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General Commentary
June 12, 2016

Silicon Valley 3.0

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Market Snapshot

Indices Week YTD
GSV 300 1.80% 42.10%
S&P 500 0.70% 9.10%
Dow 0.60% 10.40%
NASDAQ 0.80% 16.40%
Russell 2000 1.40% 1.50%
MSCI P/E Fwd P/E/G
Valuations 25.8x 0.7x
GSV 300 17.6x 2.3x
S&P 500 Now YTD
I-Rates 2.17% -11.40%
10-Year Note 1.03% 102.00%
3-Month Bill - Current
Sentiment - 28.1-38.3
Bull-Bear - 0.97
Put-Call - 11.28
Vix Now YTD
Inflation $1 12.50%
Gold $47.86 -11.10%
Oil - Week
Mutual Funds - -$3.40
Fund Flows (bil) 00-09 09-Now
Growth-Value -34% 218%
Growth 87% 133%
Value

Last week, GSV Capital (GSVC) hosted its third annual Investor Day at GSVlabs, a global innovation platform located in the heart of Silicon Valley. It was a fitting backdrop for the leaders of GSV’s game-changing portfolio companies to share a window to the future of their businesses and the industries they are transforming. We welcomed over 550 attendees and 15 presenting company CEOs. (Disclosure: GSV owns shares in GSVlabs)

While the media has taken to reporting on wounded Unicorns, and increasingly seems to view the optimism in Silicon Valley as a distorted reality field, what’s exciting to us is that innovation is accelerating. The vast majority of GSVC’s portfolio continue to exhibit extraordinary growth characteristics, with expected year-over-year revenue growth exceeding 100%. Some may quibble about appropriate values, but we’re very pleased with the value creation opportunity.

As a liquid, publicly traded stock, GSVC is a unique vehicle that enables public investors to access this asset class, which has increasingly been limited to select venture capital firms and institutional investors. We believe that growth drives enterprise value, and accordingly, our mission is to build a portfolio of the most dynamic, rapidly growing, late-stage private companies — the “Stars of Tomorrow”. (Click HERE to see my opening remarks on the state of play at GSVC, our strategy, and portfolio)

For those who were unable to join us this year, we have curated a video library of 2016 Investor Day speakers, which are discussed below. We hope you enjoy their insights as much as we did.

A NEW XEROX PARC

In 1970, Xerox Corporation launched Xerox PARC in Palo Alto to develop captive innovation for the company. The charter for the initiative was to create “The Office of the Future”. Assembling a world-class team of experts in information technology and physical sciences, Xerox PARC was a catalyst for innovation — it yielded the original design for the personal computer (and famously inspired Steve Jobs to create the first Macintosh), the first Graphical User Interface, and even the computer mouse.

Founded in 2012, GSVlabs accelerates startups and connects corporations to exponential technologies, business models, and entrepreneurs. We believe it has the potential to be a next generation Xerox PARC.

At the core of GSVlabs is a community of game-changing entrepreneurs focused on key verticals, including Big Data, Sustainability, Education Technology (EdTech), Entertainment, and Mobile. GSVlabs is home to over 170 startups, which raised $200 million in 2015.

WATCH A PANEL DISCUSSION ON THE GSVLABS INNOVATION PLATFORM HERE
GSVlabs CMO Diane Flynn Discusses the Power of an Innovation Platform with Marlon Evans (CEO, GSVlabs), Lisa Hammitt (Vice President, IBM Cloud Portfolio), and Neville Taraporewalla (President, Brand Capital — $2 Billion Venture Capital Arm of the Times of India) — Pictured Left to Right

Source: GSV Asset Management

As the access point to a startup ecosystem, major corporations like AT&T, Intel, IBM, Intuit, the Times of India, and JetBlue choose to partner with GSVlabs in order to launch new initiatives, identify talent, attack new markets, and propel new business models. GSVlabs creates value through this virtuous circle, attracting and accelerating promising entrepreneurs, while providing targeted innovation services for forward-thinking corporations. (Click HERE for the recently-published GSVlabs white paper on the future of corporate innovation).

Beyond serving as the perfect setting for this year’s Investor Day, GSVlabs is a key asset our shareholders — it is 70%+ owned by GSV Capital. GSVlabs sits at the intersection of proven models — co-working platforms like WeWork ($16 billion valuation), which generate recurring revenue from startups, and accelerators like Y-Combinator, which capture equity in potentially game-changing businesses (Y-Combinator alumni include Dropbox and Airbnb, valued at $10 billion and $26 billion, respectively). (Disclosure: GSV owns shares in Dropbox)

In May 2016, GSVlabs announced a partnership with the $2 billion venture capital arm of the Times of India to launch two centers in India — one in Bangalore and one in Delhi (Gurgaon). We envision GSVlabs expanding to the top innovation centers around the World.

Source: GSV Asset Management

EXPONENTIAL IDEAS: 2016 INVESTOR DAY SPEAKERS

PayNearMe

PayNearMe is a next-generation, electronic cash payment platform. It serves what the Federal Deposit Insurance Corporation (FDIC) estimates to be 93 million “unbanked” and “underbanked” residents of the United States, allowing them to pay auto, rent, and utilities bills through retail locations. The company currently has relationships with 7-Eleven, Family Dollar, and ACE Cash Express stores, creating a footprint of over 17,000 locations across the country. (Disclosure: GSV owns shares in PayNearMe)

WATCH REMARKS FROM PAYNEARME CEO DANNY SHADER HERE

Danny Shader Outlines How PayNearMe is Serving a Market of over 93 Million “Underbanked” Americans

Source: GSV Asset Management

CEO Danny Shader discussed how PayNearMe is continuing to aggressively expand its retail footprint, as well as the breadth of industries that its payment system covers, tapping into over $1 trillion in U.S. cash transactions that occur per year.

Enjoy

Enjoy is a personal commerce platform built to revolutionize the way people buy and enjoy the world’s best technology products. The central feature of the company is hand-delivery of every item, including product set-up, by an Enjoy product expert, at a time and place of the customer’s choosing. (Disclosure: GSV owns shares in Enjoy)

WATCH REMARKS FROM ENJOY CO-FOUNDERS RON JOHNSON + TOM SUITER HERE
Ron Johnson (Right) and Tom Suiter (Left) Share a Vision for Commerce Reimagined

Source: GSV Asset Management

Co-founders Ron Johnson (Former Head of Apple Retail + CEO of J.C. Penney) and Tom Suiter (Former Apple Creative Director) discussed how Enjoy is creating and scaling a novel retail experience that customers love. It is effectively Lyft-meets-Apple Genius Bar. (Disclosure: GSV owns shares shares in Lyft)

Lytro

Lytro is a pioneering Light Field Imaging platform that is redefining the way images are captured and created. CEO Jason Rosenthal discussed how the company’s technology platform will have a transformative impact across a broad range of applications — from virtual reality to photography and filmmaking. Effectively, Lytro has the opportunity to improve any imaging device with a lens and sensor. (Disclosure: GSV owns shares in Lytro)

WATCH REMARKS FROM LYTRO CEO JASON ROSENTHAL HERE
Jason Rosenthal Discusses the Future of Imaging and Augmented/Virtual Reality

Source: GSV Asset Management

DogVacay

DogVacay is a peer-to-peer marketplace connecting pet owners with individuals providing boarding and daycare services. By combining the efficiencies of a transparent, two-sided marketplace, with a focus on curating a network of high-quality pet caregivers, DogVacay is emerging as a disruptive force in the $60+ billion U.S. pet services market. COO Deborah Sharkey discussed how DogVacay building a vibrant marketplace — and more importantly, a brand — that pet owners trust. (Disclosure: GSV owns shares in DogVacay)

WATCH REMARKS FROM DOGVACAY COO DEBORAH SHARKEY HERE
Deborah Sharkey Discusses the Evolution of the DogVacay Peer-to-Peer Marketplace

Source: GSV Asset Management

Curious

Curious helps people learn anything, from how to play the banjo to basic business skills. Described by Forbes as the “Netflix for learning,” the Curious platform offers “all you can eat” access to over 20,000 high quality digital lessons on virtually any topic through a subscription model. (Disclosure: GSV owns shares in Curious)

WATCH REMARKS FROM CURIOUS CEO JUSTIN KITCH HERE
Justin Kitch Discusses How Curious Can Become a Netflix for Lifelong Learners with GSV Partner Matt Hanson (Right)

Source: GSV Asset Management

CEO Justin Kitch discussed the cognitive science research that is powering Curious, which demonstrates that learning doesn’t just make you smarter — it makes you happier, healthier, and more productive. Emphasizing engaging, short-form content, Curious creates entertaining, on-demand educational experiences for the lifelong learner. It focuses on eight core content areas — Mind/Body, Relationships, Humanities, STEM, Aesthetic, Music, Play, and Work — to help users build their “Curious Quotient”, or CQ.

JAMF

JAMF is rethinking enterprise mobility, streamlining the way commercial, education, and government organizations adopt and optimize the Apple platform. CEO Dean Hager shared a perspective on the emerging opportunities and challenges that come with integrating mobile devices into everything we do. (Disclosure: GSV owns shares in JAMF)

WATCH REMARKS FROM JAMF CEO DEAN HAGER HERE
Dean Hager Discusses JAMF’s Role in the Future of Enterprise Mobility

Source: GSV Asset Management

OZY

OZY is a digital media platform focused on going beyond news to what’s next. It has attracted an active audience of more than 20 million people — surpassing Politico, the Economist, and the New Yorker — by delivering timely, stylish, and insightful content every day. CEO Carlos Watson discussed the evolution of transformative new media platforms, and what’s next for OZY. (Disclosure: GSV owns shares in OZY)

WATCH REMARKS FROM OZY CEO CARLOS WATSON HERE
Carlos Watson Invites the Audience to Discover a Media Platform for the “Change Generation”

Source: GSV Asset Management

Coursera

Coursera is an education platform that partners with top universities and organizations worldwide, offering free and paid courses for anyone to take. It is capitalizing on the convergence of increasing global education demand with new technology fundamentals that enable people to learn anytime, anywhere.(Disclosure: GSV owns shares in Coursera)

The twin forces of globalization and automation are making career obsolescence a new reality. You can no longer fill up your knowledge tank until age 25 and drive off through life. Effective workers will be refilling their “knowledge tank” continuously. In this new paradigm, education technology platforms like Coursera will be like air — invisible, ubiquitous, and life-sustaining. Living will be learning.

WATCH REMARKS FROM COURSERA CEO RICK LEVIN HERE
GSV Partner Mark Flynn (Left) Explores What’s Next for Coursera with Rick Levin (Right)

Source: GSV Asset Management

CEO Rick Levin, the former President of Yale University, discussed the company’s rapid ascent — it now serves more than 18 million students with 1,800+ courses from 140 university partners. He also previewed what’s next for Coursera as it moves beyond credential monetization, including disruptive, low-cost full MBA and computer science degree programs launched in conjunction with the University of Illinois.

Coursera has also launched an enterprise strategy targeting an estimated $325 billion in annual corporate training spending. Early customers include Yahoo, MasterCard, and GE, who use the platform to provide low-cost, high-quality professional development and new hire on-boarding.

GLOBAL SILICON VALLEY

Beyond the leaders of our portfolio companies, we featured two discussions on key trends that are shaping the Global Silicon Valley.

Sustainability

The good news is that the world’s middle class will more than double to five billion over the next 15 years. The bad news is that the strain this will put on the environment will be extreme, with wealthier people traveling more, consuming more, and using more electricity for everything — from air conditioning to lighting larger homes. Sustainability is not just green technology — it is water and wellness.

There is no longer a debate between being “green” or “growing” — both are important. Water is even more precious, with California’s drought being a living example of how vital access to “blue gold” is for everything. Despite the prolonged slump in oil prices, Moore’s Law has taken effect with numerous sustainable technologies being able to compete on cost with dirty fossil fuels.

GSV Shared-X Chairman John Denniston, a leading authority on green-tech investing and a former Investment Partner at Kleiner Perkins, discussed the state of play in global sustainability, including the 10 megatrends that are driving the industry.

WATCH REMARKS FROM GSV SHARED-X CHAIRMAN JOHN DENNISTON HERE
John Denniston Discusses the State of Play in Global Sustainability

Source: GSV Asset Management

India Rising

GSV stands for “Global Silicon Valley”, reflecting our belief that Silicon Valley is no longer just a physical place. It is a mindset that has gone global and viral. No longer are the most innovative ideas limited to the corridor between San Francisco and San Jose. They have spread to Austin and Boston; from Chicago to Sao Paulo; from Mumbai to Shanghai to Dubai.

In this spirit, we were pleased to welcome Satyan Gajwani, the Managing Director of Times Internet — the digital arm of India’s largest media company, the Times Group — as a guest speaker. For context, the Times Group publishes the Times of India, the most widely circulated English-language newspaper in the world, as well as the Economic Times, the second most widely read business publication behind the Wall Street Journal. It also commands a broad range of TV, radio, internet, and publishing assets.

WATCH REMARKS FROM TIMES INTERNET MANAGING DIRECTOR SATYAN GAJWANI HERE

Satyan Gajwani (Left) Reflects on the Rise of Digital Media in India and Creating a Bridge to Silicon Valley with GSV CEO & Co-Founder, Michael Moe (Right)

Source: GSV Asset Management

Satyan shared his perspective on the state of play for digital media in India, and the role that Times Internet is playing in reshaping the future. He also discussed his company’s strategy to invest in, acquire, and partner with emerging technology platforms that can compliment core Times Internet offerings, including recently announced deals with Uber, Coursera, and Airbnb. (Disclosure: GSV owns shares in Coursera)

For the week, stocks were mixed with the fear of the day being Brexit. The Dow was up 0.3%, the S&P 500 was down 0.1%, and NASDAQ fell 1.0%. The GSV 300 was off 0.9% for the week.

World Indices

Source: Yahoo Finance, GSViQ

While we remain in a directionless market, growth fundamentals for many of our favorite names remain strong. Currently, we look to keep our positions in leading growth companies. 

Bubblin'

by Luben Pampoulov

Connecting With Next Door

Initially started as an online, crowdsourced almanac of professional and college athletes, a startup then called Fanbase pivoted and become Nextdoor — a social network for your neighborhood. The idea was to have a private community network which allows neighbors to communicate, to exchange recommendations on where to eat, to find a baby sitter, to find a handyman, a doctor, a petsitter, etc.

When Fanbase re-launched as Nextdoor in 2011, it piggy-backed on Facebook’s emerging supremacy in the social media space, and it targeted a niche area that was not addressed by any other network. Facebook was too broad and too big to allow people to easily find their neighbors. Google had the same issue. So Nextdoor expanded its footprint, quickly growing to 14K neighborhoods in June 2013, then to 53K in March 2015, and it currently counts over 99,000 neighborhoods, or more than 60% of all U.S. neighborhoods. And most recently, Nextdoor also launched in the Netherlands — the perfect country for that model. (Disclosure: GSV owns shares in Facebook, Alphabet).

Nextdoor Neighborhoods

Source: Based on company announcements, GSV estimates

Nextdoor hasn’t been disclosing much information other than the neighborhood count, but in March 2015, they stated that 63% of all Nextdoor members engage with the network on a weekly basis. Also, management recently stated that on average, there are 750 households in a neighborhood, and that they are adding 100 neighborhoods per day. 

Assuming the 750 households implies 750 users (I doubt a household will have two users on Nextdoor), this translates into 74 million total users. If engagement is still at around 63% on a weekly basis, I estimate monthly engagement to be ~70%. This implies that monthly active users (MAUs) are around ~52 million and growing in the 50-60% range, similar to the number of neighborhoods growth.

If the above estimates are accurate, Nextdoor would be comparable to Tencent (WeChat), Snapchat, and Instagram from a user growth perspective, however with a significantly smaller MAU size. (Disclosure: GSV owns shares in Facebook, Tencent, Snapchat).

Given that Nextdoor has yet to start to monetize — and it will most likely do so through displaying (local) ads — it is also comparable to freemium social network models such as Pinterest, Soundcloud, or Yelp.

There hasn’t been much information on the user demographics, but my guess is that the majority of Nextdoor users are families older than millennials, and more likely moms that dads. Why do I think so? — Young, millennial generation families are more likely to 1) use Facebook/WhatsApp/Snapchat for communication, 2) use Thumbtack/Taskrabbit/Angie’s List for finding a handyman or plumber, 3) use Care.com for finding a babysitter, 4) use Yelp or Google for finding a restaurant, 5) use DogVacay for finding a dog sitter, etc. (Disclosure: GSV owns shares in DogVacay).

With $210 million raised from A-class investors including Benchmark, Kleiner, Tiger Global and Greylock, Nextdoor is valued at $1.1 billion. While many data-points indicate that Nextdoor could be onto something big, it has yet to be seen if its engagement is strong enough to attract large marketing budgets, and if it can monetize as well as some of their comps. 

Pioneer Notes

by Li Jiang

You wake up. There’s a notification on your watch. It’s your doctor asking you to take a home saliva sample. You do using a smart phone compatible sensor and send it off. 10 minutes later, you receive a summary and you are automatically scheduled for an appointment with your doctor next week.

Of course your watch already knows what’s on your calendar.

This is just a glimpse of our future experience with health and with knowing our own mind and body.

Even today, 49% of patients globally wear or would be willing to wear technology that measures and tracks both fitness/lifestyle and vital signs.

Our experience with our bodies and our team of healthcare providers will be drastically altered over the coming years.

To explore this transformation, GSVlabs is partnering with IBM and Stanford Children’s Hospital to host Digital Wellness Innovation Showcase on Tuesday, June 21, 2016.

The digital health revolution is still in its early days and consumer adoption will be picking up in the years to come.

As industry participants are sensing opportunities here, funding for digital health startups have been steadily increase both in the US and globally.

At the Digital Wellness Innovation Showcase, we are bringing together the world’s leading startups, investors, global corporations and non-profits to examine the next generation of connected health & wellness technology. Hear from 15+ Digital Health & Wellness startups that are providing consumers 24/7 precision wellness and moving healthcare beyond the doctor’s office.

Attendees will also have the opportunity to participate in an Innovation Think Tank, sharing their insights and ideas for how Stanford Children’s Hospital can leverage AI and social platforms to expand support for some of the most vulnerable members of our society.

Join us on June 21st for a glimpse into next generation of Digital Health & Wellness.

Market Update

Week ending June 12, 2016

World Indices

America Index 9/20/2017 YTD Week
U.S. GSV 300 107.4 42.1% 1.8%
NYSE 11812.0 6.8% 1.0%
Dow 21813.7 10.4% 0.6%
NASDAQ 6265.6 16.4% 0.8%
NASDAQ-100 5822.5 19.7% 0.5%
Russell 2000 1377.5 1.5% 1.4%
S&P 500 2443.1 9.1% 0.7%
Brazil Bovespa 71073.7 18.0% 3.4%
Mexico IPC 51373.2 12.6% 0.6%
Canada S&P TSX 15056.0 (1.5%) 0.7%
Euro-Asia Index 9/20/2017 YTD Week
China SSE 3331.5 7.3% 1.9%
Heng Seng 27848.2 26.6% 3.0%
Singapore Straits Times 3259.6 13.1% 0.2%
Indonesia JKSE 5915.4 11.7% 0.4%
Japan Nikkei 225 19452.6 1.8% (0.1%)
India Sensex 31596.1 18.7% 0.2%
Russia RTS 1979.1 (11.4%) 2.5%
France CAC 40 5104.3 5.0% (0.2%)
Germany DAX 12167.9 6.0% 0.0%
U.K. FTSE 100 7401.5 3.6% 1.1%



U.S. Indices Snapshot

Valuation P/E Est. P/E/G Price/Sales
LTM NTM Growth LTM NTM LTM NTM
S&P 500 24.2x 17.6x 7.60% 3.2x 2.3x 2.4x 2.1x
NASDAQ 25.2x 17.5x 7.90% 3.2x 2.2x 2.6x 2.2x
Russell 2000 24.7x 17.6x 6.30% 3.9x 2.8x 1.9x 1.6x
GSV 300 50.6x 25.8x 38.40% 1.3x 0.7x 5.5x 4.0x

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