Duncan Davidson, managing director at Bullpen Capital of Menlo Park, has been an entrepreneur and investor through several major technological "ages". He believes we are witnessing the end of one and the beginning of the next. He made a recent visit to The Netherlands as part of a new teaching initiative organized by Tilburg University’s renowned international Law School. Jonathan Marks caught up with him to discuss what’s on the horizon and what high-tech international investors expect from European scale-ups.
Apple has peaked. So what’s next?
“I think last year we saw the peak of Apple and the era that has been driven by the smartphone. The iPhone integrated a lot of things — the cloud, broadband for example — and triggered a “Cambrian explosion” of apps and things around smartphones. But now the pace of new consumer apps is slowing. At some point, all these booms mature and we all start looking forward to what’s coming next. I just think we hit that moment in 2015.”
Learn from what we have seen before
“My first stint in venture was at the end of the PC bubble between 1983 to 1986. If you examine the PC era, there were just a few dozen business ideas worth funding. There were many more companies than that. But the lasting ideas included the spreadsheet, disk drive, word processing and PC operating system. We ended up with about 40 really good ideas and by 1986 all 40 had been tried multiple times. After that, what we saw was mostly consolidation. Eventually, there were just a few companies like Intel and Oracle that emerged.”
“The same goes for the “dot-com” era. I once did an analysis and found there were roughly 200 business ideas that were worth looking at during that period. By 2001, most had been tried. Looking at the smartphone and mobile era, I think something similar has occurred. It has hit maturity.”
So what is the next tech wave?
“I think this will be called the “Age of Robotics” although it may not be called that for maybe a decade until people understand the context. It won’t be robots in the sense that we know from science fiction, TV shows or in "Terminator" — some sort of autonomous metal humans. This will be the age of machine-tech intelligence, especially the machines assisting human activity.”
“There are hundreds of examples I could give but we have begun to see this already with the development of self-driving cars and trucks. We’re going to look back on this in a decade and say aha. This was the point at which we put enough real intelligence in the cloud so useful devices can be connected in real time.”
Which barriers need to be bridged before this new Age of Robotics arrives?
“There’s been a lot of technology associated with machine-learning and matching algorithms. But they’re not yet sophisticated enough to do the magic. They can come up with a lot of false positives and a lot of noise that you have to filter through. We’ll solve this as big data processing gets cleverer, by my estimation within three years.”
“Robots could certainly make a difference in both the consumer and B2B spaces. We invested in a company that does apparel technology. Within the next three years, we’ll have robotic sewing machines in automated factories instead of low-wage earners in, let’s say Bangladesh, who are sewing garments for a pittance. It is bespoke custom-made clothing that’s made to order by manufacturers near or close to their customers. If we get to more 3-D printing and robotic assembly of devices, we can actually move a lot of core manufacturing back to Europe and North America. Companies like Shapeways and Smart Robotics may understand where this is going."
“I think, in general, the fear about the singularity of machine intelligence and the fear of jobs being eradicated is completely misplaced. When I’m thinking about robotics, it’s basically machines assisting human activities. With robots you get rid of mind-numbing assembly line work. But you create new jobs around this technology. We have to find a way to make sure the workforce can become skilled and tuned to the new machines. A lot of people think it’s really daunting to re-educate somebody who used to be on an assembly line so they can now do more sophisticated work.”
"Robots can also assist surgeons do operations that were previously impossible. We just visited with Maarten Steinbuch at Eindhoven University of Technology where they are building extremely precise medical instruments that are world-leaders in this field. Preceyes and Microsure are the first of several amazing companies to emerge from this robotics cluster."
“Another area we’re examining is drones. We don’t want to invest in a drone company but we have invested in one called AirMap that is doing geo-fencing for drones. Every little town has different rules about where drones can fly, where they can’t, what time of day, and at what height. It’s extremely complicated and it’s constantly changing. These guys want to be the authority on that data and 80 percent of all the current drones in the US are signed up to use their technology for geo-fencing.”
Will established companies or new scaleups lead the next wave?
I think it will be both. We should be encouraged by the fact that the founding people in companies like Google and Amazon are still there, driving innovation. A lot of times these tech companies make it big and then have a very hard time maintaining that dominance in the future. It’s very rare that a tech company has a second product. Apple pulled it off with the iPhone/Ipad after the Mac and we’ll see if they can come up with the third. Dell didn’t do it. IBM has had a hard time doing it. Most don’t even get the second product. They have one great product and that’s it. That explains why we’re so interested in helping today’s later stage startups scale to become global billion-dollar businesses.
If you think about it, for the last 30 or 40 years the baby boomers have ruled the roost. Most venture people have been boomers and they were investing in the very toys they were using. But that’s gone and the mantle has been passed to the Millennials.
In the 1990's Duncan Davidson founded Covad Communications, the digital subscriber line provider that hit a market value of US $9 billion after going public. He ran Intertrust, which had a market cap of US$ 8 billion at the time of its IPO. Duncan was managing director at Vantage Point Venture Partners for four years before joining Bullpen based on Sand Hill Road in Menlo Park, California.