Invest in the Conversational Commerce Revolution
Startup: Jetson AI
Security type: Crowd note
Valuation (cap): $8 million
Minimum investment: $100
Where to invest: MicroVentures
Deadline: October 14, 2019
Conversion provisions: The company has the option to convert the crowd note into nonvoting preferred stock at a price no higher than $8 million or at a 20% discount on the price investors pay during the conversion round, if that discounted price is lower than $8 million. Please refer to the crowd note for a complete description of its terms, including the conversion provisions.
When Amazon launched in 1994, it showed us how easy it was to buy books online. At a time when buying anything online was a revolutionary concept, we didn’t suspect just how large and quickly e-commerce would grow.
Eventually, Amazon showed us we could buy virtually everything online – from groceries to pills, clothes, electronics, movies, TV shows and much, much more. And you could get it all delivered in two days – or two hours.
Then Amazon’s Alexa showed us how to talk to our computers and connected devices. It even taught us to use our voice “assistants” to order an Uber.
Now, as the e-commerce market reaches new heights and the use of voice assistant technology grows, we’re entering an era of conversational commerce – a time when more and more people are using smart speakers and voice assistants to help them shop.
Amazon understands that customers are always willing to adopt something that’s faster and more convenient than before. That’s one of the reasons it’s grown into an $888 billion company. Jetson AI, a tiny company Amazon is partnering with, understands it too.
Jetson AI sees a massive opportunity in the conversational commerce market. And it’s currently seeking funds from crowdfunders just like you.
Giving Voice to a New Form of E-Commerce
Before Jetson AI could do anything else it wanted to, it had to solve the problem of inefficient voice technology. How many times have you called a business and been forced to talk to a machine that doesn’t understand what you want? Voice technology seems to have created more frustration for people, not less.
So Jetson AI fixed it. It improved NLU (natural language understanding) technology by creating an extra layer of AI, or artificial intelligence, on top of existing NLU tech. And, just like that, it eliminated the majority of misunderstandings that drove people crazy.
From there, Jetson AI developed technology to facilitate voice orders between customers and businesses. Its technology integrates with voice assistant technology like Amazon Alexa or Google Home to enable complex, multistep conversations between the voice assistant and the customer. This way, customers can more easily explore a business’s menu or catalog of products.
Jetson’s technology gives the voice assistant knowledge of the product being ordered, so it knows what to ask and in what order. Additionally, using machine learning, Jetson’s technology enables the voice assistant to remember all previous conversations with the customer. It learns their likes and dislikes. It understands their questions and responds intelligently to what they want. It even gives customers the chance to change their minds. Too expensive? Alexa can go back and see what needs to change. Forgot the ketchup on the burger? No problem, Google Home will add that to the order.
The result is a conversation that is both orderly and free-flowing.
What’s more, the voice assistant never loses patience. It never forgets to ask a necessary question. It never puts you on hold to take another call.
When customers are ready to authorize payment for an order, they use Jetson Pay. With Jetson Pay, customers don’t have to input new payment details every time they make a voice purchase. Their payment information is linked to their voice assistant system.
As for vendors? It takes just a couple of minutes to set up Jetson’s platform on Alexa, Google Home or any other smart speaker device. Within minutes, vendors have the ability to give customers a frictionless ordering experience. And the more orders Jetson’s machine learning technology takes, the better it gets at anticipating the needs of its customers.
Jetson CEO Peter Peng describes the company’s voice technology as “human-level interaction that is highly scalable.” It can be downloaded and ready for deployment in minutes. It’s simple to use. It works across all channels. It’s priced reasonably. And it can be applied to many industries and sectors.
Now, on to the four M’s (market, monetization, metrics and management).
The Market: Smart Voice Devices Experiencing Explosive Growth
E-commerce and voice assistant technology are beginning to reinforce each other. And the convergence of these two trends should only accelerate. Around 66.4 million Americans own a smart speaker (as of January 2019), a nearly 40% leap year over year. And this is expected to have an immediate impact on e-commerce. By the end of this year, about 22.7 million Americans are expected to use voice technology to purchase goods. That number is up 31.5% since last year.
We’re at the very beginning of conversational commerce’s rise. The technology will get better and better. And voice speakers will become more prevalent. Amazon tends to lead the way in these matters, but it’s just one of many retailers that will be giving their vendors this new way of using AI and voice technology to efficiently process transactions. As a result, voice commerce sales are expected to surge from $2 billion in 2017 to $45 billion by 2022… and that’s in the U.S. and U.K. alone.
Monetization Model Paves Way for Customer Expansion
Jetson AI has a flexible SaaS (software as a service) subscription model. It has a monthly subscription service and a cheaper annual subscription service. For larger enterprises that want their current sales systems integrated into Jetson’s platform, the company will charge a higher customization fee. Jetson AI also charges a licensing fee, which is a flat percentage of each order placed through Jetson.
Right now it’s targeting restaurants, retailers and hotels (where guests can order room service and other amenities via voice commands) to help grow its business. I expect this payment model to evolve over time. (It’s interesting to note that Shopify also has a transaction fee. It’s a company that Jetson AI can watch to determine how fees can best be structured.)
A Key Metric: Partnerships Will Boost Growth
As is expected for an early-stage startup, Jetson AI is losing money. But it has a promising metric. Apart from its technological leadership, its progress in forming partnerships stands out. Partnerships help small companies like Jetson AI stretch their limited resources and grow faster.
Most notably, the company has a partnership agreement with Amazon Pay. Merchants in the Amazon Pay program can now offer their customers Jetson’s technology to make voice purchases.
It has another partnership agreement with Delivery.com. Merchants and users on that site can use Jetson’s technology to order and process deliveries by voice. Delivery.com has more than 1 million users and an online marketplace of more than 10,000 restaurants and stores. Jetson AI has also signed letters of intent with Blue Chip Marketing, which will try out its voice commerce technology in one to two major retail locations. It also has a letter of intent with Volara for a three-year project allowing hotels to offer in-room service ordered through a smart speaker.
Management Knows What It’s Doing
I recently sat down with Peter, the founder and CEO, at a New York City restaurant not far from where he works. One of the first things he told me was how he used Google Glass and voice commands to lock and unlock a smart lock. That was back in 2014. “I was the first or one of the first to do it,” he pointed out. Peter has been working in voice technology ever since.
He answered my dozens of questions with poise and conviction. He has a keen awareness and sense of urgency about the business opportunity at hand. “Voice commerce is a hot sector, but the voice commerce nut hasn’t been cracked yet,” he said. “It’s waiting for the right company to do it. I fully believe that’s us.”
Part of the “us” is his COO, Fong Wa. Fong’s impressive experience in impact investing, investment banking and executive conferences complement Peter’s skills. Voice commerce is going to be a big part of e-commerce’s future. And the founders have put Jetson AI in position to lead the way.
How to Invest
This deal is being hosted on MicroVentures, a licensed broker and dealer. The first step, if you don’t have a MicroVentures account yet, is to go to the MicroVentures site and sign up for one. Once you’re registered, go to the Jetson AI page. Click on the orange “Invest” button. You can invest $100 or more.
If you run into problems at any point, please call our friends at MicroVentures directly at 1.800.283.9903.
Editor’s Note: If you’re new to First Stage Investor or if you just need a refresher on how to invest in startups through portals, check out our video tutorial “Investing in Startups Through Online Portals.”
Jetson AI is an early-stage tech investment and, like all such investments, is risky. Do not invest money you can’t afford to lose. Also, remember that these types of investments are not liquid, meaning you can’t buy or sell your stake easily. If and when an exit opportunity arises, you’ll be informed immediately. ■
United States of Cannabis
Privacy coin with mass appeal
Invest in the Strongest Privacy Coin in the Crypto Market
I’m excited to announce that our newest addition to the cryptocurrency portfolio is Monero’s XMR. It’s replacing Cardano (ADA) in our portfolio. I recommend you allocate roughly 10% of your crypto portfolio to it.
Monero is one of the oldest and most battle-tested cryptocurrencies. It launched in 2014. Unlike most “altcoins,” it didn’t have an initial coin offering. And it did not reward developers with a free heap of coins.
In many ways, Monero functions like bitcoin. But there’s one key difference. From the start, Monero’s focus has been on creating a fully functional yet private cryptocurrency. I believe XMR is the strongest privacy coin on the market. And privacy coins are critically important to crypto’s future.
Many people think of bitcoin as private, but this simply isn’t true. All transactions on bitcoin’s blockchain are public. And they can be traced. For example, if you give someone your wallet address (so they can pay you), that person can easily see how much bitcoin you have in the wallet. And if they want to, they can see who you send bitcoin (from that wallet) to. In many cases, a bitcoin user’s real identity can be revealed using forensic accounting methods.
Monero is different. It uses advanced technologies such as ring signatures, ring confidential transactions and stealth addresses to make transactions confidential and private. When compared with public cryptocurrencies such as bitcoin, privacy coins like XMR have a number of advantages (and at least one disadvantage).
Monero’s built-in privacy is one of its biggest advantages. This privacy technology makes its cryptocurrency truly “fungible.” Fungibility means that one unit is indistinguishable from another. All U.S. dollars are considered fungible; so is gold.
This is in contrast to bitcoin, where every coin has a publicly viewable history. So a bitcoin owner could, hypothetically, find themselves in an awkward situation if it turns out the bitcoin they bought was previously stolen or used for illegal transactions.
I have heard from a reliable industry source that bitcoin’s lack of fungibility is one of the key stumbling blocks for regulators being asked to approve bitcoin ETFs.
What would happen if stolen or “dirty” coins ended up in a publicly traded ETF? Nobody knows. But from what I hear, regulators are worried about the possibility. Monero’s privacy features avoid such potential complications.
Privacy is especially important in the financial world. For example, you don’t want every person you do business with knowing how much money you have on hand. If you use bitcoin, tech-savvy people can simply look at your wallet and see how big your bankroll is. With Monero, they couldn’t access that information.
And think about how useful XMR could be in countries like Venezuela, Iran or North Korea. Bitcoin is popular in all these places. But due to the cryptocurrency’s public nature, savvy government investigators can track these transactions and take action against bitcoin users. Any place where there is an authoritarian government, private cryptocurrencies could be a lifesaver.
In terms of disadvantages, the primary one is that government regulators don’t like that XMR is untraceable. And let’s face it, no government likes competition from cryptocurrencies. It’s possible that if XMR adoption becomes widespread, governments could try to ban it or hamper its growth. However, it is a strongly decentralized crypto and would be very hard to shut down.
Real World Usage
XMR is one of the very few cryptocurrencies with real, worldwide user adoption. There are hundreds of merchants and service providers that accept XMR online.
The downside: Because of its anonymity, XMR is a popular option for users purchasing items they don’t want anyone to know about, such as “adult entertainment,” drugs (legal and illegal) and VPNs (virtual private networks, which are used by both corporations and privacy-conscious individuals).
But remember: Many of bitcoin’s early uses were also illegal. The most popular ways to spend bitcoin early on were gambling through unregulated services like “Satoshi Dice” and purchasing drugs on “The Silk Road,” an anonymous drug marketplace on the dark web.
It’s only natural that new forms of currency first take root on the fringes of commerce. So the fact that XMR has some unsavory uses shouldn’t scare us off. Cash is the No. 1 anonymous criminal currency and is used for plenty of illicit reasons. Yet nobody thinks there’s anything wrong with using cash.
Monero’s development also traces the same path the internet followed. In the early days of the internet, porn and unlicensed gambling sites helped fuel the growth and adoption of both the net and e-commerce.
I believe the world needs a private form of money. XMR is currently the lead contender. And it’s well positioned to continue its adoption path.
Strong Leadership, Very Active Development
Monero is fortunate that it has a popular and dynamic lead developer and maintainer in Riccardo Spagni. Spagni has been with Monero since its launch and is the public face of the project.
I strongly recommend learning more about Spagni before making a decision on whether to buy XMR. He is a well-spoken advocate for the coin.
For a more technical discussion about Monero’s privacy features, check out Jimmy Song’s interview with Spagni on YouTube. Song is one of the most well-respected bitcoin developers and advocates. He is dismissive of 99% of altcoins, but he takes Monero – and Spagni – quite seriously. In the podcast, Spagni responds to common criticisms and explains why he believes the world needs Monero.
It’s because of Spagni’s leadership that Monero has made such incredible technical progress over the years.
Monero has one of the most active developer communities in cryptocurrency. More than 500 unique developers have contributed to the project. And unlike many cryptocurrencies, Monero often has its big changes audited by third parties for security.
Monero’s strong decentralization comes from its mining access. Monero mining functions in much the same way bitcoin mining does. Miners process transactions and secure the network, earning rewards for their efforts.
However, with bitcoin and most other major cryptocurrencies, large corporations do the bulk of the mining using specialized computer chips called ASICs (application-specific integrated circuits). ASICs are designed specifically to mine only one cryptocurrency.
The drawback to ASIC mining is that it increases centralization. When just a few large companies have a majority share of the mining market, it is far easier for a government or other bad actor to interfere with the network.
Monero is considered an ASIC-resistant cryptocurrency. This means that anyone with almost any computer can mine XMR. Monero changes its algorithm regularly, which makes any ASICs designed for XMR worthless. So the network is more widely distributed and more decentralized. It’s harder to shut down and harder for bad actors to interfere with.
Monero developers are working on new, longer-term solutions to prevent ASIC mining. This smart tactic should help ensure strong continued decentralization.
Monero Coin Supply
There are currently just over 17 million XMR in existence (very similar to bitcoin). But unlike bitcoin, Monero does not have a “hard cap” on the coin supply. Monero’s “inflation rate” (the percentage of new coins added per year) is already low. By 2022, it will be just 0.9% per year. After that it will slowly drift toward zero. Monero’s coin supply and inflation metrics actually look quite similar to bitcoin’s.
To put these numbers in perspective, the amount of gold mined every year is around 1.7% of total global supply. And with an inflation rate set to be substantially lower than this in the near future, I think Monero’s coin supply is well thought out and shouldn’t adversely affect price.
Monero’s “uncapped” coin is actually quite reasonable. Miners need an incentive to keep processing transactions and securing the network. Having a constant trickle of coins to reward these individuals is important. I believe that population growth, increased adoption and lost coins should more than offset the trickle
of new XMR coming onto the market over time.
Kraken allows users to purchase bitcoin with U.S. dollars, but you can’t directly purchase XMR with USD. You’ll need to either transfer bitcoin into your Kraken account or purchase some directly from Kraken. Once you’ve got some bitcoin in your Kraken wallet, head to the “Trade” tab and select the XMR/BTC trading pair. Select the number of coins you want to purchase, and complete the order. International members have more exchange options, including Binance, which has higher XMR trading volume. Visit CoinMarketCap for a full list of exchanges that trade XMR.
Wallets and Storage
Once you’ve purchased your XMR, you should move it to a wallet under your direct control if you’re comfortable doing so. I recommend using a hardware wallet such as the Trezor or Ledger to store your XMR. There are a number of detailed guides on the web for these.
All cryptocurrencies are high-risk, high-reward assets. As a largely untraceable privacy coin, XMR may face additional “regulatory risk” from governments. Spagni, Monero’s lead developer, is a major asset to the community. If something happened to him, someone else would have to step up and fill his (large) shoes.
Never invest money in crypto that you can’t afford to lose. We recommend beginning your crypto portfolio with no more than around 3% of your overall investments. Over time, your crypto holdings may grow to a larger percentage, and that’s fine. But I would risk no more than 3% of initial capital in crypto. And I believe XMR offers an excellent risk-reward ratio as 10% of your overall crypto portfolio. ■
IPOs riskier than ever
Proof That Big Checks Don’t Equal Success
As I watched Uber join the Nasdaq this past May on TV, I had little confidence it would do well.
Before its IPO, Uber had raised $24.7 billion – more money than any other startup in recent memory. SoftBank’s Vision Fund alone had invested $7.7 billion in Uber. Uber CEO Dara Khosrowshahi famously said, “Rather than having [SoftBank’s] capital cannon facing me, I’d rather have their capital cannon behind me.”
With so much money to spend on marketing and bludgeoning the competition, startups like Uber are set up for spectacular success, right?
I’ve disagreed since long before Uber’s IPO. In July 2018, I wrote, “A virtually unlimited supply of cash can make ambitious, world-conquering CEOs (and their teams) lazy, sloppy, undisciplined and inefficient.”
High Price, Low Value
Venture capital firms (VCs) are writing more huge checks than ever before. Sequoia’s new fund totals $8 billion, four times bigger than its previous biggest fund. SoftBank regularly writes $100 million or larger checks. But these financial windfalls often have a downside that founders and investors can no longer ignore.
Data from CB Insights shows that startups that have raised less than $100 million far outperform startups that have raised more than $100 million. Companies with modest raises saw their post-IPO values soar to 263% on average. Companies drowning in invested capital experienced a 64% average increase.
Some of the highest-valued companies that raised less than $100 million are Veeva Systems, Palo Alto Networks, ServiceNow, Tableau Software, Splunk and Ubiquiti Networks. They’ve tripled their valuations on average since going public.
By contrast, some of the highest-valued companies that have raised more than $100 million have seen their share prices shrink since their IPOs. These include Snap, Groupon, Dropbox, Zynga, LendingClub and GreenSky.
Both groups of companies had high IPO valuations and represented the top of their class. But the group that raised less has done a far better job of continuing to excite and impress investors.
Public Investors vs. Pre-IPO Investors
So why is this happening post-IPO? Why not pre-IPO? Because public stock investors put a higher premium on profitable companies, whereas pre-IPO investors put a higher premium on fast-growing companies. Uber, which has enjoyed rapid growth but is a long way from showing profits, has a much harder time impressing its public stock investors.
The growth of deep-pocketed startups like Uber raises some troubling questions. Are their products really that much better than the competition’s? Did demand spur growth? Or was it vast amounts of money? And the big one: What happens when the cash reserves accumulated in their days as a private pre-IPO company go away?
These questions don’t apply to companies that have taken in little money on their way to a big exit. Their growth is considered more “real” and sustainable. And their management teams’ ability to make efficient use of resources points to a resiliency that high raisers may lack.
Making matters worse, as the amount of money being raised by startups has grown, the size of exits hasn’t kept up. Capital efficiency multiples (the ratio of worth at exit to amount raised) have trended lower, especially with the biggest exits. The average multiple on $1 billion-plus exits has fallen from 16.1X to 6.9X – a 57% drop in six years. For a company that raised $100 million, that’s the difference between selling for $1.6 billion and selling for just under $700 million.
Keep in mind that the money raised by startups isn’t equal. If a single player made the $100 million investment, he would make 6.9X on his stake. But early-stage investors make much more, and late-stage investors make much less, because early-stage shares are much cheaper than late-stage shares. For example, early-stage investors in Uber’s seed round made nearly 5,000X on their stakes. While SoftBank’s Vision Fund paid $48.77 each for its late-stage Series G-1 shares. And Uber’s shares are now going for less than $44.
Good News for Early Investors
Investing on IPO day or later is riskier than ever. If you do it, you should target companies that have raised modest amounts.
The mega-raises are good news for early investors, though. The mega-funds haven’t increased risk in the early-stage raises, but they have elevated the upside. More money available later on allows startups to raise at much higher valuations. That means early-stage investors can now make much more on companies that attract huge funding down the road, with IPOs more often reaching $1 billion or more. The fact that there’s a trickle-down effect – a $500 million exit is the new $300 million exit – also benefits early-stage investors.
While this trend of mega-funds writing massive checks for mega-raises is growing stronger, it’s hard to say exactly how long it’ll last. But while it continues, early-stage investors are reaping significant benefits.■
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