Tag: investment

Nine billion opportunities for fraud

The current wave of billion dollar unicorn tech companies makes a startup investment fraud almost inevitable

Everything is not all it seems at Theranos, the medical testing startup estimated to be worth  nine billion dollars reports the Wall Street Journal.

If true, the allegations Theranos is using conventional technology to run its diagnostic tests mean most of the investment community and tech media have been sucked into an elaborate con.

While it’s too early to say whether the allegations about Theranos are true, with so many multi billion dollar ‘unicorns’ running around it’s inevitable somebody will try such a scam.

Indeed, it’s in the interests of many to promote such a unicorn and for those early into the company it could be immensely profitable.

Even if Theranos turns out to be for real, there will be those that won’t be.

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Using city muscle to drive private investment

Can strategic public projects trigger private sector investment

Chattanooga in the US mid West introduced city broadband in 2008 in the face of legal challenges from the existing cable operators.

The operators lost in the courts and were forced to compete with the local, city owned power company’s network.

Now Wired reports Chattanooga is upping the ante by increasing the available throughput of their network to 10Gb.

While that’s good news for those businesses and households in Chattanooga that need those speeds, there’s a much more important effect that Wired points out.

Municipal broadband providers are raising expectations nationwide for what good Internet service means, forcing commercial providers to improve their infrastructure. And by increasing the amount of bandwidth available, they could be setting the stage for the creation of new, more bandwidth-hungry applications. This is how better service goes from a “nice-to-have” to a “you’d-better-have” for the country’s recalcitrant cable companies.

A few municipal projects could be the trigger to getting better services across the country. This is a model that could work in many other fields as well.

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Riding the rails of the global economy

A US train ride illustrates the need to stimulate private and public investment

Irish economist David McWilliams reflects on how a train ride between Boston and New York illustrates how a lack of investment in the US and over capitalisation in China has affected the global economy.

A lack of public investment is hurting the US in McWilliams view and that’s exacerbated by a reluctance of the private sector to commit to new productive assets and projects. Weak investment affects household wealth and savings, it also means the low interest rates are encouraging speculation rather than economic growth.

Meanwhile in China, the nation’s massive expansion has created a global glut in manufacturing capacity. That makes business even more reluctant to invest in plant and equipment while creating risks for the commodities based economies like Russia, Brazil and Australia that feed that machine.

One aspect that McWilliams overlooks is another shift in the global economy – the shift to smaller scale manufacturing and automation, “real investment tends to be in big machines that make big stuff,” he says.

That investment in big machines may not be the economic driver they were half a century ago as building and maintaining the machines themselves are no longer labour intensive. Furthermore, the manufacturing of tomorrow may well be much more distributed and on a local, smaller scale.

McWilliams’ points though are well made. We need to be looking at how to stimulate private investment in productive assets while looking at the public investments that will enhance our economies and improve our living standards.

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Does broadband really create an innovative economy?

Building a competitive nation is more than just rolling out broadband connections

How much does broadband really matter in developing a competitive and innovative modern economy? A corporate lunch with US software company NetApp last week illustrated that there’s more to creating a successful digital society than just rolling out fibre connections.

Rich Scurfield, NetApp’s Senior Vice President responsible for the Asia-Pacific was outlining the firm’s plans for the Australian market and how it fits into the broader jigsaw puzzle of economies across the region.

Like many companies in the China market NetApp is finding it hard with Scurfield describing the market as “chaotic”. This isn’t unusual for western technology companies and Apple is one of the few to have had substantial success.

Across the rest of East Asia, Scurfield sees them ranging as being mature, stable and settled in the cases of Japan, Singapore, Australia and New Zealand through to India where the opportunities and the challenges of connecting a billion people are immense.

Digital outliers

The interesting outlier is South Korea, one of the most connected nations in the world, where the promise of ubiquitous broadband isn’t delivering the expected economic benefits to the entire community.

In theory, South Korea should be seeing a boom in connected small businesses. As Scurfield says, “from a technology providers’ view this connectivity means you could do more things very differently because of the infrastructure that’s available.”

Global Innovation Rankings

Korea’s underperformance is illustrated by last year’s Global Innovation Index that saw South Korea coming in at 16th, just ahead of both Australia and New Zealand whose broadband rollouts are nowhere near as advanced as the ROK’s.

Making a close comparison of Australia and the Republic of Korea’s strengths in the WIPO innovation index, it’s clear the technology and engineering aspects are just part of a far more complex set of factors such as confidence in institutions, the ease of doing business and even freedom of the press.

Putting those factors together makes a country far more likely to encourage its population to start new innovative businesses that can compete globally. When you have a small group of chaebol dominating the private sector then it’s much harder for new entrants to enter the market – interestingly a private sector dominated by big conglomerates is a problem Australia shares.

Small business laggards

NetApp’s Scurfield flagged exactly this problem, “Korea is an interesting market in there’s about six companies that matter and from a competitive view those companies are extremely advanced, they have great technology and great people.”

“However what’s not happening across the rest of the country is this adoption isn’t bleeding into the broader community,” said Scurfield “Because of that I don’t see broadband connectivity as having a wide impact.”

That Korean small and medium businesses aren’t using broadband technologies to develop innovative new products and service in one of the most connected economies on earth raises a question about just how effective investment in infrastructure is when it’s faced with cultural barriers.

Certainly we should be keeping in mind that economic development, global competitiveness and the creation of industry hubs is as much a matter of people, national institutions and culture as it is of technology.

We shouldn’t lose sight of the importance of our people and institutions when evaluating the strengths and weaknesses of a nation in today’s connected world.

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Researching the next generation of wearables

The Obama Administration teams with industry to develop a Silicon Valley based wearable tech hub

The Obama Administration teams with Apple, HP, Boeing and others to develop a Silicon Valley based wearable tech hub with $170 million in funding reports Venture Beat.

Over $17o million will be invested by the US government and its private sector partners in hybrid flexible electronics manufacturing research that may well underpin the next generation of wearable and embeddable devices.

For the US, its success in the electronics industry is based upon its strong research sector. Making the investments today will help the nation compete as the technology landscape evolves.

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Are small businesses too old and slow?

Does an aging small business population pose a risk to the economy?

Yesterday I hosted the second day of the CPA Australia Technology, Accounting and Finance Forum that looked at how the accounting profession is being affected by the changing technology landscape.

There’s plenty to write about from the day and how the accounting profession is facing technological change which I’ll write up shortly but one theme from the day was striking – that older small businesses owners are struggling to deal with adopting new tech.

Gavan Ord, the CPA’s policy advisor warns older practitioners are opening themselves to disruption and  the Australian business community is in general is at risk as older proprietors aren’t investing or embracing technology at a rate comparable to their overseas competitors.

Older small business owners

That older skew in small business operators is clear, in 2012 The Australian Bureau of Statistics found 57% of the nation’s proprietors are aged over 45 as opposed to 35% of the general population.

Even more concerning is many of those small business owners expect to retire with a 2009 survey finding 81% were intending to retire within ten years – it would be interesting to see how those ambitions changed as the global financial crisis evolved.

A risk to the broader economy

This blog has flagged the risks of an aging small businesses community previously, but Gavan Ord’s point flags another risk – that older proprietors being reluctant to invest in new technology means a key segment of the Australian economy is unprepared for today’s wave of technological change.

A key message from the CPA forum was that the shift to cloud computing is radically changing the business world as sophisticated data management, analytic and automation tools become easily available. Companies, and nations, that don’t take advantage of modern business tools risk being left behind in the 21st Century.

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A tale of two social media networks

Facebook and Twitter are proving to be very different business model

This week showed the disparate

At the time of its IPO in February 2012, Facebook claimed to have 845 million active monthly users. Eighteen months later at the time of their stock market float, Twitter boasted a more modest 232 million.

This week Facebook reported 1.19 billion monthly active users while Twitter still languishes at 300 million, a number that disappointed the market and saw the smaller company’s shares drop 11% after their quarterly earnings announcement.

Even more worrying for Twitter, and competing networks like Google, is Facebook’s success in mobile services with 874 million people accessing the service through their smartphones every day last quarter.

So successful is Facebook in engaging roaming users that some pundits are predicting the company’s Instagram product may well overtake both Twitter and Google in mobile advertising revenues over the next few years.

More concerning for Twitter is the company is still not profitable – of the business’ $957 million gross profit, an astonishing $854 million was eaten up in administration and sales costs which indicates their overheads are in need of some dramatic pruning.

What is clear that Facebook and Twitter have very different user behaviour and, as a consequence, the revenue models are not the same. Twitter is never going to be Facebook.

So the question for Twitter is what does it want to be? Certainly the current quest to drive up revenues seems doomed. Perhaps it’s time to accept the company is a smaller operation and start to plan accordingly.

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