[MUSIC] Joining us now is Ivan Nikkhoo. Ivan is managing director at Siemer Associates, a merger and acquisitions investment banker that deals in the tech sector, the fast-growing tech sector in Los Angeles. He's also an advisor to Wavemaker and Associates, an early stage VC firm that invests in similar kinds of companies, digital media, all those kind of things. So, Ivan, welcome. Thank you so much for coming. >> Thanks, John. Glad to be here. >> So you have, I think, a very interesting vantage point, sitting where you sit in LA, doing M&A deals. And also working at early stage investments. You've sort of had a ringside seat, I believe, to observe Uber and other matchmaker businesses, that just bring buyers and sellers together. How important is this phenomenon? >> In my opinion, it's probably one of the most important things that has happened since Internet became somewhat very popular in and of itself. So I actually met Ryan when he was just about to start Uber, and since then, if you think about it, the most important factors are that it creates disintermediation that brings the customer directly to the provider of that service or product, whatever it may be. And that direct relationship between the consumer and the provider is key, because it has many aspects associated with that including predictabilities, service, convenience, better price, better value. It is a very, very big phenomena. Two years ago, I actually wrote a column that said Uber is the most important company in the world right now. Not from a financial standpoint, from a leading edge stand point. Look at what it's done. If the governments of several countries are trying to shut you down, you're doing something right. If there are huge, huge strikes in London and Paris because of Uber, you're doing something right. If the price of the medallion in New York has gone down by 50% because of Uber, you're doing something right. If you can grow globally in less than four, five minutes the way they have done, you're doing something right. I'm sure there are certain things they can do better, but overall they've proven that a model of disintermediation can be scaled globally. And it can benefit everyone involved, except for unions and governments. So the demand is very, very high. Which is why that has now manifested itself in Uberization of a number of sectors. We have some portfolio companies here. For example, one is called DogVacay, which is basically the platform for people that can dog sit for each other instead of taking your dog to a kennels. It's grown unbelievably well. There is another platform company called HomeHero. It's the platform for elderly care. And the list goes on and on. So the fact that that model has worked well, and has scaled to the size that it has, has compelled people to try to apply that model to other sectors, some successfully, some not. >> So when you look at the various examples, so we have lots of them now. >> Yes. >> Why are some of them successful and why do some really not work out very well? What are the keys? >> So there are several aspects. First and foremost, building platforms is very, very difficult. So the first risk is the execution risk, because you not only have your customer acquisition on one side, you have your vendor or the supply side acquisition cost, so you have two acquisition costs simultaneously. And your transaction, your cut of the transaction needs to be able to cover both cost. So it's a very difficult execution model. Number two is, you need to identify who you're actually selling to. For example, with the example of HomeHero, it turns out that the children of the elderly are the people that pay for it but the elderly are the target market. >> Very interesting. >> So that when you're creating the platform you need to really identify who you're going after so that's an additional cost as well. So the costs are high. To scale them can be very, very expensive. And but once they are at scale, they're extremely valuable because they become very, very dominant. So they're very difficult execution place and you need to really clearly identify the specific market you're going after. Who is your supply side and who is your demand side? And be able to establish that relationship in a way that that relationship continues through you. If you think about it, example of DogVacay, why should two people that have met over DogVacay use DogVacay again? Why can't they just go to each other? >> Why not cut you out, right? Why not? >> Why not cut you out? And the reason they don't, a very, very, very small percentage, but the reason they don't is number one, convenience. And number two, security. And number three, transparency. And those three things can apply to anything. So that has a lot to do with it. >> So it's sort of a chicken and egg deal, right? You have to have suppliers and, pet sitters for example, in order to have people who can buy that service, but you need buyers in order to get the suppliers on board. >> Precisely. >> How did the successful people manage that balancing act, so that they come along in tandem? >> And so, in my opinion at this point, the market has grown to a point that if you do not have a competitive edge in one or the other, it's going to be very, very expensive. So when I talked to people, for example, there was people at the London Business School that we spoke to. The question that I ask them is in the industry that you have, and particularly if you're the owner of a particular, let's say manufacturing, whatever the case may be, you have excess capacity. For example, the life example of the guy in Australia that has that huge cleaning company and I told him, the company, people there because I have a thousand cleaners. I said do you have excess capacity? He goes yeah, we run at 65, 70% utilization. I said you're the prime candidate to create an Uber version of cleaning for office buildings. And we discussed it at length because he has the supply side. >> [CROSSTALK] Yup, interesting. >> And he didn't move fast enough and that somebody else run and did exactly. [LAUGH] So, if you don't have one or the other, you have to go inch by inch. So, it would be ideal if you have a strategic partnership with someone that generally provides a supply site. >> So, are there ways entrepreneurs could take advantage of this sort of growing industry, which really it is? And thereby, do something else to serve this industry without themselves just being an Uber of x or Uber of y. >> There are absolutely. So there are few things. Number one, as the industry matures like anything else there are some segments of it that are developing. For example, if you take, again, the taxi business where you have Uber and Lyft that are very, very dominant. Now you have sub sectors that are very, very specific. So in Los Angeles, there's one that just started a while ago. It's called Hops Cars and something else, which is Uber for children, so moms, it's done in a very secure way where only moms can drive kids. But it's literally Uber for children that, because in LA, have to drive everywhere. So there is some sectors that are becoming viable businesses themselves, because now you don't have to create the market, the market has already been created. People are used to using it. So that's one. The second thing is there are a number of segments that haven't been touched yet where the demand is very high. Lots in financial services, lots in insurance. Still in emerging economies the number of these kinds of companies coming up is enormous. For example, tons of delivery companies are being funded in India and in China, huge, huge numbers. And they're being funded in big, big numbers as well. >> Will they all survive? Or will there be a shake out and only a single winner will take all? >> It won't be a single winner but I think in every geography you're going to have two or three dominant players and three or four second tier players. The issue becomes the valuation of these people because if you're not one of the top three, four, it's going to be very hard for you to raise money, which means you're not going to be able to scale as fast, which means you're not going to have the best people, which means at some point you'll be rolled up under consolidation once again]. And I think to a certain degree, the consolidation has begun. We are seeing a lot of money activity. We're seeing a lot of capital raises. So if you're not the one buying or the one raising money, you will be rolled up, you will be consolidated because you will lose your valuation. >> So let's talk about raising capital for a second. As you know the subject of this MOOC is how to start and finance and grow a business without venture capital at least in the early stages. And you and I have both talked to companies who have done Uber-like things, and at the very beginning they were able to get some customers and they were able to get some suppliers without spending any capital. But at some point then they say gee, I've got something here. Maybe I should go raise capital. How do you know when you should do that? [MUSIC]
