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General Commentary
March 25, 2018

Transcending Work… Transforming Education

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Market Snapshot

Indices Week YTD
GSV 300 3.50% 7.10%
S&P 500 2.40% 2.00%
Dow 2.30% 0.50%
NASDAQ 2.70% 7.20%
Russell 2000 2.60% 4.60%
MSCI 2.10% 0.60%
Valuations P/E Fwd P/E/G
GSV 300 24.2x 0.4x
S&P 500 17.1x 1.2x
I-Rates Now YTD
10-Year Note 2.97% 23.80%
3-Month Bill 1.92% 38.10%
Sentiment - Current
Bull-Bear - 33.5-25.5
Put-Call - 0.97
Vix - 12.65
Inflation Now YTD
Gold $1318 1.00%
Oil $70.51 17.30%
Mutual Funds - Week
Fund Flows (bil) -% -$0.20
Growth-Value 00-09 09-Now
Growth -34% 285%
Value 87% 161%

“If you think education is expensive — try ignorance.”

— DEREK BOK, FORMER PRESIDENT OF HARVARD UNIVERSITY.

“The greatest danger for most of us is not that our aim is too high and we miss it, but that it is too low and we reach it.”

— MICHELANGELO


On April 16th, leaders from across the global innovation economy will gather in San Diego for the ninth annual
ASU GSV SUMMIT, with the mission of accelerating exponential ideas in education and talent. We will welcome over 4,000 entrepreneurs, educators, business leaders, policymakers, and investors, as well as over 450 game-changing presenting companies.

What makes the Summit so impactful is the unusual “cocktail” of participants we convene, with the common ingredient being a commitment to giving everybody an equal opportunity to participate in the future. Increasingly, as exponential ideas that are transforming other industries are applied to education and talent— think Tesla’s impact on the automobile industry or Airbnb upending travel and hospitality — this goal is more reachable than ever.

We all go to conferences where there are some good speakers and intellectually stimulating conversation. But when you leave, it’s over. This is why the ASU GSV Summit has so much momentum. People come because things happen here. Connections are made. Capital is raised. Ideas are brought to life. People come here to make things happen.

2018 ASU GSV SUMMIT UNUSUAL “COCKTAIL” OF SPEAKERS
Entrepreneurs, Business Leaders, Educators, Investors, Policymakers, Thought Leaders, and Philanthropists

This year’s cocktail of keynote speakers includes 43rd President of the United States George W. Bush, John Legend (Academy + Grammy Award Winning Songwriter and Activist), Penny Pritzker (Former U.S. Secretary of Commerce and Philanthropist), Arne Duncan (Former U.S. Secretary of Education), Matthew McConaughey (Academy Award Winning Actor), Emily Chang (Anchor, Bloomberg Technology and Author of Brotopia), Dr. Michael Crow (President, Arizona State University), 55th President of Mexico Vicente Fox, and many others.

THE FUTURE OF THE FUTURE

Leading artificial intelligence (AI) expert Andrew Ng — the former Chief Scientist at Baidu and co-founder of Coursera — has said that, “AI is the new electricity.” What he means is that at the dawn of the 20th century, electricity transformed every major industry. It upended how the world operated, from manufacturing, to agriculture, and healthcare. (Disclosure: GSV owns shares in Coursera)

AI is poised to have a similar impact, or as Ng says, “Just as electricity transformed almost everything 100 years ago, today I actually have a hard time thinking of an industry that I don’t think AI will transform in the next several years.” E-commerce, web search, and advertising are already largely powered by artificial intelligence. AI decides if we’re approved for bank loans and it’s powering the future of autonomous vehicles. That’s just the beginning.

ARTIFICIAL INTELLIGENCE MEETS REAL INTELLIGENCE

Source: GSV Asset Management, MIT Technology Review, Company Disclosures 
Disclosure: GSV owns shares in Spotify, Lyft

There is, perhaps, no topic more overhyped than the “Future of Work”. The basic diagnosis is that technology — robots and artificial intelligence in particular — are going to eliminate all jobs as we know them. As a result, the government will have to provide the unemployable masses with a lifetime supply of food stamps and shelter.

As MIT scholars Erik Brynjolfsson and Andrew McAfee (2018 ASU GSV Summit speaker) observe in The Second Machine Age, an unsettling future is taking shape characterized by massive unemployment and economic disruption stemming from the fact that as computers get more powerful, companies will have less need for workers of any kind.

It’s undeniable that technology will replace many jobs that are commonplace today. Oxford researchers have projected that 47% of American jobs are at “high risk” of being automated in the next 20 years. McKinsey estimates that 12 million U.S. “middle skill” jobs will be eliminated by 2025. Globally, there are over 350 million manufacturing and warehouse workers — roles that are ripe to be replaced.

Aside from the minor issue that the government doesn’t make money — it takes money — one thing we know as sure as the Sun coming up in the East is that automation eats jobs. But it doesn’t eat work. In 1787, Thomas Jefferson observed that, “Agriculture is our wisest pursuit, because it will in the end contribute most to real wealth, good morals, and happiness.” We know how that played out.

AUTOMATION EATS JOBS… BUT IT DOESN’T EAT WORK

Source: GSV Asset Management

Kaizen is a Japanese business term meaning “continuous improvement.” An education corollary is GSV’s concept of “KaizenEDU,” which means “continuous learning.” In a world with smart machines, you can no longer fill up your “knowledge tank” until age 25 and cruise through life. Effective workers must refill their knowledge tanks continuously.

At this year’s ASU GSV Summit, we’re going to hear from innovators of all stripes — from entrepreneurs, to policymakers, business leaders, educators and investors — who are “thinking differently” to make KaizenEDU a reality.

That means applying transformational technologies to learning, including Big Data and Artificial Intelligence. It’s scaled platforms that are reaching millions of people with engaging and effective education opportunities — what we call “Weapons of Mass Instruction.” It’s new models that help people get the skills they need without dropping out of life and taking on massive debt.

At the 2018 ASU+GSV Summit, we’re proud to include over 10 concurrent program elements — all collectively focused on catalyzing change to ensure that everybody has equal opportunity to participate in the future.

Keynote Program

“The future started yesterday, and we’re already late.”

– JOHN LEGEND

This year, we’re especially proud to feature keynotes from two former Presidents — 43rd President of the United States George W. Bush and 55th President of Mexico Vicente Fox. Additionally, our keynote program will feature two current and three former Governors, as well as six former Secretaries or Under Secretaries of the United States.

Additionally, other prominent speakers joining our keynote stage include Academy Award winning artists John Legend and Matthew McConaughey, renowned authors Angela Duckworth, Emily Chang and Andrew McAfee, and leading education and talent business executives, including the executives from Chegg, TAL Education Group, Pearson, Cengage, Workday, Coursera, edX, Udacity and more.

FEATURED SESSIONS: KEYNOTE PROGRAM

The Stars of Tomorrow — 450+ Education + Talent Presenting Companies

“Whatever the mind can conceive, and believe you can achieve”.

— NAPOLEON HILL

What do Chegg and TAL Education Group have in common? Both companies saw 141% stock growth in 2017. 2017 was a banner year for many other publicly-traded education and talent companies including, 2U (+118%), New Oriental (+94%), and Instructure (+91%), American Public Education (+96%), Adtalem Global Education (+48%), John Wiley (+24%), Franklin Covey (+60%), Rosetta Stone (+84%), Ultimate Software (+28%), and Workday (+60%).

Additionally in 2017, seven Chinese education companies went public with an average 57% return. This year, CB Insights identified “Education and Talent” as the second largest category for 2018 IPO candidates, with 20 companies in the pipeline. 

In the private markets, there are seven Education and Talent unicorns, including Udacity, Udemy, Pluralsight, Glassdoor and VIPKID. Over $4 billion of venture capital was raised by learning and talent technology companies in 2017, up nearly 3x since 2012.

We’re proud to have over 450 of the World’s leading education and talent technology companies presenting at this year’s ASU GSV Summit.

450+ LEADING EDUCATION AND TALENT PRESENTING COMPANIES

The Future of Talent

“To keep a lamp burning, we have to keep putting oil in it.”

— Mother Theresa

Throughout history, whether in pre-industrial or industrial times, great nations developed based on their access to physical resources or their ability to surmount physical barriers. England and Spain crossed oceans, Germany turned coal and iron into steel, and the United States exploited a wealth of agricultural and industrial resources to become the World’s breadbasket and industrial superpower.

But the advent of the personal computer, the Internet, and the digital delivery of information shifted the World’s focus from physical capital to human capital. The most valuable resources in a physical economy are commodities like coal, iron, and oil. Their value is judged by metrics like purity and volume. In a knowledge economy, the most valuable resource is talent. Talent is valued based on brainpower, and the ability to acquire, deliver, and process information effectively.

At this year’s ASU GSV Summit, we’re going to hear from innovators from a variety of backgrounds who are reimagining ways to enhance and unlock talent.

FEATURED SESSIONS: FUTURE OF TALENT (FoT) PROGRAM

Global Silicon Valley

“The more we try to understand each other, the more exceptional each of us will be.”

— ZOOTOPIA

Looking in the rearview mirror, the economic engine for the last 100 years was the United States, Europe, Japan, and Canada. In 2000, with just 9% of the Global population, these countries contributed over 50% of Global GDP. But over the last 15 years, GDP growth has been flat-to-negative. Today the old guard contributes just 41% of Global GDP.

A key driver behind this change has been aging populations. Over 26% of these populations are over the age of 60 while just 15% are under the age of 15. In Japan last year, there were more adult diapers sold than baby diapers. These dynamics are not changing anytime soon. The average (weighted) fertility rate in Canada, the United States, Europe, and Japan is 1.6. At a fertility rate under two, you’re essentially dying.

Where is the growth and opportunity as we look ahead? One area to look is a group of countries we call the “VChIIPs” — Vietnam, China, India, Indonesia, and the Philippines.

The VChIIPs are home to over 43% of the Global population and command 28% of Global GDP, growing at 6.7%. If you look at the demographics, they are the mirror opposite of the World’s developed countries. Just 11% of the VChIIP population is older than 60, 24% is younger than 15, and the fertility rate is 2.3, driving organic growth.

But Africa is on the horizon. It claims five of the 10 fastest growing countries by population and three of the 10 fastest growing countries by GDP.

SHIFTING CENTER OF GRAVITY: DEVELOPED LEADERS TO VChIIPs

Source: International Monetary Fund, World Bank, GSV Asset Management

The ASU GSV Summit has become a global gathering of leaders focused on accelerating learning and talent. Last year, over 40 countries were represented at the Summit, with 80 senior leaders from China alone.

This year’s event will feature three days of programming on the Global Track. We are also excited to introduce ChinaWorld, which will include sessions highlighting China’s massive education and talent innovation ecosystem.

FEATURED SESSIONS: GLOBAL PROGRAM

A Window to the Future

“It’s kind of fun to do the impossible.”

– Walt Disney

On a rainy, cool evening in 1954, Roger Bannister, a lanky British medical student, ran a mile in 3:59, shattering experts’ views that a sub four-minute mile was beyond human capability. The previous record of 4:01 had stood for decades, and despite advancements in training and thousands of attempts, nobody had come close to running a mile in under four minutes.

The best part of the story, however, isn’t that Bannister cracked the barrier, but that just 46 days after he did, another runner, John Landy, beat Bannister’s time. Within a few years, dozens of runners had notched sub four-minute miles. Today, the record stands at 3:43 and even high school runners have routinely beat the once impossible four-minute mark.

The distance didn’t change. The mindset did.

ROGER BANNISTER BREAKS THE FOUR-MINUTE MILE
In 1954, Roger Bannister defied gravity by running a mile in 3:59

Source: PBS

As the late great philosopher Muhammad Ali once said, “Impossible is not a fact. It’s an opinion.” Entrepreneurs around the world continue to defy gravity, using technology to create solutions to the World’s toughest problems.

In that spirit, this year, we are introducing GSV FutureLabs — an exhibition of the World’s most innovative technologies in education and beyond. Our objective is to create a window to the future that will drive our dialogue about education and talent today.

FUTURELABS: A WINDOW TO THE FUTURE
Key Trends + Technologies featured in GSV FutureLabs

The full agenda for the 2018 ASU+GSV Summit can be accessed HERE. We hope to see you there!

Bubblin'

by Luben Pampoulov

Logistics on the Road

Smart data analytics is disrupting many business environments, especially those with outdated technology. One such area is the Logistics space — and more specifically, Fleet Management and Freight Tracking.

In the Trucking space, the one piece of technology that has been out there is a so-called ELD (electronic logging devices), which is mostly used by big trucks to monitor milage, driver’s behavior, and locations logs. In the case of smaller trucks however, sophisticated technology has been missing, and location logs have been done manually on paper.

But things are changing…

San Francisco-based KeepTruckin is tackling that opportunity and is aiming at the thousands of smaller fleets and independent truck drivers. Its current product is a hardware device, that plugs into the vehicle’s diagnostic board, and keeps drivers, vehicles and fleet managers connected at all time. Additionally, the software enables fleet managers to set driving parameters, time limits, routes, etc., and also provides constant data syncing and communication between all end points.

Shoaib Makani, the company’s co-founder and CEO, previously worked at Khosla Ventures and led their investments in Instacart, Indiegogo and Simpler. “We want to work with brokers and shippers to bring those loads to our drivers in a really targeted way,” says Makani. “We know where the drivers are, how much time they have to drive, and their historical lane preferences.”

KeepTruckin charges customers on a monthly subscription basis, and it has two subscription plans — ELD Starter, which costs $20/month and includes services such as GPS tracking, messaging, reporting, and log auditing. The more advanced plan is ELD Plus, which is priced at $30/month, and also offers vehicle diagnostics, idle time tracking, IFTA fuel tax reporting, geofencing and driver scorecards.

The innovative approach has been a boost to the company’s business, growing its revenue run-rate from $500K in 2016, to $40M in 2017, and to an expected $100M by the end of this year.

Last week, the company announced a new round of financing, led by IVP, and with participation of existing investors Google Ventures, Index and Scale Ventures. The new round values KeepTrackin at $500 million, implying a 5x multiple on 2018 expected revenue run-rate. We are adding KeepTruckin to our priority list.

Meanwhile, San Francisco-based Flexport is one of the most innovative companies in the shipping logistics space. The company calls itself the “freight forwarder for the Internet age” and offers an app- and web-based service with real-time visibility on shipments. Flexport helps customers in the process of shipping a product from A to B, by air or by sea.

Flexport has been on many investors’ watchlist, including ours, and has managed to emerge as THE innovator of freight shipping and logistics. Most of the existing companies in that space are old and slow to innovate: “There are 25 freight forwarders that each do more than $1 billion in revenue a year,” Flexport’s CEO Ryan Petersen explains, “and none of them was founded after Netscape.”

Ryan has had shipping embedded in his DNA. Earlier in his career he started ImportGenius, a startup specialized on scanning and selling shipping manifest data on imports. Prior to that he was buying scooters from China and selling them online. It is no surprise that Ryan received early backing from some of the top VCs, including Google Ventures, DST, Founders Fund, Y Combinator and First Round Capital.

Last last year, Ryan expected Flexport to generate $500 million in gross revenue, and to collect a 15% take-rate on transactions. At its latest $910 million valuation, that would imply a 12x price-to-sales multiple. We estimate Flexport’s business is currently growing close to 100% with significant recurring revenue.

Needless to say – the market opportunity is enormous: about 15% of the Global GDP is in trade activities, and the other 85% relies on it. We are keeping Flexport high on our priority list.

Pioneer Notes

by Li Jiang

6 Articles You Must Read Before Fundraising For Your Startup

Fundraising for many founders falls somewhere between going to the dentist and taking a dump. It’s somewhere between a painful experience (dentist) and just a necessary annoyance (dump).

But it probably doesn’t have to be that way if you are prepared to tell a compelling narrative, run an efficient process, and target and find the best long-term partner for your company.

Here are 6 resources you should use before setting off on your Seed or Series A raise:

1. Justin Kan, Atrium — The Founder’s Guide to Raising a Series A Venture Financing

Justin focuses on Series A but the lessons are largely transferrable to Seed rounds as well. This is a great guide that outlines how to run an overall efficient fundraising process and what are all the steps you need to complete to save yourself time and headache.

2. Sarah Guo, Greylock — What do I look for in a pitch?

Sarah creates a fairly comprehensive and systematic guide on the key things she/her firm looks for in a startup. The post hits on a lot of tactics and is a great distillation of the most important things you need to convince your (potential) VC backers.

3. Ash Rust, Sterling Road —Seed Fundraising — How to Build a Deck

Ash’s post, and the rest of his series, is a down to earth and specific guide on how to build a deck. There’s no fluff in this post and this serves as a good reminder for founders to not try to write an encyclopedia about their companies, but hit the highlights to get a meeting, and then a term sheet.

4. Reid Hoffman, Greylock —LinkedIn’s Series B Pitch to Greylock

This long, and timeless, guide from Reid Hoffman breaks from conventional wisdom on a number of fronts, including how you should start your pitch — with an investment thesis.

I highly recommend taking time to deeply read and understand the great nuggets in his essay. There’s a ton of substance here. While the slides themselves look very spartan, the narrative is powerful.

5. Geoff Ralston, YC — A Guide to Seed Fundraising

Geoff’s guide is an “all in one” that helps you check all the boxes of a seed round. While you don’t need to read every piece when starting it, it’s a great guide to reference at any point of your fundraising journey.

6. Li Jiang, GSV — 8 Questions I Ask Every Startup

Any good post wouldn’t be complete without your own contribution to the field. I previously wrote about the 8 questions I ask every startup. While there are always new questions, I think every startup will face a core list of tough questions which I did my best to capture in this post here. Enjoy!

Market Update

Week ending March 25, 2018

World Indices

America Index 4/29/2018 YTD Week
U.S. GSV 300 127.1 7.1% 3.5%
NYSE 12761.8 (0.4%) 2.1%
Dow 24831.2 0.5% 2.3%
NASDAQ 7402.9 7.2% 2.7%
NASDAQ-100 6952.6 8.7% 2.7%
Russell 2000 1606.8 4.6% 2.6%
S&P 500 2727.7 2.0% 2.4%
Brazil Bovespa 85220.2 11.5% 2.5%
Mexico IPC 46728.9 (5.3%) (0.6%)
Canada S&P TSX 15983.3 (1.4%) 1.6%
Euro-Asia Index 4/29/2018 YTD Week
China SSE 3163.3 (4.4%) 2.3%
Heng Seng 31122.1 4.0% 4.0%
Singapore Straits Times 3570.2 4.9% 0.7%
Indonesia JKSE 5956.8 (6.3%) 2.8%
Japan Nikkei 225 22758.5 (0.0%) 1.3%
India Sensex 35535.8 4.3% 1.8%
Russia RTS 2345.3 11.2% 2.4%
France CAC 40 5541.9 4.3% 0.5%
Germany DAX 13001.2 0.6% 1.4%
U.K. FTSE 100 7724.6 0.5% 2.1%



U.S. Indices Snapshot

Valuation P/E Est. P/E/G Price/Sales
LTM NTM Growth LTM NTM LTM NTM
S&P 500 23.1x 17.1x 14.20% 1.6x 1.2x 2.5x 2.3x
NASDAQ 22.6x 17.0x 16.20% 1.4x 1.0x 2.9x 2.5x
Russell 2000 24.2x 18.3x 6.30% 3.8x 2.9x 2.6x 2.3x
GSV 300 38.1x 24.2x 60.90% 0.6x 0.4x 6.6x 4.0x

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