Better Ingredients, Better Companies

As an Electrical Engineering student at University of Illinois, I had little money. I lived on ramen noodles freshman year and perpetually hunted for deals. I was overjoyed to find a pizza restaurant whose Tuesday night special of two large cheeses for $8 could provide a week of gourmet dinners. Papa John (a great entrepreneur) had a motto, “Better Ingredients. Better Pizza.” By using superior ingredients, he created a product that was the best amidst a sea of competitors.

This analogy works in technology as well.  As better ingredient technologies arrive on the scene, they open the door for new, iconic companies to be formed that meet our needs in fundamentally better ways.

Better Ingredients Can Transform The Familiar

Iconic companies massively shift behavior, yet the need for the shift isn’t always obvious. As humans, we typically accept that world we inherit. But as new ingredient technologies become available, new possibilities open up. Great entrepreneurs see the world from a different angle and take advantage of the better ingredients to execute like crazy to craft superior products.

The most iconic companies are actually those that transform the most familiar.

Learning from the Past

Three iconic companies I’ve led investments in include Roku, Siri, and Uber. In none of these cases was Menlo Ventures sitting around yearning to watch movies over broadband, command our phones with our voice, or avoid hailing taxis. Rather, we had been studying the ingredient technologies and as we heard the entrepreneurs pitch, the opportunities felt both novel and compelling.

  • Roku — ingredients of broadband + video compression + wifi + premium video licensing came together in the “Netflix player”, crafted by serial entrepreneur Anthony Wood who invented the DVR. Today, Roku is the leading operating system for smart TVs.
  • Siri — ingredients of chatterbots (SmarterChild was inspiration) + web services (e.g. reviews/weather/commerce APIs) + natural language processing combined into a smart mobile assistant with founders Dag Kittlaus, Adam Cheyer, and Tom Gruber uniquely suited to the opportunity. Today, Siri is Apple’s intelligent assistant, enabling over 100 million iOS users the ability operate the device and apps by voice command.
  • Uber — ingredients of mobile GPS (inspired by our TeleNav investment in 2007) + appstore (for on-demand download) + web services (billing and telephony) along with brilliant execution by Travis Kalanick and team enabled a truly transformative user experience for getting across town. Uber now operates in over 400 cities worldwide.

A few other mobile-first greats that leveraged powerful new ingredients:

  • Whatsapp: data + appstore + telephony API replaces costly SMS
  • Instagram: data + appstore + camera + follow-favorite social fabric = image-first social network
  • Periscope: data + appstore + camera + video streaming = live broadcast (Menlo seed investment)
  • Snapchat: data + appstore + camera = image-first messaging
  • Waze: data + appstore + GPS = real-time traffic community

The use of a few new ingredients on top of existing platforms allowed these entrepreneurs to provide step-functions in quality of life, time-to-value, usability, and personalization that led to massive behavior shifts and billions in enterprise value creation.

Ingredients to Redefine the Consumer Experiences of Tomorrow

What seven ingredients will spice up the consumer products of tomorrow?  Coming in the form of software libraries, semiconductors, sensors and know-how there is an approachable list to consider in revolutionizing your market:

  • Natural language processing — Simply the fastest way for humans to communicate, Siri was act one.  Viv, a more open platform coming soon from the Siri founders, will be act two. But others have come into picture like Alexa, the voice of Amazon’s Echo. Fellow owners know that it quickly becomes an integral part of daily life with the ability to launch music, search, shop, and control smart-home products. As voice UIs appear in more products, consumers will quickly become intolerant of machines that cannot understand us. Shouldn’t your microwave understand “defrost this pound of beef.”
  • Machine learning — Humans benefit greatly from complex pattern recognition (e.g., eat blueberries, not animal droppings) and software is starting to as well. Google’s open source library Tensorflow has been a major catalyst. We expect machine learning to make nearly all data-driven software easier and more personalized, but applications will vary widely. Consider Prisma that learns art styles and applies them to your photos with just a tap. I’d love to train Mint on my categories in real-time to make tax prep a snap.
  • Augmented and Virtual Reality — Put simply, reality augmentation adds to what you are already seeing or hearing, while virtual reality seeks to replace it. Pokemon Go has taken advantage of AR novelty to turn (many) quick bucks, but when the fad passes, companies like Doppler Labs will allow real-time coaching, Skyfit will make personal training affordable, kids will take amazing field trips with Nearpod, and somebody will come up with an Oculus/Vive killer app to justify the purchase: think virtual teleportation to those courtside seats or the front row of that concert.
  • Applets — Google’s Instant Apps and iOS10 iMessage extensions are examples of app functionality appearing everywhere, and the friction of using native platform resources like touch screen, mic, sensors and high res screens will go to nearly zero. IMVU’s Kimoji keyboard is a hint of what’s coming as users can now share selfie-like GIFs to portray an emotion or event rather than using words. Soon credit card companies will send messages allowing you to pay the balance with a fingerprint.
  • Computer Vision — Computers “seeing” is a key ingredient in autonomous vehicles, a trillion dollar market transformation coming soon (Cruise Automation saw it early). But vision comes in many forms and chipsets by Movidius will enable startups like Petronics to offer play things for your feline friends and more.  I’m excited to have more time playing and less time collecting tennis balls when a little bot can do the running for me.
  • Wearables — Changing behavior is challenging, but doing so can create a lot of value. Wearables have the potential to give in-the-moment feedback to change ingrained patterns.  Industries ripe for innovation include prescription compliance (Striiv) and enhanced treatment (Pear Therapeutics), physical activity (Fitbit), posture (Lumo Back), breathing (Spire), and athletic form (FocusMotion). As more sensors proliferate and connections are ubiquitous, we’ll have smarter houses that adapt to our needs, healthier bodies, and better sleep.
  • Bioinformatics — with the cost of human genome sequencing now within personal budgets, it’s fascinating to see the opportunities emerging to help couples have healthier babies, rip viruses out of cells, detect cancer via DNA mutations, prescribe drugs more precisely based on the patient, optimize performance of microbes and more. I’m hoping and praying for blood tests that can detect cancer and CRISPR treatments that can kill the mutations before patients miss a beat.

It’s likely that products being worked on this very day, leveraging these new ingredients, are about to redefine markets. For entrepreneurs looking to create the next iconic companies, think like The Papa and see if better ingredients can help you stand apart.