Vinit Nijhawan: Serial Entrepreneur, Venture Capitalist

Predictions for 2008

Here are my predictions for 2008:

1. Buzz--The buzz topic of 2007 will continue to be energy and cleantech. We will see a huge growth in VC investments in such companies.
2. Exits--We will see a dramatic increase in cross-border M&A with many Indian and Chinese companies acquiring US and European companies.
3. National--We will experience a recession.
4. International--The Flat World concept (Friedman) will be replaced with the lumpy world (Ghemawat). Companies will have to deal with a global skills shortage in very local ways.
5. Mobile--Apple's greatest innovation in the iPhone is its browsing capability as a result the mobile internet will finally take off.

Here is how I fared with my 2007 predictions:

1. Buzz--The buzz topic of 2007 will be energy and cleantech. We will see a huge growth in VC investments in such companies. I was right on. CleanTech investments by US venture capital firms reached $2.6 billion from 168 deals in the first three quarters of 2007, according to data from Thomson Financial and the National Venture Capital Association. The year to date 2007 dollar volume represents a 46% increase over full year 2006 dollar volume.
2. Exits--After a six year hiatus Nasdaq IPOs are back and we will see a significant increase in Nasdaq technology company IPOs. Again I was correct. In the US there were 224 IPOs, raising $50bn. Additionally, Europe had a record year with a total of 651 IPOs, raising $90bn.
3. National--We will see a slowdown in growth and may even experience a recession. I was partially correct, the sub-prime crisis did cause a dramatic drop in the housing market but while the overall economic growth slowed, there was no recession.
4. International--There will be significant growth in US VC firms investing in India, especially in Infrastructure related growth opportunities. I was dead on. India is expected to place $13.5bn in VC/PE investments in 2007, up from $7.5bn in 2006. There are 366 PE firms operating in India with another 66 raising funds.
5. Mobile--The Apple iPhone will have disappointing sales. I was totally wrong, the Apple iPhone lived up to its expectations and is selling briskly.

Predictions for 2007

A little into the year but here are my predictions for 2007:

1. Buzz--The buzz topic of 2007 will be energy and cleantech. We will see a huge growth in VC investments in such companies.
2. Exits--After a six year hiatus Nasdaq IPOs are back and we will see a significant increase in Nasdaq technology company IPOs.
3. National--We will see a slowdown in growth and may even experience a recession.
4. International--There will be significant growth in US VC firms investing in India, especially in Infrastructure related growth opportunities.
5. Mobile--The Apple iPhone will have disappointing sales.

BTW, here is my scorecard on my 2006 predictions:

1. Buzz--Like Web 2.0 was the buzz topic of 2005, the buzz topic of 2006 will be video over the internet. We will see an explosion of amateur video content creation with distribution to PCs . I was dead on: Google acquired YouTube for billions, and internet video companies raised hundreds of millions from VCs.
2. Exits--We will see many US technology companies looking to exit on the London Stock Exchange's AIM exchange which has a lower hurdle than Nasdaq but is increasingly providing liquidity. I was partially right, there were a few AIM listings but not as many as I thought there would be.
3. National--After being eclipsed by silicon valley in 2005 Massachusetts will be back: companies to watch are Airvana, Netezza, Starent, Virtusa, Airwide, Confluent Surgical. I was dead on: Airvana, Netezza, Starent and Virtusa all filed for Nasdaq IPOs. Confluent Surgical was acquired for $245M by Tyco. The CEOs of all these companies will be on a panel at www.tieconeast.com on June 16th. Airwide added over 15 new wireless operator customers.
4. International--Indian IT companies will acquire US and European IT companies. I was dead on: 60% of total M&A or $8.4B was outbound M&A, though pharma was in the lead and accounted for $2.2B. IT M&A was second.
5. Mobile--Music downloads to cellphones (songs not ringtones) will become a billion dollar market. Wireless broadband for "last-mile" internet access by companies will expand dramatically. I was partially right, Clearwire had a billion dollar IPO. Music downloads grew more slowly than wireless "last mile".

The Battle of the Smartphone-- Google Phone vs Apple iPhone vs Microsoft

There is a huge amount of interest in the lowly cellphone, why, because a 960M of them were sold last year. The majority of them were so-called feature and entry-level phones. Only 50M or so were smartphones, the category that Google and Apple are planning to dominate by leveraging their ubiquitous branding and user interface (UI) skills. So what exactly are Google and Apple planning?

There has been a great deal of speculation in the blogosphere about the nature of the upcoming Google Phone: http://blogs.business2.com/apple/2007/03/photo_is_this_t.html and http://www.engadget.com/2007/03/15/google-exec-confirms-phone-in-the-labs/. Much of what is being discussed is nonsense. Here are my predictions:

Apple: Enough has been written on the iPhone's features but not on Apple's strategic moves. The most important is Apple sees the necessity of partnering with wireless carriers. This partnership is unlike the relationship other handset vendors have with carriers. Nokia, Motorola, Samsung and other handset vendors do develop new handset concepts but in the end they customise "standard" handsets to carrier specifications. Apple's iPhone is more akin to RIM where the carrier is a distribution channel for a standard iPhone handset. As far as the iPhone's two differentiated features: a touchscreen and voicemail integration, these remind of the Apple Newton, Steve Jobs' invention of the PDA category. It was not a huge success and I am betting that the iPhone will not be a huge success. It is very hard to change user behavior and the telephone keypad and Qwerty keyboard have been around for over 30 years. Nonetheless I hope the iPhone makes me a convert to touchscreens.

Google: Google's business model is slightly different for their Google phone. Google has spent more than $50M to acquire companies (i.e. Android) and software licenses to create a handset operating system (OS) that I believe Google intends to offer handset manufacturers for free (essentially open source like Linux). Just like most PC users enter the internet via Google's home page, Google's intention is to have cellphone users do the same by making their handset OS ubiquitous. So far HTC is running the Google OS on a handset but I believe many other handset ODMs will follow. In this business model the handset ODMs will offer the Google Phone to carriers for distribution.

Microsoft: Microsoft is about the release Windows Mobile 6.0. When I was CEO of Kinetic we developed the first Windows Mobile (then called Windows CE) vehicle computer using version 2.0. We were on the bleeding edge and soon discovered that Microsoft had no idea how to develop an embedded OS nor understood user behavior for mobile phones. Microsoft's strategy of connecting Windows Mobile to Windows Office appeals to large enterprises but I'm certain they will lose out in the consumer market. I was urging Microsoft's Windows CE product managers to focus on the enterprise market back in 1999 but they felt that market was too small. Just deserts--Microsoft sold just 10M Windows Mobile OSs in 2006.

Nokia: Nokia's wholly owned OS subsidiary Symbian is more ubiquitous than any of the other smartphone OSs as it dominates the high end of the feature phone market. My prediction is that Symbian will soon be used only in Nokia handsets. I also believe that it will be the big loser in the smartphone OS battles.

Motorola: Motorola is betting on all the above OSs including embedded Linux but not Symbian. They will eventually become like Dell, dependent on TI (equivalent to Intel in the PC world) and OS vendors.