Hybrids are like Mermaids... and Other Tales of Investing in Boldness

“A hybrid is like a mermaid: if you want a fish, you get a woman; if you want a woman, you get a fish."

- Carlos Ghosn, CEO of Nissan & Renault

The marketplace has embraced hybrids, which have two powerplants: one for the gas and one for the electric.  This is significantly more costly to manufacture than a single powerplant vehicle and severely hampers the performance of the vehicle by saddling it with extra weight.

So, why do we do it?  Simple, hybrids have two powerplants because of the practical infrastructure limitations of trying to conveniently charge electric vehicles.  Electric vehicles, like dogs, have a pretty short tether while you're out on the town.

So, Nissan's partnership with Shai Agassi's Better Place, which aims to develop that infrastructure, is a no-brainer.  Which is not to say that Nissan is waiting for Better Place either... after all, they did build the Nissan Leaf (as certain places like SF already have decent infrastructure... excepting the fact that you have to wait a decent amount of time to get a decent charge).

Granted, this partnership is old news.  So why am I bringing it up?

It highlights two options for startups with infrastructure limitations (i.e. opportunities):

  1. Whatever the existing infrastructure limitations, work with them.
  2. Build a whole new infrastructure and then get that infrastructure to critical mass.  (It doesn't matter if the technology is there if no one is excited about in using it.)

So which approach do I prefer?  I prefer the latter approach.  The BOLD approach.

(Note: I love Nissan because with the Nissan Leaf, it's clear that Nissan is actively attacking with both approaches.  Now THAT'S a company doing it right!)

Why?  The most exciting opportunities of the last 15 years have almost all been layered infrastructure plays.

For example:

  1. Groupon built an infrastructure for leveraging group purchasing power.
  2. Foursquare (and this goes for all similar plays) built the infrastructure and critical mass around geo-tagging.
  3. Facebook built the Internet's social infrastructure.
  4. Google with their algorithm built an infrastructure to not only search the Web (if you don't believe me, just remember pre-algo Yahoo was in it's heyday the best way to find anything on the Web), but also an entirely new Web advertising sales model infrastructure.
  5. Ebay and PayPal built infrastructures for Consumer-to-Consumer transactions (and on and up to small and large businesses).
  6. The Global Genome Project laid the foundational groundwork infrastructure for a whole new universe of medical treatments and opportunities.
  7. Rackspace's ability to help companies leverage the infrastructure paradigm shift of cloud computing.
  8. Apple's iMac, iPod, iTunes, iPhone, iPad... all of these were infrastructure plays as they have permanently and fundamentally altered the way we purchase and consume media.

So what's my point?  The largest pain points for consumers today are systemic.

We need to break paradigms; in the process of breaking those paradigms, we unleash a whole new way of going about life.  That's what I mean by an infrastructure play.

Right now there are major infrastructure plays and opportunities.  This is the genius of Sequoia Capital and legends like Don Valentine.  They picked an obvious future and invested across the board in that future.

So what are some of the current big infrastructure opportunities?

  1. The Internet.  The Internet will continue to connect everything.  That's why Google is still a buy... between Chromebooks and the Driverless Car, Google is THE Internet infrastructure play that wants to completely alter and dominate how everything is done.  They're the Internet play that is actively shaking up the Internet infrastructure by forcing migrations to the Cloud and competing with Apple for the App infrastructure turf.  And they're not content to stop there.  Driverless Cars are most definitely the future, and they'll probably own the infrastructure that powers the driverless functions of hundreds of millions of daily drivers.
  2. The future of the automobile is Electric.  Tesla is a buy... and so is Nissan.  I'm not as crazy about Better Place though because cars that lay their battery completely under the cabin have significantly better driving dynamics, better cabin space (Tesla's New S sedan will be able hold 5 adults and 2 children, and still hold cargo under the front hood), and greater range (Tesla's new S will be able to go up to 300 miles with it's top-of-the-line extra $20k optional battery).  Batteries will go down in price, battery capacity will improve, electric car efficiency will improve, and gas prices will continue to increase.  These two car manufacturers are really the only manufacturers really building all-electric cars from the ground up.  Tesla is bigger risk, but in my opinion also bigger reward.  I'd buy now as the Model S looks like it's going to be a multi-billion dollar revenue generating crowd pleaser (as opposed to the Roadster which was really just a niche market proof of concept).
  3. Banking... In 20 years all transactions will be cashless.  Traditional banks will still have a role, but look for breakthrough opportunities in companies like Square and ideas like BankingSimple.  Even staid Internet banks, of which there are no large ones are publicly traded, are posting impressive numbers, especially when compared to brick and morter banks of the same Assets size.  The Market Cap of banks in the US is about a Trillion Dollars... and once transactions go cashless with simple and sane alternatives for Consumers and Merchants, there's just no sense in having brick and mortar banks anymore.  (Note: Well's Fargo spent $757k per office, not including the salaries of the staff who worked there.)  In fact, I'm currently banking on a banking infrastructure startup... if you're interested in potentially investing, please contact us.

Happy investment hunting!