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INTERVIEW: Accel Partners' Sonali de Rycker talks hot investments
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Accel Partners' Sonali de Rycker has overseen high-returning digital investments in Wonga, Spotify and Top10 during her time at the firm. Here, she talks about what she sees as the hottest digital investment areas over the next 12 months.
¤ What sectors are you currently investing in?
We're looking a lot at mobile following the wave of smartphones coming on the market. You're aware of the phenomenon of the Apple App Store, which didn't exist in the summer of 2008 but [generated last] year somewhere between USD7bn and USD8bn in total revenue. In many ways we're just in the early stages of the applications that will be big and monetise well. Gaming has been a great one, but there are others to come. There's cloud and we're looking a lot at next-generation businesses that will be built within social, specifically on Facebook.
¤ What were your best investments last year?
We were an early investor in Groupon and the public markets are volatile, but it's a great company. We invested in Spotify and a couple of years ago we invested in Wonga.
¤ Who do you wish you'd invested in last year?
Companies like AirBnb, which we think of as killer applications, are disrupting some very large markets. Travel and home rental is one of the largest categories in e-commerce and within travel. There are always companies that we wish we'd invested in, but until those companies go public or they sell, you never know whether you were right or wrong - that's the tricky part of our business.
¤ What kind of trends do you see emerging in 2012?
We're actively watching what's happening on social. E-commerce today, at least in the US, is about 9% of retail spending. What's going to be very interesting is what happens when online influences offline commerce. It's only 9% and growing, but something between 30% and 40% of offline commerce, i.e. high street spending, is influenced by what you're hearing online, as well as what you're reading on mobile.
¤ How big do you think mobile ads will be?
Advertising dollars always follow viewership and we're talking about the smartphone and the tablet market overtaking the PC and desktop market: this is where the eyeballs are going. Today the ad dollars are just a fraction on mobile compared to the audience, so this is a massive opportunity.
¤ Do you see any digital sectors deteriorating this year?
Some say that we're watching the volatility in the markets but consumers are [still] looking for deals, they're looking for discovery - the way they are searching the internet is changing. What's fascinating about innovations in Groupon and some shopping clubs is that e-commerce used to be about Google: it was all internet-based. It was quite a clinical experience. The shopping club and the daily deals changed it really from pull to push because you're showing [goods] that are going to go out of stock very soon and it becomes about impulse.
¤ What are the key areas to invest in this year?
A lot of revenue has gone towards mobile gaming but we're watching other segments: health and fitness is a very interesting category because both are sticky and people are willing to pay for it. Online banking has elements that are broken and next-generation financial services continue to be a sector where consumers are attracted to new products. We're figuring out sectors that are going to be built on top of the social graph.
¤ There is talk of some companies not being able to live up to their pre-IPO valuations. Do you think some startups are going public too soon?
People tend not to recognise category-leading companies immediately. With some of these companies, when they go public, they need to be viewed in kind of a longer-term horizon. Some of the comments that we've heard are from investors who have much shorter-term views.
¤ How important is monetisation?
We think of success in a longer-term horizon, so by definition the answer is that it's not something we're obsessed with. If we were, we might have taken Facebook in a different direction in the early days - [it] would be a different company if we were only focused on monetisation in the early days. We know that it matters, but we think of the longer term.
¤ How successful will Spotify's freemium model be in terms of revenue?
It's already very successful in Sweden, a market that was the hotbed of piracy, from the Pirate Bay etc. It's been a fantastic test case - in a market that was very difficult for the legal music market to do well in, streaming has become pervasive and they're doing very well there. They've really gone there on the back of a great friend called Facebook so, yes, we're very optimistic.
¤ Will they be able to replicate the same growth in the US?
Not exactly the same success because the market is more mature there than when they launched Spotify, but they have a very strong product and the new backbone they built where developers can build applications is going to kick-start that even more.
¤ Why has Facebook seen such success?
It's a great company, we think of Facebook as being the backbone of the internet in terms of the next-generation businesses that will be built on top of it. 2.5m websites are integrated into Facebook and more than 7m apps and companies use the data to build businesses, so we think that it's a very valuable company that will only become more pervasive as the internet grows. What they're doing on mobile is really exciting - 350m people access Facebook via their mobile, so it really has the ability to be the backbone of the internet and has innovated to validate that thesis.
