabled high-performance video processing. Intel's press release commented, "The Silicon Hive capabilities will aid in the delivery of more differentiated Atom-processor based SoCs as multimedia and imaging grow in importance across the mobile smart device segments."

Check out the CEO Perspective in this newsletter where Intelleflex CEO, Peter Mehring, delves more deeply into their mobile data story – Intelleflex's vision of RFID 2.0.

 

Spinout Spotlight

 


BLiNQ Networks

New Venture Partners helps form new company, BLiNQ Networks through acquisition of IP and assets from Nortel and Series A Funding.
Read Press Release »


Intelliflex

New Venture Partners leads spin-out of IP and engineering team from Maxim and $8 million Series A investment into Intelleflex.
Read Press Release »


Own Products

New Venture Partners invests in Own Products, a spinout from Unilever commercializing natural-based skin care products.
Read Press Release »


ShopWell

New Venture Partners works with IDEO to form new company, ShopWell, a personalized nutrition website.
Read Press Release »

 

Investment Update

 


Intelleflex

Intelleflex Closes $11.5 Million in Funding, Gears Up for Expansion Read Press Release.
Read Press Release »


EverSpin

Investors Support Company with Follow-on Financing.


GainSpan

Closes Round of Financing.


SiPort

Raises Additional Round of Financing from Existing Investors.

 

Exits and M&A

 

Silicon Hive acquired by Intel.
Read Press Release »

NetScout to acquire Psytechnics.
Read Press Release »

Liquavista acquired by Samsung.
Read Press Release »

AirVersent merged with AirClic.
Read Press Release »

Elanti acquired by VPI.


Read Press Release »

Texert merged with Neohapsis.
Read Press Release »

 
 
CEO Perspective

By Peter Mehring, President & CEO, Intelleflex

RFID 2.0:  Next Generation RFID Solutions and Cloud Computing

Cloud computing is a hot topic in the IT industry today because it promises many benefits both for traditional computing as well as for distributed, Internet-based services. The Internet is commonly viewed as a something used by people, but we are entering the age of "the Internet of things" where everyday objects communicate directly with each other. While industry discussion of cloud-based services has only recently broadened to include such services, at Intelleflex we are already laying plans to address a significant, unmet opportunity in extending the cloud to include the monitoring of goods in global supply chains.

Intelleflex is a leader in providing on-demand solutions for tracking and monitoring products and assets with a current focus on perishable foods and pharmaceuticals, mobile worksite and personnel, and defense and security markets. Our offerings are based on our patented Extended Capability RFID™ tag products that provide long range, high reliability, temperature monitoring, on-tag memory, and security. Integrating cloud-based services into our supply chain solutions has the potential to reshape the supply chain management industry.

Open supply chains can be a conglomeration of independent participants brought together in the forwarding and distribution of goods. Often the participants in the supply chain have a relationship only with companies they directly exchange goods, much as links in a chain only connect to their immediate neighbor. This makes end-to-end condition monitoring of goods through the supply chain difficult. However, when the condition of the goods directly relates to the value – such as with perishables – then the lack of communication directly impacts the value of the goods.

Intelleflex products deliver a breakthrough in perishable monitoring by providing in-transit data visibility though-out the supply chain. Current products, such as the Intelleflex TMT-8500 temperature logger, enable determination of remaining shelf life for perishable produce based on capturing the temperature history since harvest. Both the ability to read the temperature history when packed within a pallet of produce, and the inexpensive cost point encouraging use in each and every pallet, enable a fundamental change in the handling of perishable goods in the supply chain. By reading the temperature history from the TMT-8500, supply chain participants can re-prioritize shipments at the pallet level based on remaining shelf life – not just shipping out in the order received, regardless of the condition.

Changing perishable supply chain management to First Expiring, First Out (FEFO) delivers direct benefit to all supply chain participants, as it result in more goods reaching the retail shelves in higher quality condition. It is estimated that this could reduce supply chain shrink by up to 25%. For perishable produce alone, that savings is estimated to exceed $9 billion annually. Growers who use our products see payback in 1 to 2 years, while realizing significant ancillary benefits such as adherence to government mandated traceability, documented quality of delivery for price protection and insurance records, and real time inventory visibility at no additional cost.

Just as in chess or checkers, optimizing each move based on the current state of the game can improve your play – but thinking two, three or more moves ahead can deliver a winning strategy. In a supply chain, the sequential hand-off of goods and data make looking more "moves" ahead difficult. This is where bringing mobile condition monitoring data up into the cloud is so powerful.

Consider a grower who has three retail customers, each with the same amount of strawberries, but with strawberries in different conditions. With cloud-based condition monitoring he knows that the fruit at retailer #1 have 10 days of remaining shelf life, fruit at retailer #2 has 5 days of remaining shelf life, and the fruit at retailer #3 has only 3 days of remaining shelf life. Clearly the grower can better satisfy his customers by delivering first to retailer #3, but that knowledge requires the customer to share the condition data with the grower – which is not common today. Cloud-based services can combine connectivity of mobile devices like our the Intelleflex TMT-8500 for retrieving the strawberry shelf life, aggregation of all of the grower's customer data, and integration with his own inventory data. This powerful combination of data and services in the cloud enables the grower to "see" two, three or more "moves" ahead in the supply chain, unlocking huge potential in delivering higher quality goods more efficiently.

Certainly, some of these benefits could be delivered through traditional, dedicated IT infrastructure, but the nature of cloud computing – easily accessible, virtualized resources that can be dynamically reconfigured and scaled to adjust to a variable load – makes it ideally suited to span the disparate links in a supply chain. Further, the "...as a service" business model enables easy adoption due to the low cost of engagement. These are critical attributes for engaging with the supply chain, where participant relationships, types and volume of goods, and transportation are truly dynamic. Significant overhead in establishing a data relationship, scaling throughput or capacity, or performing analysis would quickly limit the usefulness of time sensitive condition monitoring information.

Cloud-based services and supply chain condition monitoring are a powerful combination in delivering a winning strategy for perishable goods management. Intelleflex is leading this effort, initially with products that provide in-transit data visibility while accumulating relevant product history. Enabling supply chain management applications with cloud-based data aggregation and data warehousing services will further extend this value. This provides a winning combination for the next generation of supply chain management.

 
 

New & Notable

Venture Capital Journal: VCs Dine on Food Sites – Apr. 1, 2011
Read Article »

GainSpan Continues Global Sales Channel Expansion – Mar. 16, 2011

Read Press Release »

BLiNQ Networks Introduces Intelligent Spectrum Optimization to Drive Mobile Backhaul Capacity Costs – Mar. 15, 2011

Read Press Release »

KGO-TV: Wireless technology helping keep food safe; Intelleflex profiled – Mar. 6, 2011

Watch Video »

Phoenix Business Journal: Everspin Technologies hits the track to prove reliability – Mar. 1, 2011

Read Article »

EverSpin's automotive-temperature MRAM meets harsh environment demands in BMW S1000 RR racing bike – Feb. 28, 2011

Read Press Release »

TimeSight Systems Installation Achieves Nevada Gaming Control Certification Using Industry's Only Video Lifecycle Management Solution – Feb. 16, 2011

Read Press Release »

Toyota to Offer HD Radio™ Technology – Jan. 6, 2011

Read Press Release »

Thrillist: ShopWell Eating healthy just got crazy simple – Sep. 22, 2010

Read Article »
 
 

Articles & Events

TM Forum Management World 2011: Harry Berry to deliver keynote about Open Innovation on May 23 in Dublin

European Innovation Conference: Chris Winter and Dr. Henry Chesbrough conducted a spin-out workshop: Opportunities & Challenges with "Inside Out" Open Innovation on March 31 in Billund, Denmark

Growth Business: Spin-out success stories – Jan. 11, 2011

Read Article »

Wall Street Journal: Walking The CES Booths With A VC Looking To 'Liberate' Good Ideas – Jan. 6, 2011

Read Article »

IBF Corporate Venturing & Innovation Partnering: David Tennenhouse and Rob Rosenberg both spoke at the February conference in Newport Beach

The New England Venture Summit: Rob Rosenberg participated on a panel: Getting the Deal Done: Negotiating a Win Win on Dec. 15 in Boston

EE Times: Open Innovation: A channel to success in RFID – Nov. 1, 2010

Read Article »

Xconomy: ShopWell, Ideo's First Big Spinoff, Says Better Health Starts at the Supermarket – Nov. 1, 2010

Read Article »

David Tennenhouse Appointed to FCC's Technological Advisory Council – Oct. 21, 2010

Read Press Release »

Open Mobile Summit: Dan Deeney moderated panel: Network innovations — Improving the economics of mobile data networks on Nov. 8 in San Francisco

East Anglian Daily Times: Start-ups urged to rise to the challenge – Sep. 21, 2010

Read Article »

Xconomy: Saving Stranded Technologies: Talking with Spinout Expert David Tennenhouse at New Venture Partners – Sep. 1, 2010

Read Article »
 

430 Mountain Avenue - Murray Hill, NJ 07974 - United States of America
Tel : +1 908 464 0900 - Fax : +1 908 464 8131

© 2011 - New Venture Partners, LLC. All Rights Reserved.
Unsubscribe