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@EnCountry @juliemariemeyer Channel ECTV julie@ariadnecapital.com
How Ecosystem EconomicsTM
Predicts the Winners
© Proprietary & Confidential – Ariadne Capital
© Proprietary & Confidential – Ariadne Capital
Shift Happens
Easter Parade on Fifth Avenue, New York. 13 Years apart
Where is
the car?
Where is
the horse?
© Proprietary & Confidential – Ariadne Capital
Ecosystem EconomicsTM
Three versions of the future
The technology platform companies take
over every industry
Music & Telecoms Advertising Books
First Version of the
Future
© Proprietary & Confidential – Ariadne Capital
Second Version
of the Future
The Digital David’s become disruptive
forces & create new established giants
Personal Loans Taxis Travel
Ecosystem EconomicsTM
Three versions of the future
© Proprietary & Confidential – Ariadne Capital
Ecosystem EconomicsTM
Three versions of the future
DAVID GOLIATH
David and Goliath dance
David shows technology enables the existence of an ecosystem through data and business model
Goliath brings customers, distribution, scale and reach
Third Version of
the Future
© Proprietary & Confidential – Ariadne Capital
PALO ALTO
Great Entrepreneurs Can Come From Anywhere
The Infrastructure of Entrepreneurship is not Evenly Distributed
© Proprietary & Confidential – Ariadne Capital
The face of every entrepreneur
They just may not show it to you!
© Proprietary & Confidential – Ariadne Capital
The face of every entrepreneur
They just may not show it to you!
They see the
inevitable and
advance the
future
They are
willing to live
abnormal
lives
2 good reasons
© Proprietary & Confidential – Ariadne Capital
Capital Follows Ideas
© Proprietary & Confidential – Ariadne Capital
Let's continue with the
historical perspective….
The
History
© Proprietary & Confidential – Ariadne Capital
Academic Influences of Ecosystem Economics™
Carlotta
Perez
Hernando
De Soto Polar
Ronald
Coase
Renee
Mauborgne
Geoff
Moore
Chan
Kim
© Proprietary & Confidential – Ariadne Capital
Economic growth since the end of the 18th Century
5 Distinct Stages, associated with 5 successive Technological Revolutions
Five Successive Technological Revolutions, 1770’s to 2000’s
Technological
Revolution
Popular Name for
the Period
Core Country or Countries Big-bang initiating the revolution Year
FIRST The Industrial Revolution Britain Arkwright’s mill opens in Cromford 1771
SECOND
Age of Steam
and Railways
Britain (spreading to
Continent and USA)
Test of the Rocket steam
engine for the Liverpool
- Manchester railway
1829
THIRD
Age of Steel, Electricity
and Heavy Engineering
US and Germany forging ahead
and overtaking Britain
The Carnegie Bessemer stell plant
opens in Pittsburgh, Pennsylvania
1875
FOURTH
Age of Oil, the
Automobile and Mass
Production
USA (with Germany at fist vying
for world leadership), later
spreading to Europe
First Model-T comes out of the
Ford plant in Detroit, Michigan
1908
FIFTH
Age of Information and
Telecommunications
USA (spreading to
Europeand Asia)
The Intel microprocessor is
announced in Santa Clara, CA
1971
© Proprietary & Confidential – Ariadne Capital
Lifecycle of technological revolution
Gestation
period
Big-bang
Paradigm
configuration
Introduction of successive new products,
industries and technology systems, plus
modernisation of existing ones
Constriction
of potential
Time
60 to 80 Years
Degreeoftechnologymaturity
andmarketsaturation
Period one Period two Period three Period four
Early new products
and industries.
Explosive growth and
fast innovations
Full constellation
(new industries,
technology systems
and infrastructure)
Full expansion
of innovation and
market potential
Last new products
and industries.
Earlier ones
approaching
maturity and
market saturation
© Proprietary & Confidential – Ariadne Capital
INSTALLATION
Late 1970’s through to Noughties
1976 – Steve Jobs, Steve Wozniak found Apple Computer
1984 - Michael Dell founds PC’s Limited later named Dell Computer
Corporation
1985 – Irwin Jacobs founds QualComm, pioneer in Wireless
Communications
1990 – CERN / Tim Berners Lee
1994 – Yahoo founded
2003 – Skype – “free calls on web”
2004 - Facebook founded
Age of IT and Telecommunications
60 to 80 year cycle – 1971 – 2030
BIG BANG
NOVEMBER 1971 IN SANTA CLARA,
CALIFORNIA
Bob Noyce and Gordon Moore launched
Intel’s first microprocessor, the precursor of
the computer on a chip
THE
TURNING
POINT
© Proprietary & Confidential – Ariadne Capital
The Revolution starts as a small
fact with a BIG promise and
moves to a significant force in
the market
The
Revolution
© Proprietary & Confidential – Ariadne Capital
Technological Revolutions
1999
David with his
slingshot wants
to kill Goliath
© Proprietary & Confidential – Ariadne Capital
The Economy & Social Institutions Respond
1999 to 2014
Broadband and Mobile Technologies
continue to invade our lives
2015
David and Goliath must dance
© Proprietary & Confidential – Ariadne Capital
The David
& Goliath™
Model
© Proprietary & Confidential – Ariadne Capital
Our Framework: David & Goliath
Ecosystem EconomicsTM
DigitalEnabler
Strategic
Value
Financial Value
Network Effects
Vulnerability
Distribution
Ecosystem Economics™
shifting industry players
Consumer
Data sets become prevalent
Network
Orientation at heart of the
consumer insight
When partnering with,
1) Brings new digital
revenues
2) Brings lean operating
system
When acquired,
1) Can become
2) Can reinforce or gain
a position as industry
architect
Renting
Not Licensing
Operating system
to the industry
© Proprietary & Confidential – Ariadne Capital
Engaging “Natural Allies” with incentives
Ecosystem EconomicsTM
You
Natural
Ally 1
Natural
Ally 2
Natural
Ally 3
You
Natural
Ally 1
Natural
Ally 2
Natural
Ally 3
You
100%
© Proprietary & Confidential – Ariadne Capital
Innovation is about Economics not Technology
Otherwise we’d all be flying the Concorde but we’re packed into Jumbo Jets
© Proprietary & Confidential – Ariadne Capital
APPLICATIONS
“Digital Enablers”
Digital Davids enabled
by
Goliaths + EC Global
Goliaths
INFRASTRUCTURE
High Regulation, Low Margin, Others using
your investments without contribution
PLATFORMS
(Google, Facebook, Apple, Amazon)
Make Investments
in assets (Costs)
Take advantage
of Revenue (Profits)
The Platforms are Making All the Money
Ecosystem EconomicsTM
© Proprietary & Confidential – Ariadne Capital
Shape your Industry by changing your business model
Step 1 Step 2 Step 3
Business model/Transaction
Micro
Industry > Ecosystem
Distribution > Platform
With Network Effects
Goliath/
David
Partnership
Macro
Building Net
New Revenue
Everything is Network-based, not linear • Everything is Multi-stakeholder
Company’s ability to shape
industry dynamics
Company valuation
increases
Company market
power increases
© Proprietary & Confidential – Ariadne Capital
Imagine a world where you couldn’t get:
Now imagine a world where everything you do is part of your aggregated
personal transactional ability.
a credit card on the housing
ladder
Where you had no assets
© Proprietary & Confidential – Ariadne Capital
Europe is an eldest child; it values the “estate”.
The US is a later born child.
B2C
Raise huge amounts of capital
Disrupt Industry
B2C2B
Capital efficiency @ Unit Economics
Enable & Extend Industries
European
Model
to Win
Classic
Valley
Model
© Proprietary & Confidential – Ariadne Capital
Google Economics
• Google says that they organise the world’s information
• They actually organise the economics of the world’s information
• I, as a consumer of their search, am not given any economic upside in the search transaction.
• They have built a multi-billion pound business using – albeit anonymously – my personal data –
aggregated with that of others, but releasing none of the economic value to me
• Their biggest Achilles Heel is if someone in the search space were to cut a different set of economics
for the consumer
• Ariadne Capital found that entrepreneur – John Paleomylites – founder of BeatThatQuote, and sold his
business to Google on the 4th of March 2011 for a 122 EBITDA multiple for these reasons
© Proprietary & Confidential – Ariadne Capital
Industries are being transformed
by digital business models
© Proprietary & Confidential – Ariadne Capital
In 2015, “Network Benefits” accrue to those Firms
who understand their role in their ecosystem and organise
the economics for it.
This in turn leads to exceptional returns for their shareholders.
© Proprietary & Confidential – Ariadne Capital
PALO ALTO
If you didn't go to Palo Alto at the beginning,
you will go to Palo Alto in the end …
© Proprietary & Confidential – Ariadne Capital
Building the Future From the Future
In EntrepreneurCountry,
You Build the Future
“If I had asked my customers what
they wanted, they would have said
faster horses.” - Henry Ford
STATUS QUO
REMAKING THE INDUSTRY BY
DEFINING THE FUTURE OF IT
© Proprietary & Confidential – Ariadne Capital
Creative Destruction
defines the problem …
… Ecosystem Economics™
provides the solution.
© Proprietary & Confidential – Ariadne Capital
From the Financial Times 20 October 2015
We take that as a personal challenge.
You should too…
“We are the only European player with significant size
to build great businesses in Europe and keep a large
share of it”, Samwer says.
© Proprietary & Confidential – Ariadne Capital
Shift Happens
Easter Parade on Fifth Avenue, New York. 13 Years apart
Where is
the car?
Where is
the horse?
© Proprietary & Confidential – Ariadne Capital
Don't go to Palo Alto
© Proprietary & Confidential – Ariadne Capital
Go to
www.entrepreneurcountry.com
© Proprietary & Confidential – Ariadne Capital
The Prince by Nicolo Machiavelli CHAPTER VI
And it ought to be remembered that there is nothing more difficult to take in hand, more perilous to
conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of
things. Because the innovator has for enemies all those who have done well under the old conditions, and
lukewarm defenders in those who may do well under the new. This coolness arises partly from fear of the
opponents, who have the laws on their side, and partly from the incredulity of men, who do not readily believe in
new things until they have had a long experience of them. Thus it happens that whenever those who are hostile
have the opportunity to attack they do it like partisans, whilst the others defend lukewarmly, in such wise that the
prince is endangered along with them.
© Proprietary & Confidential – Ariadne Capital
David Wins
Because he sees the future

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How Ecosystem Economics™ Predicts the Winners in the Digital Age

  • 1. @EnCountry @juliemariemeyer Channel ECTV julie@ariadnecapital.com How Ecosystem EconomicsTM Predicts the Winners
  • 2. © Proprietary & Confidential – Ariadne Capital
  • 3. © Proprietary & Confidential – Ariadne Capital Shift Happens Easter Parade on Fifth Avenue, New York. 13 Years apart Where is the car? Where is the horse?
  • 4. © Proprietary & Confidential – Ariadne Capital Ecosystem EconomicsTM Three versions of the future The technology platform companies take over every industry Music & Telecoms Advertising Books First Version of the Future
  • 5. © Proprietary & Confidential – Ariadne Capital Second Version of the Future The Digital David’s become disruptive forces & create new established giants Personal Loans Taxis Travel Ecosystem EconomicsTM Three versions of the future
  • 6. © Proprietary & Confidential – Ariadne Capital Ecosystem EconomicsTM Three versions of the future DAVID GOLIATH David and Goliath dance David shows technology enables the existence of an ecosystem through data and business model Goliath brings customers, distribution, scale and reach Third Version of the Future
  • 7. © Proprietary & Confidential – Ariadne Capital PALO ALTO Great Entrepreneurs Can Come From Anywhere The Infrastructure of Entrepreneurship is not Evenly Distributed
  • 8. © Proprietary & Confidential – Ariadne Capital The face of every entrepreneur They just may not show it to you!
  • 9. © Proprietary & Confidential – Ariadne Capital The face of every entrepreneur They just may not show it to you! They see the inevitable and advance the future They are willing to live abnormal lives 2 good reasons
  • 10. © Proprietary & Confidential – Ariadne Capital Capital Follows Ideas
  • 11. © Proprietary & Confidential – Ariadne Capital Let's continue with the historical perspective…. The History
  • 12. © Proprietary & Confidential – Ariadne Capital Academic Influences of Ecosystem Economics™ Carlotta Perez Hernando De Soto Polar Ronald Coase Renee Mauborgne Geoff Moore Chan Kim
  • 13. © Proprietary & Confidential – Ariadne Capital Economic growth since the end of the 18th Century 5 Distinct Stages, associated with 5 successive Technological Revolutions Five Successive Technological Revolutions, 1770’s to 2000’s Technological Revolution Popular Name for the Period Core Country or Countries Big-bang initiating the revolution Year FIRST The Industrial Revolution Britain Arkwright’s mill opens in Cromford 1771 SECOND Age of Steam and Railways Britain (spreading to Continent and USA) Test of the Rocket steam engine for the Liverpool - Manchester railway 1829 THIRD Age of Steel, Electricity and Heavy Engineering US and Germany forging ahead and overtaking Britain The Carnegie Bessemer stell plant opens in Pittsburgh, Pennsylvania 1875 FOURTH Age of Oil, the Automobile and Mass Production USA (with Germany at fist vying for world leadership), later spreading to Europe First Model-T comes out of the Ford plant in Detroit, Michigan 1908 FIFTH Age of Information and Telecommunications USA (spreading to Europeand Asia) The Intel microprocessor is announced in Santa Clara, CA 1971
  • 14. © Proprietary & Confidential – Ariadne Capital Lifecycle of technological revolution Gestation period Big-bang Paradigm configuration Introduction of successive new products, industries and technology systems, plus modernisation of existing ones Constriction of potential Time 60 to 80 Years Degreeoftechnologymaturity andmarketsaturation Period one Period two Period three Period four Early new products and industries. Explosive growth and fast innovations Full constellation (new industries, technology systems and infrastructure) Full expansion of innovation and market potential Last new products and industries. Earlier ones approaching maturity and market saturation
  • 15. © Proprietary & Confidential – Ariadne Capital INSTALLATION Late 1970’s through to Noughties 1976 – Steve Jobs, Steve Wozniak found Apple Computer 1984 - Michael Dell founds PC’s Limited later named Dell Computer Corporation 1985 – Irwin Jacobs founds QualComm, pioneer in Wireless Communications 1990 – CERN / Tim Berners Lee 1994 – Yahoo founded 2003 – Skype – “free calls on web” 2004 - Facebook founded Age of IT and Telecommunications 60 to 80 year cycle – 1971 – 2030 BIG BANG NOVEMBER 1971 IN SANTA CLARA, CALIFORNIA Bob Noyce and Gordon Moore launched Intel’s first microprocessor, the precursor of the computer on a chip THE TURNING POINT
  • 16. © Proprietary & Confidential – Ariadne Capital The Revolution starts as a small fact with a BIG promise and moves to a significant force in the market The Revolution
  • 17. © Proprietary & Confidential – Ariadne Capital Technological Revolutions 1999 David with his slingshot wants to kill Goliath
  • 18. © Proprietary & Confidential – Ariadne Capital The Economy & Social Institutions Respond 1999 to 2014 Broadband and Mobile Technologies continue to invade our lives 2015 David and Goliath must dance
  • 19. © Proprietary & Confidential – Ariadne Capital The David & Goliath™ Model
  • 20. © Proprietary & Confidential – Ariadne Capital Our Framework: David & Goliath Ecosystem EconomicsTM DigitalEnabler Strategic Value Financial Value Network Effects Vulnerability Distribution Ecosystem Economics™ shifting industry players Consumer Data sets become prevalent Network Orientation at heart of the consumer insight When partnering with, 1) Brings new digital revenues 2) Brings lean operating system When acquired, 1) Can become 2) Can reinforce or gain a position as industry architect Renting Not Licensing Operating system to the industry
  • 21. © Proprietary & Confidential – Ariadne Capital Engaging “Natural Allies” with incentives Ecosystem EconomicsTM You Natural Ally 1 Natural Ally 2 Natural Ally 3 You Natural Ally 1 Natural Ally 2 Natural Ally 3 You 100%
  • 22. © Proprietary & Confidential – Ariadne Capital Innovation is about Economics not Technology Otherwise we’d all be flying the Concorde but we’re packed into Jumbo Jets
  • 23. © Proprietary & Confidential – Ariadne Capital APPLICATIONS “Digital Enablers” Digital Davids enabled by Goliaths + EC Global Goliaths INFRASTRUCTURE High Regulation, Low Margin, Others using your investments without contribution PLATFORMS (Google, Facebook, Apple, Amazon) Make Investments in assets (Costs) Take advantage of Revenue (Profits) The Platforms are Making All the Money Ecosystem EconomicsTM
  • 24. © Proprietary & Confidential – Ariadne Capital Shape your Industry by changing your business model Step 1 Step 2 Step 3 Business model/Transaction Micro Industry > Ecosystem Distribution > Platform With Network Effects Goliath/ David Partnership Macro Building Net New Revenue Everything is Network-based, not linear • Everything is Multi-stakeholder Company’s ability to shape industry dynamics Company valuation increases Company market power increases
  • 25. © Proprietary & Confidential – Ariadne Capital Imagine a world where you couldn’t get: Now imagine a world where everything you do is part of your aggregated personal transactional ability. a credit card on the housing ladder Where you had no assets
  • 26. © Proprietary & Confidential – Ariadne Capital Europe is an eldest child; it values the “estate”. The US is a later born child. B2C Raise huge amounts of capital Disrupt Industry B2C2B Capital efficiency @ Unit Economics Enable & Extend Industries European Model to Win Classic Valley Model
  • 27. © Proprietary & Confidential – Ariadne Capital Google Economics • Google says that they organise the world’s information • They actually organise the economics of the world’s information • I, as a consumer of their search, am not given any economic upside in the search transaction. • They have built a multi-billion pound business using – albeit anonymously – my personal data – aggregated with that of others, but releasing none of the economic value to me • Their biggest Achilles Heel is if someone in the search space were to cut a different set of economics for the consumer • Ariadne Capital found that entrepreneur – John Paleomylites – founder of BeatThatQuote, and sold his business to Google on the 4th of March 2011 for a 122 EBITDA multiple for these reasons
  • 28. © Proprietary & Confidential – Ariadne Capital Industries are being transformed by digital business models
  • 29. © Proprietary & Confidential – Ariadne Capital In 2015, “Network Benefits” accrue to those Firms who understand their role in their ecosystem and organise the economics for it. This in turn leads to exceptional returns for their shareholders.
  • 30. © Proprietary & Confidential – Ariadne Capital PALO ALTO If you didn't go to Palo Alto at the beginning, you will go to Palo Alto in the end …
  • 31. © Proprietary & Confidential – Ariadne Capital Building the Future From the Future In EntrepreneurCountry, You Build the Future “If I had asked my customers what they wanted, they would have said faster horses.” - Henry Ford STATUS QUO REMAKING THE INDUSTRY BY DEFINING THE FUTURE OF IT
  • 32. © Proprietary & Confidential – Ariadne Capital Creative Destruction defines the problem … … Ecosystem Economics™ provides the solution.
  • 33. © Proprietary & Confidential – Ariadne Capital From the Financial Times 20 October 2015 We take that as a personal challenge. You should too… “We are the only European player with significant size to build great businesses in Europe and keep a large share of it”, Samwer says.
  • 34. © Proprietary & Confidential – Ariadne Capital Shift Happens Easter Parade on Fifth Avenue, New York. 13 Years apart Where is the car? Where is the horse?
  • 35. © Proprietary & Confidential – Ariadne Capital Don't go to Palo Alto
  • 36. © Proprietary & Confidential – Ariadne Capital Go to www.entrepreneurcountry.com
  • 37. © Proprietary & Confidential – Ariadne Capital The Prince by Nicolo Machiavelli CHAPTER VI And it ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new. This coolness arises partly from fear of the opponents, who have the laws on their side, and partly from the incredulity of men, who do not readily believe in new things until they have had a long experience of them. Thus it happens that whenever those who are hostile have the opportunity to attack they do it like partisans, whilst the others defend lukewarmly, in such wise that the prince is endangered along with them.
  • 38. © Proprietary & Confidential – Ariadne Capital David Wins Because he sees the future