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1Mby1M Virtual Accelerator Investor Forum: With David Blumberg of Blumberg Capital (Part 3)

Posted on Wednesday, May 16th 2018

David Blumberg: I was speaking at a conference in Mexico recently. It was about transportation of the future. I’m not an expert in that, but I’ve got some theories. A lady from Ford Motors got up and said, “The future of transportation is green, recyclable, and sustainable.” Then a man from Delphi Auto Parts said, “The future of the automobile is connected.”

I got up and said, “I don’t know what the future of automobiles will be. I want to ask you. I have two choices. Is it a product that you buy, own, fill with gas, take to the garage to park and only comes in one shape and size during the lifetime of your ownership? Or is it a service? It comes to you when you call it? It comes as a motorcycle today, or Ferrari the next day? You don’t pay insurance. It’s all wrapped in a service.”

900 of those thousand people voted for the service. I see it with my nephews who are well-to-do engineers in Silicon Valley. They don’t want cars. They want Uber. They want Lyft. They want alternative transportation systems that are delivered as services. Some of the changes are gargantuan. They’re going to completely turn industries on their side.

Sramana Mitra: Absolutely. The transportation industry is probably at risk of being disrupted more than any other because the chain effect is so large. The behavior change of people not buying cars means that auto manufacturing goes bust or shrinks dramatically. The auto service shrinks dramatically. This is like a hundred million jobs kind of impact.

David Blumberg: But you’re talking about it in the negative. Let me reframe it. In 1776 when the United States became independent, 95% of Americans worked in agriculture. Today, 2% of Americans work in agriculture, yet we produce 20 times more food. It’s more healthy. It’s more GDP. Our farmers are incredibly more productive. In the transportation industry, we are very inefficient. One car is driving me from my home to my office and is sitting in the garage when I’m working and when I’m at home.

Sramana Mitra: I don’t have any disagreement with you on any of that. I think the larger trend, however, is that probably 60% to 80% of jobs in the next 50 to 100 years will go away. That is a very disruptive change. I’ve written extensively about this. I’m more interested in what this does and what opportunities it opens up for the entrepreneur and correspondingly for people like you who are going to invest in these entrepreneurs.

If you look at the grand scheme of things, artificial intelligence is a driving trend. Vertical cloud is a driving trend. Vertical AI is a driving trend in each of these segments that we talked about. There are immense opportunities for automation and thinking machines as we see them gradually morphing into. That’s one of the areas where entrepreneurs are going to create innovation and create growth.

The large companies are also not sitting and twiddling their thumbs. IBM’s big bet is Watson. That’s one key trend. Everything we’ve discussed falls in this general area. Is there anything else that you’re tracking where you see a lot of opportunities for entrepreneurs to build large companies?

David Blumberg: Let me give you one example where we had an incredible exit recently. That’s in cyber security. Size is not on your side. The startup community has more of the new knowledge that’s important and more of the value than the largest companies. We see this over and over. Our acquisition was a company called Cyvera. It was 20 months old when it was sold for $200 million to Palo Alto Networks.

They had almost no sales. They had a tiny staff but they had incredible IP for endpoint security protection that protected against advanced persistent threats and in particular, zero-day threats. This is an area where the large companies find that the product cycles are moving too fast for them to keep up.

They need entrepreneurs desperately, but the entrepreneurs find it easier to develop in a startup environment than in a larger organization. Typically, startups develop to a certain stage and then sell off. They don’t always go public themselves, but they sell to a big market leader who a has huge sales force.

Guess what? Those entrepreneurs are not going to retire and live on an island in Tahiti. They go back and start another company. We see it over and over again. When I was in junior high school, I heard of a very powerful futurist. He talked about the fact that my parents had one job for their whole life and that we would have many jobs in our lives. It’s so exciting because you can keep reinventing yourself and learning from the past experience.

My message to entrepreneurs is to try things. You’re not going to succeed all the time. That’s okay. Keep learning. You will succeed further along. Maybe it’s going to come early in your life or late in your life. Just keep trying. The journey is as great as the end result.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With David Blumberg of Blumberg Capital
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