Trends & innovations shaping the global tech sector
TECHNOLOGY
PREDICTIONS
2 01 9
Important disclosures appear at the back of this report
GP Bullhound LLP is authorised and regulated by the Financial Conduct Authority
GP Bullhound Inc is a member of FINRA
Dealmakers in Technology
Dealmakers in Technology
04 THE VIEW FROM GP BULLHOUND
06 RECAP OF GP BULLHOUND’S 2018 PREDICTIONS
08 TECHNOLOGY PREDICTIONS 2019
10 DIGITAL BANKING CONTINUES TO RISE

12 EXPERT VIEW


Norris Koppel, CEO, Monese
14 APP DISTRIBUTION MOVING AWAY FROM APPLE AND GOOGLE
16 EMPLOYEE ENGAGEMENT GOES HIGH TECH
18 RETAIL TECHNOLOGY GETS SMARTER
20 ARTIFICIAL INTELLIGENCE IS THE END OF REPETITION, NOT THE END OF LIFE
22 CONSUMER SUBSCRIPTION SET TO ECLIPSE ADVERTISING

24 EXPERT VIEW


Jade Van Doren, CEO, AllTrails
26 A BREAK-UP OF AN ADVERTISING DUOPOLY

28 EXPERT VIEW


John Ghiorso, CEO, Orca Pacific
30 LAST MILE DELIVERY: GOING THE DISTANCE
32 END OF THE BOYS CLUB
36 PROFESSIONAL CAPITAL SOURCES:

SCOUTING FOR ENTRY POINTS INTO BLOCKCHAIN

39 EXPERT VIEW


Olga Feldmeier, CEO, Smart Valor
40 METHODOLOGY
CONTENTS
EXECUTIVE SUMMARY
THE VIEW
From GP Bullhound
Per Roman
Managing Partner
4
It has been a year of trials and tribulations for
technology as regulators have sought to match
its evolution with existing frameworks; yet this
report shows that technology does not just
move the goalposts, it reshapes the world
as we know it.
How we bank, shop and the type of money
we carry are all covered. Our predictions on
the rise of digital banks, the influence of crypto
currencies, and retailers’ attempts to upgrade
delivery systems exemplify how technology
impacts everyday decisions, as well as
shedding light on what businesses are doing
to speed up transactional processes and
introduce safeguards.
We also make our predictions on employee
engagement, subscription models and the
Technology’s transformative effect has
touched every corner of today’s world. Its
commercial, social and political impact has
been unprecedented. At GP Bullhound we
are proud to work with the entrepreneurs and
the world-leading companies that appreciate
technology’s potential – and work hard to turn
its promise into reality. Now entering its twelfth
year, our Technology Predictions report reflects
our optimistic mindset and demonstrates what
technology and its leading minds could achieve
over the next 12 months.
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
5
Alec Dafferner
Partner
future of app stores, considering how we can
expect them to change and grow in 2019. Each
one shows how technology’s impact can be
laser-focused, laying strong, specific foundations
for future industries.
Meanwhile, we investigate what the next
12 months may hold for developments in AI,
advertising and retail. In each, we unearth
an unrelenting pace of change, which could
bring countless benefits – if pragmatic decisions
are made.
To do that, technology must be viewed as friend
not foe, which is one of the macro themes of
the report. Treating tech as a negative force will
limit the good it can do. How to balance fears
of technology with optimism of the better world
it can build looks set to carry on being
a question that defines our time.
Consumers are expecting technology to give
them a lot in return for very little: giving rise to
a second macro theme that emerges. Pressing
questions over what we get for what we give
will continue to be the focus of boardroom
and consumer debates.
The scope and scale of technology means
challenges will inevitably exist, so it is important
that we remain faithful to our belief that
technology is a positive force. This report is
intended to act as a roadmap to readers,
shedding light and expert opinion on the
trends that matter. We hope you find it useful.
THE PREDICTIONS
RECAP OF GP BULLHOUND’S
2018 Predictions
Before we dig into 2019, here is a brief recap of last year’s predictions
and how we saw their development throughout the year.
While the Pixel Buds have not been the success
we, or Google, imagined they might be, translation
technology as a whole has still taken off this year.
Neural machine translation has given translation
technology a more accurate and faster way to
provide context to different words or phrases, which
has revolutionized the efficacy and adoption of tools
like Google Translate6. As a global bank, we are
constantly in need of translation services for our own
personal use. Voice translation and text translation
have reached a point where, with connectivity,
anyone can seamlessly travel in foreign cities and
communicate with the people that call them home.
Remarkably, we weren’t strong enough with last
year’s prediction. Mobile usage continues to
skyrocket in China, and overtook TV usage in April
of this year, with adults spending two hours and
39 minutes a day on mobile devices, accounting
for 41.6% of their daily media time – compared
with two hours and 32 minutes a day watching TV,
which represents 39.8% of daily media time4. Some
98% of China’s internet users are mobile, which is
a bewildering statistic, and further underlines their
mobile-first culture, underpinned by their all-in-one
super apps5.
Much has happened in the realm of politics and
technology over the course of 2018. The top digital
advertisers have enacted a multitude of measures
to counteract nefarious influences on democratic
elections, as well as increase the transparency of
legitimate political advertising. Both Facebook and
Google have released their archives of all political
advertising on their platforms and have bolstered
security spending in a big way1. Facebook is
ratcheting up spending on AI initiatives to counter
rogue accounts and it plans to double the number
of its security engineers – from 10,000 to 20,0002.
Though the reputational damage done by these
kinds of activities far outweighs the monetary cost,
the financial impact cannot be understated and it is
certainly felt by their bottom line.
There is no doubt that consumer cybersecurity
continues to be an incredibly important topic
for consumer brands and consumers themselves.
Awareness, and unfortunately the number of
victims, of cybersecurity continues to rise – with
54% of people more concerned with protecting
their personal data after the Cambridge Analytica
scandal than they were previously3. With more
awareness comes increased action. This consumer
security trend can be seen in the cybersecurity
space, for example with the IPO of Avast in May
2018, which is one of the largest providers of
consumer antivirus and VPN solutions.
6
1. AN UNEASY FUTURE
For Politics and Technology
4. TRANSLATION TECHNOLOGY
Takes Hold
3. MOBILE TRUMPS TV
In China
2. CYBER SECURITY
Exposure and Adoption
Sources: 1. Tech Crunch, Facebook launches new weekly ad archive report for political spending, August 15, 2018 2. The Hill, Facebook launches new
weekly ad archive report for political spending, October 23, 2018 3. Tech Republic, Consumers are more concerned with cybersecurity and data privacy
in 2018, November 7, 2018 4. eMarketer, In China, Mobile Usage Will Overtake TV This Year, April 19, 2018 5. Tech Crunch, Consumers are more concerned
with cybersecurity and data privacy in 2018, August 21, 2018 6. Wbur, Translation Technology Is Getting Better. What Does That Mean For The Future?, July
19, 2018
Inaccurate prediction
Accurate prediction
Partially accurate prediction
7
We were only partially correct in our prediction about
email in the workplace. It seems people are more
reliant on aging forms of communication than we
thought, with both workplace instant messaging tools
and email growing at a clip in 2018. We sent roughly
281 billion emails per day in 2018, with that number
forecast to grow to 294 billion in 2019. However,
messaging services have grown dramatically in
popularity and usage over the last year. Slack, for
example, now has 8 million daily active users, with
users spending an average of 320 minutes a day (!)
on the platform per week day7.
The movement of tech companies to areas
outside traditional hubs has continued over the
past year. While key drivers of this migration were
once economic, politics now play a larger role e.g.
Thiel Capital’s move from San Francisco to LA. The
passing of Proposition C in San Francisco has caused
a deep divide in the tech community. Capital is
abundant outside of target cities - Seattle and
San Diego have both attracted over $1 billion in
VC investment8, leading to a more geographically
distributed ecosystem. In Europe, Brexit has caused
many entrepreneurs to move to cities such as Brussels
– throwing into question London’s title as the start-up
capital of Europe9.
We were spot on in our prediction that the HR software
market is moving towards suite solutions rather than
‘best-of-breed’ point solutions. In a big shock to
the market, LinkedIn announced a move into the
Applicant Tracking System (“ATS”) market with the
launch of Talent Hub10. This is a natural extension of
its ‘top of the funnel’ sourcing and it will be interesting
to see how it plays out in a crowded and well
capitalized ATS market. LinkedIn clearly sees the
value of the suite, choosing to enter into a space
that it has previously avoided.
Regulatory bodies reported a significant increase
in enforcement actions and civil monetary penalties
due to cryptocurrency oversight. The largest court
case of its kind in 2018 saw cryptocurrency established
as a commoditiy, which allows the Commodity Futures
Trading Commission to police the market13. Bitcoin has
experienced a sharp decline, crashing through the
$6k barrier and reaching its lowest level since October
of last year. Notable Bitcoin thought leader Barry
Silbert famously tweeted “capitulation” in the face
of the continued Bitcoin rollercoaster. The concerning
factor in the Bitcoin market is the magnitude of the
volatility – sometimes dropping and rising over 10%
in a single day.
Industry 4.0 has officially arrived in 2018 in a
meaningful way. We mentioned that consulting
firm activity was the leading indicator of a slow
moving but massive opportunity in Industry 4.0. As
manufacturers begin to retrofit legacy factories with
smart robotics, they are leaning on consultants for
their expertise. Deloitte posted record revenue for
FY2018 and explicitly stated one of the main growth
drivers of their consulting business to be digitally-
enabled business transformation opportunities11,
many of which are created by Industry 4.0.
Accenture has been busy in the space, as usual,
acquiring Mindtribe and Pillar Technology, which
further bolster its “Industry X.O” practice12.
For all the hype surrounding Apple and Google’s
forays into augmented reality, the early market
reacted with a tepid response, but then proceeded
to take off. Data from Sensor Tower suggests ARKit
has been downloaded over 13m times just six months
after launch14. In unsurprising fashion, consumers are
mostly interested in gaming titles, which comprised
47% of AR installations. Consumer interest remains
bullish, and AR continues to become more and more
mainstream with the introductions of advanced
handsets and pre-installed AR apps. With the news
that Magic Leap does not live up to expectations,
we are unsure of the near term prospects for
enterprise applications, but we remain true believers
in the long term opportunity.
6. INTERNATIONAL LABOR
Arbitrage Flourishes
5. OVER AND OUT
Email
8. INDUSTRY
4.0
10. AUGMENTED REALITY
Adapts for Early Adoption
Sources: 7. Expanded Ramblings, 55 Amazing Slack Statistics and Facts (August 2018), November 10, 2018 8. Pitchbook, November, 2018 9. ZD Net,
The Brexit dilemma: Will London’s start-ups stay or go?, October 16, 2018 10. LinkedIn, LinkedIn Announces new Recruiter platform it’s first ATS and
new diversity insights at Talent Connect Conference, October 10, 2018 11. PR Newswire, Deloitte announces record revenue of US$43.2 billion, September
18, 2018 12. Accenture Newsroom, Accenture Expands Industry X.0 Capabilities with Two Acquisitions in North America, August 9, 2018 13. Wall Street
Journal, Cryptocurrencies, Trading Scams Draw Increased Federal Enforcement, October 5, 2018 14. Venture Beat, Sensor Tower: ARKit apps rack up
over 13 million downloads in 6 months, March 28, 2018
9. REGULATORS RULE ON
Boom and Bust of ICOs
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
7. THE UNLIKELY COMEBACK
Of the Software Suite
THE PREDICTIONS
TECHNOLOGY
Predictions 2019
Over the course of more than a decade, GP Bullhound’s Technology
Predictions report has established a reputation as an industry-leading
analysis of the trends and innovations shaping the global technology
sector. What follows are the ten trends we believe will define tech in 2019.
8
Between 2017 and 2018 there was a 24% increase
in digital transactions, with more than two-thirds
of millennials in the US using their smartphone as
a wallet. This is creating an environment where
traditional financial institutions are implementing
innovative digital banking solutions, while start-ups
grow at a rapid rate due to the demand from
venture capitalists to invest in fintech.
1. DIGITAL BANKING
Continues to Rise
Recruitment processes, data analytics and capital
management are just three areas of HR set to be
disrupted by new technology. HR tech could have
a major impact on the way teams manage their
internal processes, but artificial intelligence used
in HR will have to be tuneable in order to avoid
institutionalizing the biases it aims to eliminate.
3. EMPLOYEE ENGAGEMENT
Goes High Tech
Income from apps makes up 20% and 18%
of Apple and Google’s respective revenues,
charging a commission to app developers to host
and distribute on their platforms. However, a backlash
is beginning with the tech giants becoming a leech
on app developers that have the product popularity
to stand alone.
2. APP DISTRIBUTION
Moving Away From Apple and Google
Traditional bricks and mortar retail still dominates
over e-commerce, making up 88% of global retail
purchases. Tech giants and online start-ups are even
turning their attention to physical rather than online
exclusive retail. A new age of retail is emerging, with
the combination of innovative technology and the
social dimension consumers enjoy in traditional retail.
4. RETAIL TECHNOLOGY
Gets Smarter
9
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
7. A BREAK-UP
of an Advertising Duopoly
Advertisers spent $4.6 billion on Amazon’s platform in
a watershed year that has seen advertising money
move away from the Google-Facebook duopoly,
which currently hold 58% of the market combined.
With the development of its own end-to-end service,
brands will begin to allocate budget to specialized
performance partners in order to get their product
in front of Amazon’s consumers.
5. ARTIFICIAL INTELLIGENCE IS THE
End of Repetition, not the End of Life
The media narrative has often portrayed technology
as the end of the white-collar workforce, but like all
previous industrial revolutions, humans will adapt
to new technologies. Artificial intelligence is set to
improve working conditions, create more flexible
ways of working, and remove the need for humans
to take on time-consuming menial tasks.
10. CRYPTOCURRENCY
Will Grow Up
We are yet to see the best of cryptocurrencies.
Blockchain activity is picking up with even
traditional financial institutions ensuring they
do not get left behind. 2019 should be the year
institutional capital flows into cryptocurrency, with
previous obstructions and tight regulations lifted.
8. LAST MILE DELIVERY
Going the Distance
More than half of shoppers under-35 expect to have
an option of same-day delivery, despite only two
of the top 50 online US retailers offering this. But with
next-day delivery already a staple, and Amazon
leading the way in developing fulfilment centers for
rapid delivery, more retailers will turn their attention
to last mile delivery solutions.
6. CONSUMER SUBSCRIPTION
Set to Eclipse Advertising
As concerns of data misuse grow, and content
quality increases, it is becoming clearer that
consumers are more interested in reliable paid
subscription services. Growth in the digital ad
market is slowing, while subscription models
have grown in popularity, with more incentive
for companies to improve their products for
a loyal user base.
9. END OF
The Boys Club
Though the technology sector has been among
the most progressive when it comes to corporate
initiatives for reaching gender balance, veteran
female investors and executives are now taking
a different angle by improving accessibility to
the venture backed tech ecosystem for new
and prospective female entrants.
PREDICTION 1
COMPANIES TO WATCH
DIGITAL BANKING
Continues to Rise
1,765
Bank branches
closed in 2017
in the US
46%
increased their
mobile banking
usage from
last year
91%
Prefer using mobile
banking apps
compared to a
physical branch
10
From a macro perspective, the combination of
regulatory relief and reductions in corporate tax
rates alongside rising interest rates could help
US banks reach pre-crisis return on equity levels.
This has resulted in banks and other enterprises
flexing their investment muscles, with investments
contributing to $40bn in M&A activity in the first
half of 2018 across 140 transactions4.
Despite high funding activity surrounding
financial technology start-ups, many traditional
players are developing their own digital banking
solutions to compete with the newer players in
the field. Commission-free trading and investing
platforms spurred JP Morgan to create a digital
investing service that provides free or discounted
trades and no-fee access to the bank’s stock
research. Venmo’s rise led to the development of
Zelle, a competing digital money transfer system
developed through the combined efforts of
seven of the largest banks in the US. Meanwhile,
Goldman Sachs responded to the proliferation
of digital savings accounts with Marcus, which
provides middle class customers with access to
products that once existed solely for high net
worth clientele.
There are some areas in the banking ecosystem
that remain uncapitalized by larger players,
which leaves start-ups to grow at rapid rates until
traditional players realize the opportunity. Brex,
which recently reached unicorn status in under
two years, is changing the face of credit cards
by issuing them to small start-ups and charging
based on company revenues or credit history.
ID Finance is pioneering the fintech market by
providing digital access to banking services in
areas where traditional methods are inaccessible.
Both Brex and ID Finance have developed a
proprietary scoring model to determine the risk
of their users, providing a technological edge
compared to larger banks.
However, despite growing interest and investment
in digital banking, there are associated risks and
uncertainties in these solutions. Due to low unit
economics, as the average balances across
digital accounts are quite small compared to
their acquisition costs, most digital accounts
are unprofitable.
Banks combat this by expanding their offerings
to increase cross-selling opportunities. However,
this may be especially difficult as the market
becomes increasingly saturated as banks target
the same tech-savvy demographic. Furthermore,
most customers prefer dealing with humans on
matters like setting up financial goals or getting
investment advice, while about half of US banking
customers aged 18 to 44 said they banked digitally
but prefer to resolve some matters in-person5. Thus,
digital banks need to recreate the branch network
virtually to the greatest extent possible, aiming to
offer digital-only customers the comfort that larger
institutions can.
However, despite these difficulties, the future looks
bright for digital banks. As greater investment, more
considerate regulation and increasing innovation
pushes the industry forward, we will continue to
monitor the market with the hope that more choice
and lower costs will encourage and incentivize a
fully digital consumer financial system capable
of global reach.
Tech-savvy millennials have driven – and continue to drive — a seismic shift
towards an uptake in digital banking. According to the latest data available, there
are 71 million millennials in the United States1, with 68% using their
smartphone in tandem with their wallet to handle transactions2. The transition
towards digital banking will continue to be facilitated by payment services like
PayPal and Venmo, which have seen a combined 24% increase in transaction
volume from $6.1bn to $7.6bn from 2017 to 20183. This should continue to
grow as most millennials conduct at least some of their banking-related activities
via digital channels, such as checking account balances, transferring funds, and
performing account maintenance.
Sources: 1. Pew Research, Millennials projected to overtake Baby Boomers as America’s largest generation, March 1, 2018
2. Citibank: Mobile banking use is up 25% in the last year, April 27, 2018 3. Paypal, 10-k, filed February 7, 2018 4. Pitchbook, 2018
11
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
EXPERT VIEW
Norris Koppel
Founder & CEO, Monese
I discovered that regulators and governments are
generally supportive of streamlining processes –
like making it easier for people
who have recently arrived in a country to
open a bank account. The blocking force,
in fact, is the traditional banks.
Outdated technology, archaic paper-based
compliance processes and old ways of working
combine to inhibit traditional banks from offering
their customers a modern, seamless experience.
That’s where we spotted our opportunity: to
create a banking service that truly supports
customers living their financial lives across multiple
countries, whether it is for work, study or retirement.
Through our ability to verify customer identity and
background globally on their mobile devices in
real time, we have removed the biggest barrier
to accessing financial services in new countries.
From there, we are building a globally connected
service that gives customers an easy and smart
access to accounts, credit, mortgages, savings
and more - a locally smart and globally portable
banking service.
Our innovation – and the work done by businesses
like ours – has not just been welcomed by millions
of customers around the world, but increasingly
by the big banks that once stood in our way. A
mindset shift has crept into traditional providers
– a move that has seen them get on board
with fintech.
A few years ago, when the fintech revolution
really started, it felt like big banks were ignoring
the change. But as digital banks opened, grew
and began to take market share, traditional banks
realized they could soon be made obsolete.
In response, they’ve invested heavily into
redeveloping their digital offering and are
pumping money into their digital mobile apps.
They are operating faster, finding ways to be
consumer friendly and – importantly – on the
hunt for partnerships.
When we started, it was difficult to get in the same
room as the traditional banks. As a financial services
company, we have to hold customers’ funds in a
traditional bank, so their collaboration was vital to
success. Big banks didn’t know what to think of us –
or those like us – so many just kept the door closed.
However, as fintech has grown, banks now actively
approach us.
Thinking ahead, it’s likely that some banks will want
to retain as many product offerings as possible, but
I predict there will be some banks that completely
relinquish control, working in tandem with newer
players like us to provide services instead – and
doing a better job at it.
In the next five to ten years, I see many traditional
banks playing an essential role in the financial
services process but having less customer-facing
points and being more reliant on digital channels
like Monese to offer products.
Going forward, there are plenty of digital players
entering the arena, but there is little overlap in what
they do. As each one finds its identity and builds its
own customer base, the most successful ones are
those that go after different customer sectors. The
market, in the grand scheme of things, is still young.
For Monese, we will continue to be global in our
ambition and approach – we are proud to already
have launched in 20 countries, serving customers
in 11 languages. And, we will stick to our vision that
frustration-free financial services should be available
around the globe.
The rise of digital banks, the increasing enthusiasm
of traditional financial service providers to work with
start-ups and the fast-paced evolution of banking
technology all benefits one person: the customer.
There has never been a better time to be in the
market for financial services.
Like many great things in life, Monese was born out of frustration. After moving to
a new country and trying to open a bank account, I couldn’t believe how difficult the
process could be. Not one to be put off, I started to look at why banks behave the way
they do and why certain processes can be tricky for a customer to navigate.
12
13
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
PREDICTION 2
COMPANIES TO WATCH
$34.4bn
In app revenues
combined for Google
and Apple in
H1 2018
30%
Initial sales
commission
15%
Sales commission
for iterative sales
APP DISTRIBUTION
Moving Away From
Apple and Google
14
Sources: 1. Techcrunch, Apple’s Appstore revenue nearly double that of Google Play in first half of 2018, July 16, 2018
2. Techcrunch, Sidestepping Appstores, Facebook Lite and Groups get Instant Games, October 17, 2018
Generally, app developers are happy to pay
this initial price for viewership and distribution.
However, once apps reach a critical mass of users,
this can turn from a launchpad into a leech. Some
developers are even considering cutting their ties
with the App Store and Google Play as a means
of sidestepping the sales commission. For example,
Epic Games, developer of the viral success
“Fortnite”, has been taken off the Google Play
Store, with Android users able to download the
game to their phones directly from its own website.
Apple is now even facing a class action lawsuit
in the U.S. arguing that they are using monopoly
control to overcharge customers for apps.
Could this pushback be putting a significant
portion of Apple and Google revenues at risk?
The backlash from app developers and consumers
could disrupt the entire app distribution ecosystem,
leading to the emergence of two strategies that
could potentially challenge Google and Apple’s
dominance in the sector:
1)
Tech giants creating their own separate

platforms to host their applications
2) Smaller players developing competing


distribution models that are more

consumer and developer friendly.
Some tech giants, with well-established user
bases and business models, are asserting their
position with competitive offerings of their own.
An example of this is Facebook Lite, a less robust
version of Facebook targeted at emerging
markets. Facebook’s instant games were
originally separate apps available on the Android
and Apple stores that would be downloaded
separately. However, to sidestep these platforms,
Facebook has integrated its instant games into
Facebook Lite, meaning they can be accessed
and launched through a mobile browser rather
than a separate app.
The advantage of this approach? It keeps
Facebook Lite’s file size small to the benefit of
international users with slow connections or limited
data plans and provides its 90 million monthly
active users easier access to engage with
their community of 270,000 Facebook groups2.
Other tech players have been demonstrating
similar behavior, with Netflix and Spotify moving
their subscription services off the App and Play
stores and onto their own websites.
However, despite these efforts, both still list their
apps on these stores and are unlikely to stop
doing so anytime soon.
Why? Most apps are in a highly competitive
marketplace full of copycats with similar offerings,
so proximity to the consumer is vital for continued
thriving and surviving. Thus, despite Facebook’s
entrance into app distribution, and Netflix and
Spotify’s middle ground strategy, we should not
anticipate the tech titans taking a clean break
from Apple and Google’s distribution.
But on the other end of the size spectrum, a
number of innovative start-ups, such as Robot
Cache and Ultra.io, are disrupting the market
by offering more consumer and developer-
oriented alternatives to the traditional distribution
model. These new platforms can charge a lower
sales commission (e.g. 5% on each sale and
microtransaction instead of 30%), creating new
revenue streams for developers, such as facilitating
in-game trading through a digital marketplace.
Furthermore, consumers can interact with these
platforms in new ways; reselling their games and
earning money by testing new ones, providing
more meaningful ways to interact with their apps.
So, what will happen next? Google will likely be hit
harder as its platform is more open to applications
from outside the store, whilst Apple makes it more
difficult for companies to download apps from
other platforms.
But even Apple will have to react if these new
start-up distributor disruptors are able to gain
traction and develop large, consistent user bases.
This ongoing discussion will only help the industry
move forward – with more competition meaning
a better experience for consumers and a more
considerate one for all developers.
App revenues represent a significant contribution to Apple and Google.
Through the App Store and Google Play, the tech giants generated
approximately 20% and 18% of their respective total revenues for the
first half of 20181. These distributors charge a 30% commission on
every sale in the first year after app launch, decreasing to 15%
in subsequent years.
15
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
PREDICTION 3
COMPANIES TO WATCH
47%
of organizations
are involved
in automation
projects
24%
of organizations
are using AI
to make tasks
routine
$6bn
of investment has
been made in over
1,000 start-ups in
the last three years
EMPLOYEE ENGAGEMENT
Goes High Tech
16
One key area where technology will make a great
impact on HR is the recruitment process. Human
decision-making is indelibly tinged with bias, and
whilst a recruiter may not overtly show it, variables
will subtly impact the decision-making process.
Firms are exploring how AI-based innovation can
find the right talent and do so with zero bias and
a laser focus on the traits that make a successful
hire: ambition, learning agility, passion, and sense
of purpose. Entelo and Wade & Wendy are using
AI to enable more natural engagement with
candidates during the process. According
to AllyO, AI and Machine Learning have helped
clients increase capture and conversion rates
up to six times over a more traditional
recruitment approach1.
Another way for technology to enhance HR
functions is through data analytics. With the
increased proliferation and sophistication
of analytics, HR firms can develop a better
understanding of what roles in which markets
will pose challenges for their recruitment team,
when they can expect to ramp up hiring, and
how they can best plan for growth initiatives
based on the talent available. Overall, analytics
is not just a buzzword. Rather, data will become
fully integrated into the candidate life cycle
and its power will drive how firms recruit.
M&A activity shows that there is greater interest
in integrating Human Capital Management
(HCM)capabilities across the software space,
with many notable acquisitions occurring recently.
Not only has the number of acquisitions in the
space increased – from 55 in 2015 to 76 in 2018
– but the median deal size has also increased
by more than 10x – from $28m in 2015 to
$300m in 20182.
Transactions such as LinkedIn’s acquisition of Glint
demonstrate how traditional players are finding
ways to increase user engagement by facilitating
more career development services and moving
beyond traditional recruiting and HCM software.
Workday’s recent acquisition of Adaptive Insights,
a follow up to the acquisition of Rallyteam and
Skipflag, conveys a desire from existing HCM firms
to transition from a Software as a Service (SaaS)
model to a Platform as a Service (PaaS) model,
indicating a changing model that sees firms
expand their reach with a broader base
of products.
Despite the impact that HR tech and AI will have
on HR functions, there are risks and concerns
regarding the technology. As AI requires training
data, it must learn from current management
styles to develop its own practices. Therefore, if a
firm’s current practices are biased, discriminatory,
punitive or overly hierarchical, they may be
institutionalized rather than eliminated through
the technology.
To avoid this, AI needs to be transparent and
“tuneable”, thereby allowing iterative tweaks
to the algorithms to make sure they do not
incorporate biases. There’s also the risk of data
exposure and inadvertent misuse of AI. We must
learn how to apply behavioral analytics carefully,
so we do not let AI turn against individuals. AI has
been a “tool” for suggestion and improvement
– not an independent decision-making system
as it stands today.
To conclude, HR tech will have a major impact
on the way HR teams manage their internal
process and could provide greater efficiency
and accuracy in talent management and
retention processes. However, the success of an
HR tool will be dependent on the accuracy of its
algorithms, the ease of use of its systems, and
the ability to provide what is called “narrow AI”
(or specific solutions that solve your problems).
This can only be done when the vendor has
massive amounts of data to train the system,
as well as following several revisions based
on feedback. That’s why we believe the key
barriers to implementing HR tech are going
to be leadership, company strategy, and
employee comfort – not forgetting the
need for great engineers.
The enterprise world has discussed the impact of AI and Machine Learning on
human resources for years. Recently, this discussion has shifted from how to
replace human decision making to how to streamline it using AI and Machine
Learning, especially in relation to HR functions such as performance reviews,
gender diversity, inclusion, compensation, and workforce forecasting.
Sources: 1. Randstad Sourceright, Talent Trends Quarterly, Q3 2018, 2. Pitchbook
17
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
PREDICTION 4
COMPANIES TO WATCH
61%
Prefer brands with
physical stores
than online
only brands
58%
Use smartphones
to research
products whilst
in a store
40%
Would pay more
for a product if they
could experience
it in AR
RETAIL TECHNOLOGY
Gets Smarter
18
It is not a new concept for tech companies to open physical stores. Microsoft and
Apple were the first major players to do so for their own products, but more
recently we have seen Amazon enter physical commerce with its 4-star stores
and Amazon Go supermarkets. Alibaba similarly has its own supermarket,
Hema, and its own clothing retailer. This is even happening to relatively smaller
companies such as Warby Parker, which was born online in 2010, and this year
will have almost 100 physical stores1, similarly Bonobos
now has 48 current locations2.
It seems almost counterproductive in our
increasingly digital world for these tech giants,
who dominate our lives through their online
presence, to have entered the physical market.
But, to paraphrase Mark Twain, rumors of physical
retail’s death have been greatly exaggerated.
Some 88% of all global retail purchases are still
made physically, contributing between $23-25
trillion compared to less than $3 three trillion
through retail e-commerce3. Despite considerable
effort to entice consumers to online – and mobile
traffic has increased in popularity, representing
more than half of digital retail traffic and 26-30%
of purchases3 – most still prefer interacting with
product experts face-to-face.
Good old bricks and mortar will survive and thrive
alongside e-commerce for as long as consumers
want a social dimension to their shopping
experience. But this is not to say we are at an
end point in retail disruption. Technology is still
set to make a greater impact in the sector.
Alibaba’s clothing store comes from a partnership
with the company Guess and uses mobile IDs from
online shopping website (also owned by Alibaba)
Taobao, to monitor customer behavior, tracking
items they try on, purchase and recommend.
They are then able to target these customers as
Amazon or Google do through online searches4.
Amazon Go meanwhile has experimented
with the elimination of cashier checkouts,
simply tracking the movement of customers and
putting the bill on a user’s account afterwards.
It also uses machine learning algorithms to decide
what items are stocked and uses data analytics
to customize the in-store experience for every
customer.
Many fledgling start-ups are also entering the
space by providing an array of possible solutions
to enhance physical retail. AR/VR is being
explored by the likes of NanoVR, who are creating
virtual interfaces, such as a brand ambassador or
a store showcase that customers can interact with.
Another start-up, Reply.ai is aiming to develop an
AI Chatbot system that learns from conversations
with customers, to create a more personable and
human assistant at physical stores – the social
dimension remains, and the technology enters.
The potential of machine learning meanwhile
is being tested by the likes of Persado, building
a platform that leverages “emotionally tagged
content” such as images, words and phrases in
its database. This helps retailers determine what
elements of an advertisement work and the
form these should take moving forward.
A new age of retail will emerge through
the merging of Silicon Valley’s innovative
technology, with main street’s tangibility and
social dimension. With companies like Amazon
and Alibaba spearheading the transition and
smaller start-ups developing solutions to augment
physical retail, our current way of shopping may
be completely disrupted sooner than we think.
Just do not think a purely online model will be
the dominant form of retail.
Sources: 1. CNBC, Warby Parker aims to run nearly 100 stores this year, as other Web shops follow, February 15, 2018 2. Bonobos
website, October 30th, 2018 3.Tune, TAPS, CLICKS, BRICKS: Omnichannel Customer Engagement Is the New Brand Superpower,
April 25, 2018 4. Digipay, Alibaba rethinks retail with a new Guess store in Hong Kong, July 9, 2018
19
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
PREDICTION 5
COMPANIES TO WATCH
31%
of companies are
expected to add AI
over the next year
47%
of digitally mature
organizations
have AI
strategies
4.5x
increase in
jobs requiring
AI skills
since 2013
ARTIFICIAL INTELLIGENCE IS
the End of Repetition, not the End of Life
20
Yes, work tasks will change, occupations will
disappear, our education system will have to
evolve. But this should be viewed as an opportunity
for the next generation, not an apocalypse.
AI has the potential to – and increasingly will – solve
important issues, particularly highly repetitive tasks
that involve analysing, testing and re-testing vast
amounts of data and/or decision trees. Medical
product development, risk and compliance
analysis, information aggregation and predictive
analysis are good examples. But AI alone cannot
drive the next phase of development, that has to
come from humans.
A 2006 study in the Monthly Labor Review by
Wyatt and Hecher reported that between 1910
and 2000, the number of farm workers in the United
States decreased from twenty-four percent of the
labor force, to less than one percent. In a similar
decline, other manual labor decreased from ten
to three percent.
As these industries faced disruption, others grew
with a twenty percent rise in technical professions,
the number of teachers doubling, and a seven
fold increase in the number of health workers.
The concept of an engineer meanwhile went
from almost non-existent, to five percent of the
workforce.
Through every industrial revolution – and we are
now in the fourth – concerns have been raised
about what will happen to the human workforce
as automation increases. But just as the farm worker
went from sowing the seeds to driving the plough,
the regular office worker’s creativity will be freed
and their living conditions improved.
The digital revolution is no different to those
preceding it, removing the confinement of sitting
in an office for eight hours a day, five days a week,
battling rush hour commutes and overpopulated
metropolises, to a world of flexible working patterns
and new locations. With less time commuting and
more personalized office environments, productivity
is bound to increase.
As well as improving working conditions, AI will also
improve the experience of doing a job. Instead of
eradicating jobs, AI will augment the domain of
tasks that existing employees spend far too much
of their time completing. One example of this AI
narrative is driven by companies like UiPath that
specialize in Robotic Process Automation (“RPA”),
software that is capable of automating many
traditional ‘white-collar’ tasks, including copying
and pasting, completing forms and extracting data.
While the prospect of these capabilities may sound
threatening to the livelihoods of some workers, in
reality they will enhance human productivity by
removing menial tasks, allowing people more time
to actually analyze the data.
A compelling case for the benefits of this is in
the financial sector, where UiPath’s virtual robot
monitors multiple databases to check income,
exposure and expenses, and posts a report for the
creditor to analyze1. The result is fewer human hours
spent pulling data, and more bandwidth dedicated
to processing a greater number of applications, with
shorter turnarounds.
Many innovators in the space are painting a
picture of symbiosis between humans and artificial
intelligence. Apprentice.io raised $8 million in
September 2018 to enhance productivity for skilled
manual laborers2. The startup is helping lab scientists
easily access standard operating procedures,
visualize 3D technique demonstration, and capture
data with computer vision, all through a hands-
free interface. While Apprentice.io is currently
focused on applications in biotech and pharma,
the technology has massive potential to assist a
wide-range of professionals including surgeons,
machinists, soldiers and chefs.
To forecast a future of unemployment, of a useless
class, from the rise of AI is bleak and melodramatic.
The vast majority of occupations stand to benefit
from enhanced decision making and higher
productivity. The digital revolution has the potential
to fundamentally transform our approach to work
and ultimately improve our quality of life. The future
is bright, and we see the continued introduction of
AI into our daily work in 2019, despite some of the
“doom and gloom” narrative in the press.
“The development of full artificial intelligence could spell the end of the human
race… Humans, who are limited by slow biological evolution, couldn’t compete
and would be superseded,” the late Stephen Hawking told the BBC in 2014.
Professor Hawking was by no means the only, nor even a rare voice of doom when
discussing artificial intelligence (AI), believing that robots will render much of the
world’s population what historian Yuval Noah Harari calls a “useless class”
– unemployable, compared to far superior robots.
Sources: 1. UiPath, RPA for the Banking industry, Copyright 2005-2018 2. PR Newswire, Apprentice.io Raises $8M Series A for First
Conversational AR and AI Platform, September 18, 2018
21
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
PREDICTION 6
35%
Growth when
Candy Crush cut
ads from its game
46%
Of online shoppers
pay for media
subscriptions
CONSUMER SUBSCRIPTION
Set to Eclipse Advertising
COMPANIES TO WATCH
22
This trend is playing out in the world of media,
entertainment, health and wellness, education
and a variety of other industries. As consumers
push back against ad-supported products, and
concerns over the misuse of customer data
grow, companies are rapidly transitioning to
the subscription model as a way to improve
the consumer experience.
Software subscriptions or Software as a Service
(SaaS) have become the holy grail of business
models, as proven by the performance of leading
B2B software companies, including Microsoft and
Adobe, which have transitioned from perpetual
license to SaaS platforms.
For consumer businesses, relying on ad-support
is a major constraint because revenue growth is
bound by total ad spend available in the market,
as opposed to the platform’s intrinsic value to
consumers. On top of that, growth of the digital
ad market is forecast to slow down from 17.7%
in 2018 to 8.6% in 20221.
At a fundamental level, the ad-backed model
misaligns the directives of management teams to
create as much demand as possible for ad space,
instead of improving user satisfaction. Companies
are forced to pour money into ad sales teams and
lure more traffic by appealing to the masses.
For consumers, there is an ocean of free content
online, but unfortunately that also means a lot of
advertising distractions. Global digital ad spend
is estimated to reach $629 billion in 20181, and
users of “free” apps and media are confronted
with advertisements at nearly every touch point
in their digital lives. Consumers must increasingly
cut through the distraction of ads and low-quality
content to find real value, so much so that a
growing number of users are willing to pay for
quality and reliability.
In 2016, amidst a post-election surge of fake
news, the New York Times saw its highest rate
of growth from digital subscriptions since
launching its pay model in 20112. The media
and entertainment sector is rapidly adopting
the subscription model, pioneered by leaders
like Netflix, Spotify and Match3.
Subscription-based platforms are incentivized
to improve their product and retain a loyal user
base. When revenue comes from subscribing
customers, management teams benefit from
exceptional visibility into consumption patterns,
helping to illuminate effective levers for growth.
An increasing number of content and media
platforms have trended toward the ‘freemium’
model, offering basic services or content for
free, but placing additional features behind
a paywall – typically via subscription.
With the nuisance of ads in basic offerings,
augmented by the value of premium features,
this creates a dynamic push and pull incentive for
free users to convert to paid subscribers. With this
loyal base of subscribers, companies are able to
refine their offerings and get better at convincing
consumers of the value behind the paywall.
The key to creating value on these platforms
is delivering highly personalized and curated
experiences. For consumers debating a
subscription, there is a strong value proposition
for a platform that offers not only consistent
format and quality, but highly relevant content
discovery. Companies are continuing to
implement the formula, and we are seeing
a meaningful shift in consumer preferences
to valuable end-to-end subscription solutions.
Up-and-comers like AllTrails, Duolingo, Calm,
and Masterclass continue to carve out a place
in consumers’ budgets, demonstrating their value
and utility. This shift will only continue to play out
across a range of verticals as consumers and
platforms cut advertisements out of the equation
in favor of subscriptions.
Consumers are rapidly waking up to what the business world
already knows – paying for robust subscription solutions is
a superior experience to using free, ad-supported products.
Sources: 1. eMarketer, eMarketer Releases New Global Media Ad Spending Estimates, May 7, 2018 2. The New York Times,
Journalism That Stands Apart, January, 2017 3. GP Bullhound is an investor in Spotify.
23
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
EXPERT VIEW
Jade Van Doren
CEO, AllTrails
The Cambridge Analytica scandal and fake
news fuelled by social media have underlined
the challenges facing businesses that depend on
driving their growth through advertising.
In 2018 we expect services such as search engines
and social media platforms to come for free.
But as we are seeing, there can be all sorts of
downstream impacts of having a business model
where a company’s users are the primary product.
We realized at AllTrails that our big win would be
to build an app that provides enough value to
people who get outdoors that they will pay us
money for it. Producing accurate hand-curated
trail maps for hikers, trail-runners and mountain
bikers globally is a big challenge, and we rely on
our Pro users to keep the lights on.
That said, we provide a lot of functionality for free -
users can find directions to trails, record and share
their activities, and much more. But we charge a
subscription fee for things like downloading maps
for when you don’t have a data signal (but still
get a blue GPS dot), real-time weather, air-quality,
and fire history, drawing your own maps, and lots
more features.
We also work hard to make our paid model appeal
to all sorts of users. When I started at AllTrails three
years ago, our Pro users were mostly older, white
and male, so we decided to try to make the
product more useful to a younger, more diverse
consumer base by adding Pro features like Lifeline,
which lets you share your location with safety
contacts that you specify – friends and/or family
who will be alerted if you don’t make it back when
you planned.
Pro users also don’t see any ads when they’re
signed in. Additionally, the ads we do run are
only sold directly (not programmatically) which
provides us with more control of the quality of the
ads we show.
While advertising will never completely go away, I
believe companies and their users both win when
the companies create products with enough value
that users are willing to pay them directly.
I think companies will continue to find innovative
ways to provide value through consumer
subscriptions in new verticals – you only need to
look at how subscription models are moving beyond
markets that have always been big like music
(Spotify) and news (New York Times), and into what
have traditionally seemed like niches - meditation
(Headspace) and karaoke (Smule) for example.
These last two have become big companies by
solving the real problems required to make an
activity accessible to a broader audience.
In an era when consumers are paying more attention than ever to how their data
is used, are subscription models, rather than advertising, becoming a more appealing
way for companies to monetize?
24
25
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
26
PREDICTION 7
COMPANIES TO WATCH
A BREAK-UP
of an Advertising Duopoly
1. eMarketer, Amazon Is Now the No. 3 Digital Ad Platform in the US, September 19, 2018, 2. New York Times, Amazon Sets Its Sights on
the $88 Billion Online Ad Market, September 3, 2018, 3. Marketing Week, Amazon reveals how it thinks about advertising, September
15, 2018, 4. Jumpshot, The Competitve State of eCommerce Marketplaces Data Report Q2 2018, July 1, 2018
5. Bloomberg, Former Amazon Ad Executive Gets VC Funding for Marketing Startup, October 23, 2018
It has been a watershed year for Amazon. Having
relaunched its advertising services last year following
complaints its ad products were too complicated
to use, in Q3 of 2018, the conversion rate of Amazon
Advertising was almost three times higher than that
of Google Shopping1.
Logically, Amazon should be the go-to for advertising.
It is the primary e-commerce destination for
consumers, well-trusted with its broad selection,
fast shipping, competitive prices and simple return
policies. When customers visit Amazon, they are
visiting as shoppers and so have more purchase intent
than one would browsing Facebook or Google. The
scale of the platform, combined with the intent of its
users, means advertisers now view Amazon as another
primary distribution channel.
But it is not just intent and scale of platform, it is the
extent of the purchasing data available to advertisers,
which is far greater on Amazon than on other
platforms2. For example, consumer goods corporation
Proctor and Gamble aims to employ Amazon’s
consumer ID data to target consumers3. Amazon has
more visibility into consumer purchasing activity than
any other platform and can thus better determine
which keywords and marketing strategies ultimately
lead to a purchase.
Advertisers will spend $4.6 billion on Amazon’s
platform in 2018 as marketing money continues to shift
away from Facebook and Google, which collectively
hold close to 58% of the market1. The environment is
ripe for Amazon to establish itself as a market leader
in online advertising, and the company is looking to
extend the reach of its ad platform. It is developing
an end-to-end service, and so rather than employing
its previous strategy of purchasing ad space on other
sites, it is charging some sellers to run advertisements
on its own site, going head-to-head with Google.
It additionally plans on rolling out premium services
to large accounts and vendors, such as Fortune
500 brands, to solidify its position as an all-in-one
marketing and distribution platform.
Meanwhile, agencies looking to ride the wave
are positioning themselves as specialized brand
performance partners, to help typical account
managers navigate the massive scale of Amazon’s
constantly evolving platform. More than half of online
product searches begin on Amazon4, and without
specialized agencies, many account managers lack
the tools and expertise to optimize all of the levers
in the Amazon ecosystem. Amazon already controls
multiple touch points of the brand experience, from
product visibility to supply chain, and this control will
only grow with the introduction of these agencies.
The need for an end-to-end partner is greater than
ever, and the challenge has already been set by WPP-
owned Marketplace Ignition, which hopes to manage
all touch points of the brand experience from creative
assets, to ad placement, to packaging, to consumer
reviews. Meanwhile, Gradient.io – launched by ad-
tech expert Bobby Figueroa, who left his role with
Amazon to leverage his inside knowledge and advise
brands on advertising with the tech giant - raised $3.5
million in October 20185. And expect accelerating
growth from independent Amazon-focused digital
platforms and agencies in the next year, including
Channel Key, Downstream, Content 26, and
Orca Pacific.
As brands continue to allocate more of their
marketing resources towards Amazon in order to get
their products in front of consumers, the Facebook-
Google duopoly will continue to be broken down. In
the US, Amazon is still only the fifth largest generator
of digital revenues1, but the e-commerce empire is
competitively positioned to grow its piece of the pie
and disrupt ad-tech in 2019.
Facebook and Google have established themselves as the primary online
advertising platforms, but a shift in the last year has allowed a third tech
giant – Amazon – to push into the big leagues of the ad-tech market.
% of Total Digital Ad Spending 20181
Duopoly
(Facebook
& Google)
Amazon
Other
58%
38%
4%
Duopoly
(Facebook
& Google)
Amazon
Other
56%
37%
7%
% of Total Digital Ad Spending 20201
27
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
EXPERT VIEW
John Ghiorso
CEO, Orca Pacific
I remember a decade ago when I bought into
the Amazon promise and, seeing the sheer size
of its potential market, becoming convinced
that it was on track – one day – to be the biggest
company in the world.
In recent years, we have seen Amazon use
its market share to grow into an advertising
powerhouse – and it is my belief that it could
become the number one advertisement platform
in the US. It currently competes against Facebook
and Google and I often find myself thinking about
the received wisdom, “‘Facebook knows what you
talk about, Google knows what you search for, but
Amazon knows what you buy.”
Think about Amazon’s knowledge of the first party
shopper and it’s clear that the business is poised
to take “Adland.” It’s why at Orca Pacific we
developed a level of specialization that would
mean we could support Amazon’s rise and its
customers along the way. We do that by acting as
a full-service Amazon agency that works with top
first party vendors & third party sellers to increase
their performance on the platform’s marketplace.
Amazon is not just different from traditional retailers
but also its technology rivals, due to the quality
of the data it holds, which enables it to be an
expert platform for advertisements. Google, for
example, may know what people are looking for
but it lacks knowledge on what they go on to buy
and it generally fails to make sufficient physical
connections.
At Amazon, 2018 will go down as a year when
physical connections went through the roof with
the opening of more Go stores. There are now
a handful of them across California, Washington
and Illinois. Each one pulls a magic trick where
technology tracks consumers throughout the
experience and shoppers can leave the store
without having to wait at the checkout to pay.
The visual data that Amazon gains from these
transactions combined with the digital shopping
data that it has collected for years gives them a
massive edge over the other advertising platforms.
Amazon’s focus on bricks and mortar stores is just
one physical manifestation of how brands and
manufacturers around the world have pursued
innovation at a startling pace. The rate at which
businesses change today would, not so long ago,
have been viewed as foolhardy in
certain circles.
Count Amazon out of the advertising race at your
peril. In fact, I predict that Amazon will increase
its embrace of external technology companies
in order to accelerate its ad-tech offering. As
has become commonplace with these matters, I
would also expect competitors to look on and find
inspiration in what Amazon achieves and find their
own ways to follow suit.
Finally, getting into specifics, there is one more
thing I would like to draw attention to. When
people talk about Amazon’s advertising, or focus
on it, they are mostly talking about search. It was
called Amazon Marketing Services (“AMS”) and
now it is called Sponsored Brands, and it’s the
bread and butter for advertising for most brands
and clients – including us.
But display advertising – through what Amazon
calls the Amazon DSP – is so far not widely used
and I predict it will become much more prominent
in 2019. DSP does not necessarily apply to smaller
players, but if you have $500,000 - $1 million in your
advertising budget, then display advertising should
be a critical piece of your advertising strategy.
Do that, and you may be putting your business
on track to enjoy Bezos-like success in 2019.
2018 will go down as the year that Jeff Bezos became the world’s richest man.
With a record $141bn to his name, Bezos has eclipsed his rivals and grown
Amazon into the second-most valuable company in the world.
28
29
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
PREDICTION 8
56%
Of shoppers
expect same-day
shipping
53%
Of shipping
cost is in the
last mile
LAST MILE DELIVERY
Going the Distance
COMPANIES TO WATCH
30
As consumers turn towards e-commerce for more of their shopping
and retail needs, users expect fast delivery to come as standard. Some
56% of millennial shoppers expect to have same-day shipping be an
option when they buy online1. However, only 51% currently offer
same day shipping to date, with 61% of online shoppers willing
to pay for the convenience of avoiding brick and mortar shopping
trips2.
These figures highlight the massive competitive
advantage of the front-runner, Amazon, as it
expands free one-day delivery options and rolls
out one-hour delivery with Prime Now. If retailers
want to survive in the era of Amazon, they must
meet customer demand for faster shipping. We
predict many real time delivery options will be
available across various verticals.
The last leg of the delivery supply chain, when
a package is out for delivery to the doorstep, is
the most expensive and inefficient aspect of the
shipping process. Last mile delivery accounts for
53% of the total transportation cost, and with the
proliferation of “free shipping”, consumers are less
likely to foot the bill3. Thus, retailers are targeting
innovation in last mile delivery to protect margins
and accelerate delivery times.
Some companies are trying crowdsourced delivery
as a less asset-intensive way to achieve agility and
on-demand flexibility in the last mile. Customers
are already aware and familiar with on-demand
models like Uber, Airbnb, and Postmates, so
adoption in the shipping supply chain would
require minimal user education. Crowdsourced
delivery also provides greater control over the
shopping experience for customers and offers
faster deliveries with enhanced visibility of
delivery hanging.
Larger shipping enterprises have started to
develop urban warehouse spaces to have nearby
access to inventory for fast customer deliveries.
Amazon has developed 75 fulfillment centers
within 20 miles of half of the U.S. population4, and
it has the first-to-market advantage; large big box
stores are offering two-day delivery for a minimum
order while Amazon is closing in on free two-hour
delivery. Other players are now racing to catch
up. Ryder System, a provider of fleet management
solutions and supply chain logistics systems
recently announced an expansion of its
Ryder Last Mile, a two-day home delivery
and white-glove installation solution for
big-and-bulky goods5.
Competing models are also in the works,
with the likes of Walmart testing a new drop-off
program last year, in which employees could
voluntarily drop-off packages to customers on
their work commutes. While it was only tested
in two stores in New Jersey and Arkansas, the
potential for expansion is great as 90% of US
consumers live within ten miles of a Walmart
store6. Walmart’s existing physical presence
could prove to be its advantage in standing
up to Amazon’s elite shipping operations.
With the rise of big data, some companies are
developing mobile warehouses to have inventory
on-hand even closer to customers’ doorsteps.
Companies could use customer data to see
what they may want, even if they didn’t order
it, allowing for delivery services to load non-
committed inventory into delivery fleets, which
can be upsold during the delivery process. Similar
to how Amazon shows customers additional
products they might like during checkout, the
driver can bring items the customer bought in the
past or might need, providing more options to the
customer and increasing the value of each sale
for the delivery service.
Last mile delivery is a pain point that we see
gaining considerable attention from retailers
entering the next era. Amazon has already
established itself as the front-runner, but as
entrants from traditional retailers and
crowdsourcing operators invest in their supply
chains, we will enter a world of ubiquitous
instant gratification in online retail delivery
and varied delivery options.
1. Business Insider, Crowdsourced delivery explained: making same day shipping cheaper through local couriers, July 22, 2018
2. GoPeople, Same Day Delivery Trends and Statistics to Guide Your Business, August 2, 2018, 3. Business Insider, The challenges
of last mile logistics & delivery technology solutions, May 10, 2018, 4. Curbed, 9 facts about Amazon’s unprecedented warehouse
empire, November 19, 2018, 5. Ryder, Ryder Expands Last-Mile Delivery Network in 11 North American Markets, October 17, 2018
6. LiveMint, Walmart discovers why the ‘last mile’ is the hardest, July 30, 2018
31
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
COMPANIES TO WATCH
END OF
The Boys Club
Topia
PREDICTION 9
32
The technology sector has been among the most progressive when it comes
to corporate initiatives for reaching gender balance. However, veteran
female investors and executives are taking a different angle by improving
accessibility to the venture backed tech ecosystem for new and prospective
female entrants. Specifically, equal access to mentorship, funding, business
relationships, and job opportunities is critical for gender balance to persist
in the technology sector. Efforts to equalize access are originating from
organized networks of decision makers, venture capital investors, and
exceptional entrepreneurs.
Founded in 2017 by thirty-four female venture
capitalists, All Raise is a non-profit organization
doing just that. The group is building a community
for connecting female peers and decision
makers in the tech community, bridging the gap
between initiatives and outcomes. All Raise aims
to double the percentage of female partners at
US tech venture firms and increase the share of
venture funding going to companies with female
founders1. To reach those goals, it hosts a variety
of social networks designed to target each piece
of the ecosystem, including founders, investors,
limited partners, and veteran industry executives.
For example, one initiative called Female Founder
Office Hours offers female entrepreneurs access
to one-on-one mentoring from peers and venture
investors who share advice about fundraising or
company building. Through these networks, All
Raise is changing the template for firms in Silicon
Valley and beyond.
Funding is a vital component of the tech
ecosystem. Investors like Aspect Ventures
(“Aspect”) and Cowboy Ventures (“Cowboy”)
are actively focused on accelerating the success
of female founders and rising women in venture
capital by promoting access to senior General
Partners. Aspect is led by two female General
Partners and curates an investment portfolio
of founders that is representative of the real
societal gender demographic. Founded by All
Raise member Aileen Lee, Cowboy backs a large
percentage of women entrepreneurs in its portfolio
and helps founders build more balanced teams.
Further up the capital stream, these investment
strategies have garnered support from many LP
counterparts. Aspect recently raised $181m for
its second fund, drawing support from Melinda
Gates and Cisco, among others2. Cowboy also
recently closed another fundraise, and nearly
half of the LP’s involved were women3. When
raising money, Aileen wanted Cowboy to support
gender balance in its cap table, embodying the
All Raise’s mission of facilitating access for women
in each segment of the tech ecosystem.
Sources: 1. AllRaise.com, 2. Geek Wire, Melinda Gates invests in $181M fund for women-led VC firm Aspect Ventures, January 23, 2018
3. Pitchbook, Q&A: Aileen Lee on Cowboy Ventures’ latest fund, getting women on her cap table and what keeps her motivated,
August 8, 2018
Female Representation in VC Across Fund Size1
0%
20%
40%
60%
80%
100%
Micro
$0-100m
Early
$101-250m
Multi
$251m-550m
Growth
$551m-$1.6bn
Huge
$1.6bn-$5bn
Female
Male
9%
91%
7%
93%
91%
9%
91%
9%
10%
90%
33
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
Sources: 4. Financial Times, How the tech industry is attracting more women, March 8, 2018, 5. Tech Crunch, Cisco is acquiring business
intelligence startup Accompany for $270M, May 1, 2018, 6. Nextdoor Blog, Welcoming Sarah Friar to the neighborhood, October 10, 2018,
7. Recode, Andreessen Horowitz has finally hired a woman as a general partner, as it also officially debuts a crypto fund, June 25, 2018
US VC Activity in Companies with at least one female founder1
2008
0%
15%
10%
5%
20%
2009
2010
2011
2012
2013
2014
2015
2016
2017
% of Total Deals
% of Total Deal Value
Female entrepreneurs are rewriting the narrative
at the startup level as well. Textio, co-founded by
Kieran Snyder, leverages artificial intelligence to
correct gender bias and predict the performance
of business documents as they’re being written.
Last year, the four-year-old startup helped Nvidia
boost the percentage of women applicants
by 28% and increased the number of women
Vodafone recruited by 7%, all by rephrasing
job listings4. To fuel its growth, Textio was able
to raise money from Cowboy, serving as a proof
point and an inspiration that there are available
opportunities and resources for the taking and
the time is ripe for women considering the field.
Growing from a startup to a valuable enterprise
is a challenge that requires access to sources of
capital and strong business relationships. With
leaders like Aspect and All Raise promoting
accessibility and action, we are seeing a growing
number of rock star female founders shake up the
M&A markets with successful exits. Amy Chang,
who founded the relationship intelligence platform
Accompany, led her business from startup to
disrupter with investments from female forward
investors like Floodgate Ventures (“Floodgate”).
Last year, Amy, Floodgate, and other stakeholders
celebrated a successful exit to Cisco for $270
million5. Following the deal, Cisco installed Amy
as SVP of its Collaboration Technology Group
for her expertise and impact in the space.
We are seeing a push for change from the
top to unify the tech industry’s decision makers
and facilitate the success of prospective female
entrants. In 2018, neighborhood networking
platform NextDoor named Sarah Friar its first
female CEO6, and Andreessen Horowitz hired
its first female general partner, Katie Haun7. In
an industry historically known for its gender bias,
female leaders in the tech ecosystem are taking
a new angle at building a community of support
and accessibility. These types of initiatives give
conviction that there will be a shift in the tide
to come in 2019.
34
35
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
PREDICTION 10
PROFESSIONAL CAPITAL SOURCES
Scouting for Entry Points into Blockchain
COMPANIES TO WATCH
36
Between January 2017 and January 2018, Bitcoin’s price rocketed from $800 to
nearly $20,000. Over twelve months, we watched the explosion of cryptocurrencies
– moving them from the periphery firmly into the mainstream and putting
blockchain at the front of the corporate agenda. When we predicted a crypto
bloodbath in our 2018 research report “Token Frenzy – The fuel of the
blockchain”, precisely specified as a 90% correction of the overall market with a
wipe out of the majority of cryptocurrencies in the course of 2018, we saw the
need for a correction at a time of unprecedented global blockchain and crypto
euphoria. The velocity with which the market plummeted and many
cryptocurrencies went to zero value after reaching an overall market cap of over
$800bn, has nonetheless surprised. Also Initial Coin Offerings (“ICOs”) stalled
to centre around fewer projects such as Telegram and EOS. But we haven’t seen
the last of blockchain and cryptocurrency.
Underneath the surface, activity in Distributed
Ledger Technology (“DLT”) is in full speed, even
within financial institutions. Clearly, no one
wants to take the lead, but given the pace
of innovation, there is a thin line between
being first and being last. Since many market
participants on the financial and strategic side
are aware they largely missed benefiting from
the digital revolution, we expect they’ll ensure
they do not miss out on the blockchain and
cryptocurrency revolution.
200
815
514
255
467
237
298
193
203
Total market capitalization of the cryptocurrency market*, last 12 months, USDbn.
Institutional money flowing into crypto
331
Global crypto assets under management, USDbn
Decreasing volatility, growing professionalism, regulatory adjustments
April 13
Barclays announces
crypto trading desk
May 31
Bittrex announces the
launch of a USD/BTC
trading pair
June 25
Andreesen Horowitz
launches $300 million
crypto fund
October 5
Yale invests in crypto
fund that raised
$400 million
May 3
Goldman Sachs
plans to launch a
crypto trading desk
March 19
G20 meet and focus
on crypto regulation
June 6
SEC states that Bitcoin
is not a security
July 2
Coinbase Custody
opens its doors
for business
October 15
Fidelity is launching
a crypto trading and
storage platform
September 13
BitGo receives
approval to act
as a custodian
June 15
SEC states that
Ethereum is not
a security
Nov 17
Dec 17
Jan 18
Feb 18
Mar 18
Apr 18
May 18
Jun 18
July 18
Aug 18
Sep 18
Oct 18
July 16
Ethos launches crypto
wallet and plans for
fiat gateway
October 23
Coinbase receives
approval to act
as a custodian
Source: CoinMarketCap; cryptofundresearch.com, *A simplified representation
37
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
We predict 2019 will be the year of institutional
capital inflow into blockchain, which will not
be solely financially motivated, but backed by
increasing demand we see on the corporate and
family office side and their desire to build positions.
Initially this will happen through funds, equity
investing into blockchain technology projects
as well as financial instruments and derivative
products related to major cryptocurrencies. But
the question remains: what obstructs professional
capital inflow?
Regulation: The regulator has taken a thoughtful
approach on cryptocurrencies of which most
are categorized as securities apart from Bitcoin
and Ethereum. Both now officially classified by
the SEC as non-securities, with Bitcoin being
considered a replacement for sovereign
currencies and Ethereum a commodity, like
oil or gold – with the rationale mainly linked to
their level of decentralization. The regulatory
security, particularly among those two, protocols
is expected to be reflected in how capital is
allocated in the sector, directly and through
derivative products.
Most other ICOs and cryptocurrencies are in
fact security offerings and increasingly will need
to adhere to regulation and AML/KYC, most of
which is troublesome if not impossible ex-post.
There is a massive wave of fully compliant security
token offerings (“STOs”) lined up and also the
developments around tokenization of assets
(“TOAs”) is extensive – both are expected to
continue to raise the bar on market standards
very fast and hence become a focus area of
activity, also because they resemble blockchain
equivalents of existing banking products that
investors are very familiar with.
Custodianship: The market needs banking-grade
custodian solutions of which many promising
initiatives are underway. Most of the large volume
trades are done over-the-counter (“OTC”) mostly
via as yet unregulated intermediaries. Absorbing
the risks in executing these transactions through
standardized and audited processes as well
as later on the risk of total loss through errors in
managing custody will be key comfort to the
broader scale of professional investors. Offerings
structured as tokenized financial products are
expected to initially absorb substantial volumes
and allow avoidance of direct handling of
cryptocurrencies.
Liquidity: We have seen an increase in the number
of regulated exchanges and large banks getting
involved in the cryptocurrency exchange field.
There is strong activity in launching index and
derivative products as well as Exchange Traded
Funds (“ETFs”) for Bitcoin and eventually some
major altcoins soon. Lastly, stablecoins – 1:1 fiat
backed tokens – will serve as a haven for investors
to deal with liquidity and to manage the still high
volatility. More institutionally backed projects will
go live soon and contribute to liquidity and hence
adoption.
Overall, the correction is ongoing and healthy for
the sector to allow the technology to catch up.
The main activities we currently see are around
building the products and services aimed at
reducing the barriers of adoption both on the retail
and institutional side. The capital formation at the
exchange and issuance platform level is expected
to catalyze near-term consolidation aimed at
growing the number of wallets, users and trading
volumes. We look forward to an interesting 2019 in
DLT and expect another wave of hype - this time
more technology and product focused.
38
EXPERT VIEW
Olga Feldmeier
CEO, Smart Valor
But, like all major technologies, it will take time
to find its feet – this is, after all, a marathon and
not a sprint.
Cryptocurrencies have a fundamental security
advantage and therefore have a safe place in
our financial world. However, there are still hurdles
to mass adoption that need to be removed – and
these are not just of a technical nature.
Regulations will need to keep up on all things
crypto in order to protect investors and provide
more trust in these new asset classes, which is the
ultimate prerequisite for broader adoption.
Right now, smaller jurisdictions are moving quickly
to stay ahead of the regulatory curve, for example
the Swiss Financial Market Supervisory Authority
(FINMA) recently announced a new fintech license
to support innovative financial companies.
Blockchain, the technology that enables
cryptocurrencies to operate, is also backing asset
tokenization, which is disrupting how we manage
ownership of real assets. By converting rights in an
asset into tokens, transactions can be handled
faster, can be done peer-to-peer without the
middlemen taking a margin. But most importantly,
the minimum investment threshold are much lower,
allowing access to asset classes that were out of
reach for many.
At SMART VALOR, we are building the first
regulated exchange and investment platform
for such tokenized assets. We have requests from
over 50 projects so far and we get ten requests
every week.
We’re only seeing the tip of the iceberg at the
moment, with more than $1bn-worth of assets
tokenized so far. In H1 2019 I expect this figure
to pass $10bn, which is just a tiny fraction of the
massive trillion-dollar opportunity that alternative
investment methods offer.
Adoption of tokenized assets is occurring most
where there is less effort required on the back-end,
in terms of complex documentation of ownership
and transfer of it.
Alternative investments such as private equity funds,
venture capital funds as well as tokenized fungible
commodities are three areas progressing at pace.
But the biggest challenge remains the regulatory
environment, as we are comprehensively leaving
the beaten path by pursuing these innovations.
We at SMART VALOR are discussing these topics
with the regulatory offices here in Switzerland and
Liechtenstein and get strong support for the industry
innovations required for these asset classes, while
staying 100% compliant with regulations to protect
investors.
As for what investors need to do today: as usual,
they have to determine what level of risk they are
willing to take – remember these are until now
unregulated waters, and they are operating under
unclear legal and regulatory conditions for now.
But Financial authorities, for their part, have stepped
up their efforts to protect investors and are shutting
down uncompliant players in the market.
The crypto market is still in its early stage and so high
volatility is to be expected. Over the mid-to-long
term, cryptocurrency is a new alternative class of
digital financial products that offers many benefits.
And there will be offerings that are fully regulated
and under a reliable legislation like SMART VALOR.
That’s why I am certain they will find mass adoption
– first with progressive, innovative investors, and then
others who will follow in their footsteps.
Cryptocurrencies will continue to innovate
beyond the well-known bitcoin and Ethereum,
and we will see many more coin and payment
products emerging. All that will clear the way for
mass adoption, which we will see in the second
half of 2019.
The past 12 months have seen cryptocurrencies become a mainstay of international
headlines and face the ups and downs of fast-moving market trends. Speculation in the
second half of 2017 led to a cryptocurrency boom as buyers searched for quick wins.
However, reality kicked in when market opportunities were not immediately as lucrative
as some speculators had imagined.
39
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
METHODOLOGY
METHODOLOGY
AUTHORS
This report was compiled through the expert insights of GP
Bullhound’s worldwide team alongside detailed analysis of
investment trends in the global technology sector in recent years.
It is intended to provide our predictions for growth, investment,
and impact in the digital economy in 2019. Each year, we provide
a transparent assessment of our predictions from the previous
report to maintain a high level of scrutiny on our own research.
40
PER ROMAN
Managing Partner
JONATHAN CANTWELL
Director
ALEC DAFFERNER
Partner
SEBASTIAN MARKOWSKY
Director
ERIC CROWLEY
Vice President
OKAN INALTAY
Associate
CONNOR SMITH
Intern
ROBERTO TABET
Intern
37
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
SIMON
NICHOLLS
Partner

ADAM
PAGE
Associate
FELIX
BRATELL
Associate

RAVI
GHEDIA
Vice President

PER
LINDTORP
Director

SIR MARTIN
SMITH
Chairman

FLORIS BACKER
VAN OMMEREN
Executive Director

CARL
ELFVING
Analyst

ANN
GREVELIUS
Senior Advisor
JAVED
HUQ
Vice President

DIPAM
PATEL
Associate
MATTHEW
FINEGOLD
Associate

SEBASTIAN
MARKOWSKY
Director

SVEN
RAEYMAEKERS
Partner

STAFFAN
INGEBORN
Non-Executive
Director

CARL
WESSBERG
Executive Director

HAMPUS
HELLERMARK
Analyst

CHRISTIAN
LAGERLING
Co-founder &
Senior Advisor
KARL
BLOMSTERWALL
Associate

FRAENZE
GADE
Vice President,
Events

ALON
KUPERMAN
Director

OLIVER
SCHWEITZER
Executive Director

JOAKIM
DAL
Partner

PER
ROMAN
Managing Partner

SIMON
MIREMADI
Associate

ELENA
BOCHAROVA
Analyst

SETH
ALPERT
Senior Advisor

OUR TEAM
PAUL
GAILLARD
Associate
JONATHAN
CANTWELL
Director

JULIAN
RIEDLBAUER
Partner

GRAEME
BAYLEY
Partner &
Group CFO

ED
PRIOR
Associate

PIERCE
LEWIS-OAKES
Analyst

MIKE
MORTELL
Senior Advisor

BEN
PRADE
Director

JAIME
MORENO
Vice President,
Strategy
ALESSANDRO
CASARTELLI
Director

JAIME
SENDAGORTA
Associate
CECILIA
ROMAN
Senior Advisor
CHRISTOPH
GRUNEWALD
Associate

NIKOLAS
WESTPHAL
Director

ANDRE
SHORTELL
Partner

ROBERT
AHLDIN
Partner

JACOB
LOVENSKIOLD
Analyst

JOE
TABBERER
Vice President
CLAUDIO
ALVAREZ
Partner

OKAN
INALTAY
Associate
DAVE
NISH
Vice President,
Technology

OSKAR
HERDLAND
Director, ECM

GREG
SMITH
Partner

ADAM
BIRNBAUM
Director

BULAT MARDANOV
Analyst
GIOIA
GERBELLI
Associate

HUGH
CAMPBELL
Managing Partner

JOY
SIOUFI
Vice President

NICK
HORROCKS
Director

MIGUEL
KINDELAN
Executive Director

GUILLAUME
BONNETON
Partner
IMAN
CRISBY
Vice President,
Marketing

MATHILDE
JAKOBSSON
Associate, Events
& Marketing
RACHAEL
SHAPIRO
Analyst
THEA
MOELL
Analyst
JOHANNES
ÅKERMARK
Vice President

ERIC
CROWLEY
Vice President

ELSA
HU
Director

ALEXIS
SCORER
Executive Director

ALEC
DAFFERNER
Partner

MANISH
MADHVANI
Managing Partner

MARVIN
MAERZ
Associate

REDA BEN
LARBI
Analyst

MANON
RODIER
Analyst

41
42
ABOUT US
OUR MARQUEE
CREDENTIALS
ABOUT US
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Jobandtalent, Klarna, Match, Netflix, Slack,
Spotify, Stratio, Tiptapp and Unity.
GP BULLHOUND TECHNOLOGY PREDICTIONS 2019
3
LONDON
tel. +44 207 101 7560
52 Jermyn Street
London SW1Y 6LX
United Kingdom
MANCHESTER
tel. +44 161 413 5030
1 New York Street
Manchester M1 4HD
United Kingdom
PARIS
tel. +33 1 82 88 43 40
45 rue de Lisbonne
75 008 Paris
France
SAN FRANCISCO
tel. +1 415 986 0191
One Maritime Plaza Suite 1620
San Francisco CA 94111
USA
Dealmakers in Technology
STOCKHOLM
tel. +46 8 545 074 14
Grev Turegatan 30
114 38 Stockholm
Sweden
HONG KONG
tel. +852 5806 1310
Level 6, Champion Tower
3 Garden Road, Central
Hong Kong
BERLIN
tel. +49 30 610 80 600
Kleine Jaegerstr. 8
10117 Berlin
Germany
MADRID
tel. +34 609 279 661
Paseo de Recoletos 6
28001 Madrid
Spain
NEW YORK
tel. +1 212-759-1870
489 Fifth Avenue, 34th PH
New York, NY 10017
USA
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