Showing posts with label Column. Show all posts
Showing posts with label Column. Show all posts

Death To C

Ladies and gentlemen, the C programming language. It’s a classic. It is sleek, and spartan, and elegant. (Especially compared to its sequel, that bloated mess C++, which shares all the faults I’m about to describe.) It is blindingly, quicksilver fast, because it’s about as close to the bone of the machine as you can get. It is time-tested and ubiquitous. And it is terrifyingly dangerous.

But don’t take my word for it. Take the word of living legend John Carmack:
or Andy Isaacson, one of the smartest hackers I know, which is saying quite a lot:
If you write code in C, you have to be careful not to introduce subtle bugs that can turn into massive security holes — and as anyone who ever wrote software knows, you cannot be perfectly careful all of the time. (This is especially true in C; it’s so easy to write impenetrable, incomprehensible C that it has become a competitive sport.)

In principle, as software evolves and grows more mature, security exploits should grow ever more baroque, in the same way that plane crashes are getting weirder and weirder. We learn from previous crashes, and fix those problems, and “as the obvious fixes are found, we discover less and less likely ways that things can go wrong.”

And this is indeed the case for much of today’s software. Look at a few prominent recent exploit discoveries. A side-channel attack to read L3 caches via Javascript. The mindboggling “Rowhammer” attack, which relies on the fact that
As DRAM manufacturing scales down chip features to smaller physical dimensions, to fit more memory capacity onto a chip, it has become harder to prevent DRAM cells from interacting electrically with each other. As a result, accessing one location in memory can disturb neighbouring locations, causing charge to leak into or out of neighbouring cells. With enough accesses, this can change a cell’s value from 1 to 0 or vice versa.
and. astonishingly, turns that fact of hardware life into a totally viable attack vector.

But this is not the case for software written in C/C++. Buffer overflows and dangling pointers lead to catastrophic security holes, again and again and again, just like yesteryear, just like all the years of yore. We fail to learn. Heartbleed. GHOST. The Android 4.3 KeyStore. Etcetera, etcetera, etcetera.

C was and is magnificent, in its way. But we cannot afford its gargantuan, gaping security blind spots any more. It’s long past time to retire and replace it with another language.

The trouble is, most modern languages don’t even try to replace C. They’re vastly more abstract. They’re easier to read. They provide programming constructs which are enormously powerful if you’re dealing with vast quantities of data, or multiple concurrent threads and processes, or distributed systems. But they’re not good at the thing C does best: getting down to the bare metal and working at mach speed.

…Which is why I’m so interested in Rust. It’s the one new programming language that might, finally, at last, replace C and C++ — and Rust 1.0 finally went into beta last month. To quote Steve Klabnick:
Historically, programming languages have had a tradeoff: you can have a language which is safe, but you give up control, or you can have a language with control, but it is unsafe. C++ falls into that latter category. More modern C++ is significantly more safe than it used to be, but there are fundamental aspects of C++ which make it impossible to ever be truly safe. Rust attempts to give you a language with 100% control, yet be absolutely safe.
So please, low-level programmers of the world, I beseech you (while, to be clear, also respecting you immensely): for your next project, try Rust rather than C/C++. There is no longer any good reason for today’s software to be as insecure as it is. Those old warhorses have served us well, but today they are cavalry in an era of tanks. Let us put them out to pasture and move on.

The Gold Apple Watch Is Perfect For Douchebags

(GNN) - Editor’s Note: Kevin Rose is the founder of Digg, a technology investor, and CEO of North Technologies, creator of the watch news aggregator, Watchville.

I’m a mechanical watch collector and self admitted Apple fanboy. I wanted to love the Apple Watch Edition (Edition = marketing speak for “gold”). But I don’t understand the value here outside of the literal 1-2 troy ounces of 18k gold ($900-$1,800).

With its luxury watch offering, Apple missed me as both a technologist and collector. Let me explain.



Selling To The Technologist
The path to the technologist’s pocketbook is paved with (surprise) bleeding edge technology.

For Apple to succeed with the Watch Edition it would need to offer us more, technically. Say, an extra sensor or higher resolution display that has yet to hit high enough production volumes to make it throughout the rest of the line. The technologist could then point to these features as justification for the extravagant purchase. After all, higher tech is the reason they purchased the retina Macbook when it was first released.

Sadly this is not the case here, as nothing is different technically in this watch except for the addition of gold, for which you pay an over $7k markup.

Selling To The Collector
The watch collector craves the story, the artisanship of a collectable watch. We enjoy the painstaking craftsmanship that goes into making a timepiece that will last for decades.

A popular advertising campaign by storied watch manufacturer Patek Philippe states: “You never actually own a Patek Philippe. You’re merely looking after it for the next generation.”

Will The Apple Edition Watch Last To The Next Generation?
For me to purchase this watch as a collector, Apple would need to create a different (and more expensive) fabrication process that uses new internal (not just external) materials, specifically built to stand the test of time. Sell me on the story of lasting technology, a watch that even when out of date will still function for my grandkids, a watch that won’t be shuffled off to a corner of your closet like an old iPod.

As with traditional watches, add in a transparent sapphire back. I imagine something similar to the digital FPJourne Elegante would do. Showcasing the internal upgrades would also add to its collectability.
Right now with the Apple Watch Edition, the buyer is getting the same internals of the $349 version in a gold case. Where is the collectability in that?

I believe watchmaker Roger Smith best sums it up in saying (in reference to the late watchmaker Dr. George Daniels, creator of the coaxial escapement):

“For it takes a lifetime of experiences to create the pieces that he did. So when a collector buys a Daniels watch, they are not buying the year that it took Daniels to make the piece, they are buying the many years of self-sacrifice that it takes in order for a man to rise to a level where he can create greatness.”

Mass produced internals created in China, by machines, doesn’t create a feeling of craftsmanship or an aura of exclusivity – both key tenants a high-end collectible timepiece must have.



Selling To The Gold Lover
Apple’s focus should be on selling as many watches as possible, not becoming a fashion brand. Gold (the color) is hot right now in the fashion world. Why not use technology to get the gold watch in the hands of more people. Why didn’t Apple develop some type of “10x stronger gold coating” giving us the same visual aesthetic with the technological payoff? I’d happily pay an extra $500-$1,000 for that upgrade. But we don’t need solid gold on something that is disposable after a couple years.

So, I’m lost. Who is this watch for?

Without a technological advantage, and no upgrade or trade-in path, I would imagine the value to the consumer is that of broadcasting wealth. There are certain markets where this watch will sell well, regions of China (just put a goat on it) and Dubai come to mind.

But elsewhere, I fear that we’ll look at the Watch Edition as actress Anna Kendrick did:
I’m not sure that’s the image Apple wants.

Why Greece Should Not Switch To Bitcoin

(GNN) - Editor’s note: Wences Casares is the founder and CEO of Xapo.

In some discussions about Greece exiting the euro, it has been suggested that Greece should swap the euro for bitcoin. At first glance, bitcoin may appear to be the cure. But if the euro is the problem, switching to Bitcoin would be like trying to cure a headache with a bullet to the brain.

The main problem with the euro is that Greece cannot print more of it; only the European Central Bank can. But at least someone can. In theory, Greece could persuade the European Central Bank to print more euros for them. On the other hand, if Greece were to switch to bitcoin, it would have no ability to control how much of their currency they could issue, and no one could be persuaded to issue more bitcoins (not the European Central Bank, not the U.S. Federal Reserve, not the U.S. Marines, no one).

A defining characteristic of bitcoin is that its supply is fixed and capped. There are 13,882,100 bitcoins today, there will be 20,343,750 bitcoins on January 1, 2025, and there will never be more than 21,000,000 bitcoins.

There are about 10 million people who own bitcoins. If bitcoin is successful, we can expect 1 or 2 billion people to own bitcoins sometime in the next 20 years. The only way 1 or 2 billion people can have 21 million coins is by the price of bitcoin increasing (significantly). An economist would call bitcoin a “deflationary currency.”

Yanis Varoufakis, Greece’s new Finance Minister, agrees that because it is deflationary, bitcoin would be bad for Greece. But he goes on to say that bitcoin is a flawed currency because it is deflationary. This misses the point. Bitcoin is not a currency for a government; it is a global currency for the people. People will generally prefer a currency that goes up in value over time (which is called a deflationary currency, like bitcoin) over one that loses value over time (like all country currencies, which are called inflationary).

It is a bad idea for Greece (or any other country) to renounce their currency and adopt bitcoin. It is akin to adopting gold as a national currency and giving up monetary policy. Monetary policy, used responsibly, has been a step forward for public finances and prosperity. Monetary policy, however, has also been abused by governments that choose to print too much currency.

This has created inflation and devastated the finances of the poorest people in these countries. These people have had no choice but to hold on to their national currency as it loses value, in many cases losing everything.
Bitcoin gives people everywhere an alternative. Anyone with a smartphone can hold bitcoins as a refuge from a currency that is losing value. This sends a message to their governments: “Let’s have our own currency, but manage it responsibly, because now we have a choice.”

If bitcoin is successful, it will not replace any country’s local currency, not even Greece. Bitcoin is poised to become not the currency of any particular country but the global, digital currency of the Internet, by the people and for the people.

Beware The Pretty People

(GNN) - The tech industry used to be home to a disproportionate number of misfits and weirdos. Geeks. Nerds. People who needed to know how machines worked; needed to take them apart, make them better, and put them back together again. People who existed a little apart from society’s established hierarchy … and often saw that hierarchy as another machine to be deconstructed and improved.

That is no longer the case. Now that technology is the dominant cultural and economic force of our time, and startup execs have become rock stars, the establishment is flocking to the tech industry. Rap stars and movie stars want to be tech investors. “Tech firms and consultants both appeal to the growing number of students who want to gain the right experience to start their own business,” observes The Economist. “Elite Grads in Business Flock to Tech,” concurs the Wall Street Journal.

Tech is becoming the finishing school and springboard for the upper-middle-class, the way law and finance were a decade ago. Now that the tech industry is cool, the pretty people are taking over, flooding out of top-tier universities with MBAs and social graces and carefully coiffed hair, shouldering the misfits and weirdos out of the way. And often, paradoxically, despite their privileged backgrounds, they have much less appetite for risk.

Oh, many pay lip service to being weird and different. Our whole culture does these days —
— as long as you’re not dangerously weird; as long as you’re not a genuine rebel; as long as you don’t actually try to challenge anything important. The establishment scions pouring into tech take on the trappings of subversion, while remaining fundamentally conformist. Meanwhile, rampant success inevitably causes the former tech counterculture to morph into posturing “Prada revolutionaries,” as Klint Finley puts it.

There was a tech counterculture, and it mattered. The Internet didn’t have to be so free and open.

Governments have been trying to impose their demands on it for many years. Consider the long-ago attempts to impose bizarre, unworkable standards such as X.400 instead of the simple email addresses we still use. Consider the crypto wars of the 1990s, the attempted crippling of SSL, and the prosecution of Phil Zimmermann. But the tech industry ignored, supplanted, and/or fought back — and won — against these attempts.

To be fair, it’s still doing that today. The post-Snowden growth in end-to-end encryption is heartening. Everyone fought hard for net neutrality, and won. But these aren’t examples of an underdog fighting back; these are examples of a new giant protecting its turf. Meanwhile, as Dan Gillmor says in Why I’m Saying Goodbye to Apple, Google and Microsoft, “We are losing control over the tools that once promised equal opportunity in speech and innovation—and this has to stop.”

It seems to me that as the establishment slowly infects and merges with the tech industry, and vice versa, the people who actually do think differently–“the misfits, the rebels, the troublemakers”–will be, and are being, pushed out. (In some cases simply priced out.) It’s all too easy to imagine the American tech industry in ten years as a new Wall Street, a giant machine built largely to siphon yet more power and privilege up to people who already have too much.
This is why I like Bitcoin: say what you like about it, such as that you want it to “die in a fire” because it’s a libertarian conspiracy, it is genuinely weird, disruptive, and potentially dangerous to the status quo. This is why I have a soft spot for Travis Kalanick: for all of Uber’s flaws, someone needed to tear down the walls of the established taxi cartels.

Technology is, indisputably, the premier force for change in the world today. Every startup is an engine of change, and a potentially enormously powerful one. But we still tend to measure their success wholly in terms of millions raised, billions in valuation, revenues, profits, and timeline to IPO. That’s not genuinely subversive. That’s not truly disruptive. That’s establishment talk.

“We live in capitalism. Its power seems inescapable. But then, so did the divine right of kings,” said the great Ursula Le Guin at the National Book Awards.
I believe capitalism is excellent … up to a point. (I don’t believe anyone who has travelled in the developing world as much as I have can reasonably think otherwise.) But is that inflection point at which capitalism offers diminishing returns still ahead of us, here in the rich world? Will we live in capitalism (as we know it) forever? It seems unlikely.

While we do, though, we need the weirdos, the rebels, the counterculture, to be gathering together and founding companies. Because while we live in capitalism, no art collective, no protest, will be as effective an engine of change as a successful startup.
What’s more, there has never been a better time to try to found a genuinely subversive company than right now. Consider Y Combinator’s new openness to not-for-profit startups. Consider the remarkable recipient list of Reddit Donate. It seems to me that there is a hunger for real change out there. A huge audience. You might even call it a market.

Capitalism won’t be violently overthrown. Nor should it be. Whatever system(s) may one day supplant it will instead grow quietly in the shadows of its tallest towers, and coexist for years. But in order for that to happen, I believe we need our true iconoclasts, dangerous freethinkers, and weird subversives to flock to the tech industry — rather than recoil from it in disgust, now that the pretty people have invaded.

Multiple Directions On Valuation Multiples

(GNN) -Editor’s Note: Max Wolff is an economist and investment strategist who is the managing partner and chief economist at Manhattan Venture Partners Wolff previously served as the Chief Economist at Citizen VC, Inc., a financial technology and investment firm. 

Private company valuation is as much art as science, and sometimes as much alchemy as chemistry. Among the few reliable and well-worn guidelines to follow are public companies and recent M&A multiples.

This is why we spend so much time refining, tracking and parsing the multiples we use. Oddly, we have observed a strange lag in the re-evaluation of comparable pricing and an over-correction between public company multiples and the private company valuations of the leading later-stage companies.

The swollen ranks of the unicorn club — private technology companies valued at over $1 billion — have broken away from traditional public comparable multiples. It remains far from clear how sustainable this will prove.
Over the last few months we have seen a generalized increase in public equity volatility. Leading tech firms are reporting meaningfully surprising numbers on the upside, and while guiding up, have sustained or increased their multiples. We have seen this in the mobile gaming space, big data and e-commerce.

The flip side has also been true, with earnings misses and downward guidance producing swift and dramatic compression of multiples. Of course, information is slower and less completely distributed in the private corner of tech. This creates a lag and the over correction pattern in the valuation adjustment for private companies.

The swollen ranks of the unicorn club — private technology companies valued at over $1 billion — have broken away from traditional public comparable multiples. It remains far from clear how sustainable this will prove.
Private companies don’t live and die by quarterly estimates and sometimes marginally informed Wall Street expectations. These companies tend to see fortunes ebb and flow on the sometimes equally arbitrary perceptions of media, competitors, the width of the opening of the initial public offering window and public companies’ appetite for M&A at premiums.

We expect that this lag between public market prices and private company premiums will hold. So the question is, what should we expect for the balance of 2015, when it comes to valuation trends in leading private tech names? Our answer is, a divergence of fortunes. We expect the global movement of wealth to the US public and private markets to continue. We further expect folks to be drawn to growth opportunities like the venture-backed companies.

We expect many new investors to continue allocating to traditional venture capital funds. Fundraising records are consistently broken. In fact, venture capital funding reached nearly $33 billion and was over 60 percent higher in 20014 vs. 2013, according to The Wall Street Journal.

All this follows on the heels of 105 IPOs for VC backed firms in 2014, the WSJ reported. The year 2014 proved a record for fundraising and fund redemption must have also broken the Twenty-First Century record that used to belong to 2000. We also expect to see significant rotation to the many emerging alternative funds and vehicles that seem to be sprouting up, particularly but not exclusively, online.

The wrinkle we expect is that there will be a divergence of fortunes among private pre-IPO companies under our purview. We expect 2015 to place a higher premium on execution over vision in disruptive markets.

Those perfecting delivery and logistics as a service will outperform those espousing grand visions of moving people and things with armies of part-time contractor generalists.
We expect growth to be harder for unicorns with giant valuations and easier for those perfecting execution and streamlining their user interface and user experience. By way of example, growth is likely to be faster at smaller, execution-focused Lyft than dynamic but aggressively valued visionary Uber.

Expectations, in some cases, have really run away from the likelihood that they can be met. Some unicorns will struggle under the weight of their current valuations given issues with either their business model or their governance headwinds. Others will run away with the attention from the hordes looking for the next big thing. These next big thing hunters have always chased what the herd is running towards. That, at least, never seems to change.

Don’t Be Google


(GNN) - Dear Google: what happened? Android sales are falling. Chrome has become a bloated hog. Analysts are calling you the new Microsoft, or, much worse, “the new Yahoo!” And most damning of all: you have squandered our trust. You used to be special, Google. Or at least we used to believe you were special.

But you seem more and more like just another megacorporation.
Does that sound harsh? Consider the Zoe Keating kerfuffle:
YouTube gave Keating a take-it-or-leave contract, some terms of which were unacceptable to her. Some of the terms were also pretty hard to understand […] As YouTube now explains it — following a public debate following Keating’s blog post — Keating has a relatively simple choice […] These responses go against descriptions of the agreement presented to Keating (and transcribed by her) by YouTube previously, and presumably represent an update to the contract’s terms.
At best, Google is guilty of incredibly confusing and heavy-handed communication, something they have long been (rightly) accused of. At best. But, as Jamie Zawinski put it:
This sounds like Google using the same strategy they used with Google Plus: instead of creating a new service and letting it compete on its own merits, they’re going to artificially prop it up by giving people no choice but to sign up for it. Except in this case the people being strong-armed are the copyright holders instead of the end users. (So far, that is! Wait for it.)
Consider “Never trust a corporation to do a library’s job“:
As Google abandons its past, Internet archivists step in to save our collective memory … Google Groups is effectively dead … Google News Archives are dead … Projects that preserve the past for the public good aren’t really a big profit center. Old Google knew that, but didn’t seem to care […] The desire to preserve the past died along with 20% time, Google Labs, and the spirit of haphazard experimentation.
…or, as VICE puts it: “Google, a Search Company, Has Made Its Internet Archive Impossible to Search.”
Consider “Google to shut down GTalk on February 16, will force users to switch to Hangouts“:
Remember the good old days, a decade ago, when everyone admired everything Google did? What happened?

…I believe I may have an answer or two to that question.
Google has long been a bizarre swan of a company. To the casual eye, it’s a billion Android phones playing YouTube videos, its nonpareil search engine, plus its Google X moonshots and miracles, robot dogs rescued from the military, SpaceX funding rounds, etc, all cruising effortlessly along. Call that Awesome Google. But under the waterline, a gargantuan advertising machine paddles desperately, propelling Awesome Google towards its applause. Call that Mammon Google.

For all those analysts cavils, Mammon Google is still a colossal money-making machine, and both it and Awesome Google employ thousands of the smartest people alive (including — disclaimer/disclosure — multiple personal friends.) I fully expect Google to overcome the business challenges it faces…

…but I no longer expect to be particularly happy about this.

We’ve all been conditioned to see Awesome Google, but of late, Mammon Google seems harder and harder to ignore. Why is this? There seems to be no need for this. Mammon is still pouring money into Awesome. So what happened to the golden glory-days Google we knew and loved?

It’s true what Ben Thompson of Stratechery says: Google today is very reminiscent of Microsoft in the 90s. They too were the beneficiary of a seemingly endless, unassailable, firehose of money. But instead of spending that money on moonshots, Microsoft became a much-loathed corporate predator that wasted colossal amounts of time and money on infighting and horrors like Microsoft Bob and Windows Vista. Why has Google apparently taken a few steps down that cursed primrose path? Why is Mountain View in danger of becoming the new Redmond?

Why indeed. It turns out that Google is literally the new Microsoft:
(And we’re not just talking about low-level engineers here. Vic Gundotra, the former head of Google Plus, was a former Microsoft executive; which kind of explains a lot.)

This may help to explain why Google is, I believe, slowly but steadily losing our trust. Nowadays, when you interact with Google, you don’t know if you’ll be talking to Awesome Google; Mammon Google; …or a former Microsoftian whose beliefs and values were birthed in Redmond, and who, as a result, identifies a whole lot more with Mammon — and with bureaucratic infighting — than with Awesome.

Say what you like about Apple, and I can complain about them at length, you always know what to expect from them. (A gorgeous velvet glove enclosing an exquisitely sleek titanium fist.) But Google seems increasingly to have fragmented into a hydra with a hundred tone-deaf heads, each with its own distinct morality and personality.

That wouldn’t matter so much if trust and awesomeness — “don’t be evil!” “moonshots!” — weren’t so intrinsic to the Google brand … which, to my mind, gets a little more tarnished every year.

Fundraising Acceleration Is The New VC Investment Thesis

GNN - There was a quite a jolt on Friday from the news that Slack, a company whose eponymous enterprise communications platform was first publicly launched this year, raised $120 million in new venture funding from KPCB and Google Ventures.

Even more eye-popping was the valuation: $1.12 billion. Although Slack pivoted from an earlier incarnation as a games company called Tiny Speck, such a growth in valuation in just the first 8 months of a new product’s existence is almost completely unheard of in the annals of venture capital. This is even more true in the lethargic enterprise space, where there is significantly more friction in adoption and sales than in the consumer market.

What might look like a frothy bubble though, is in fact a much more fundamental change in the way venture capitalists perceive investments. These fundraising accelerations are here to stay, and represent a far more nuanced view of startup performance than we have ever seen before from VCs.

VCs have always known that the big returns are made from the largest exits. What the industry has slowly accepted over the past decade is that the biggest winners win by staggering amounts compared to their competitors. What used to be perceived as a 5x or 10x gap in valuation between the winner and a runner-up is now more widely seen as between 100x or even possibly 1000x. For every 100 startups that exit above $100 million, only one of them will reach into the billions of dollars of capital. Facebook’s chief competition during its rise was from companies like MySpace, which are almost non-existent today.

The person who most popularized this notion of investing was Marc Andreessen (who ironically also happens to be one of the earlier investors in Slack), as well as Peter Thiel, whose experience with Facebook’s growth encouraged his investment thesis for Founders Fund. The essential point is that if there are only a handful of startups a year where the vast majority of the returns go, then the only sensible investment strategy is to get into those startups and ignore the middling winners.

This philosophy leads to the current investment strategy that I call fundraising acceleration. If price sensitivity on these top winners makes little sense, then we should be willing to project ahead of a company’s growth and buy early. We might value the equity of a company 12 months early, meaning that we would invest as if they had already secured the growth of the coming year. Maybe we are even willing to accelerate our price by 24 or 36 months.

This absolute laser focus on the winners has led to the current data revolution in venture investing, where firms hire teams to scour the web for signs of startups breaking out, all in the hope of catching the next winner before any other firm realizes what is happening.

We can see this new approach right in Slack’s own numbers. The company told TechCrunch that it is currently generating sales above $1 million per month, or (and I know VC math is complicated) about $12 million per year in run rate. Since the company is valued at $1.12B, that means that its revenue multiple is about 93x. In general, SAAS companies have run rates around 8–12x on the public markets, and possibly a bit higher multiple in private rounds.

To put it another way, if Slack had the same annual revenues as LinkedIn at $1.5 billion in 2013, it would be valued at almost $140 billion and become one of the most valuable technology companies in the world.

Compare this to Yammer, which was founded in mid–2008 and sold to Microsoft just a little under four years later. It raised $142 million in venture capital according to Crunchbase, and sold to Microsoft for $1.2 billion. That means that in less than a year, Slack has raised more money and has a higher valuation than its immediate market predecessor.

Some might call this a bubble, but Slack is literally the embodiment of the fundraising acceleration thesis. The company’s sales growth is incredible – achieving a $12 million run rate in the first year of the company’s product launch is among the fastest growth rates seen for a SAAS startup.

Given the investors in the syndicate, it is clear that many have started to take this fundraising acceleration to heart. However, as the competition for these identified early winners becomes more keen, the valuations of these companies skyrocket. All of these investors are sophisticated and can see the same data, and when growth metrics are this good, everyone wants to get a piece.

This is great news for some founders. Founders with high growth companies can now command a growth premium that gives them more resources earlier in the company’s life than before, without losing as much equity. That means startups that can find growth extremely early are able to build even more advantages over their competitors.

The flip side of course is that founders who struggle to find growth early on may find raising funds even harder than before. Can you get 100 million users in the consumer world within three years? For enterprise startups, can you get $10 million in yearly revenue within the first 24 months of launching a company? As VCs seek the top 10 winners and recalibrate their expectations to the growth of companies like Slack or Snapchat in the consumer market, the bar is rising quite quickly. A few percentage points difference in growth can radically change the outcome of a fundraise process.

And even for those startups that do hit that peak level of growth, there are still the very challenging scaling issues of building a business. Slack may be led by Stewart Butterfield, a highly-experienced entrepreneur, but he still has to recruit in an incredibly competitive labor market. With the company’s valuation so high already, he no longer has the promise of massive equity paydays to easily entice prospective new employees. How quickly can hiring scale with user growth?

Those challenges for founders are nothing compared to the real challenge for VCs, who must show a return on these accelerated deals. As valuations grow, the multiples on investment that VCs can earn on the biggest winners is rapidly declining. If that happens consistently and VCs can also identify the winners with enough accuracy, much of the returns in the industry could be flushed out through competition.

And we are still early for judging the accuracies of these large bets. While data has certainly improved the quality of VC decision-making over the last few years, we still have a few years to go before we can really see the results of this new investment thesis.

Fundraising acceleration is the new modus operandi for top VC firms in Silicon Valley. So far, it has been carefully executed, generally targeting startups with strong growth potential. It’s not a bubble, and it is certainly not crazy. For founders who can take advantage of that early focus on success, the sky is the limit.

FEATURED IMAGE: NATHAN E PHOTOGRAPHY/FLICKR UNDER A CC BY 2.0 LICENSE

Hardware Crowdfunding: Where The Venture Dollars Flow

#GNN Tecm - Editor’s note: Matt Witheiler is a General Partner at Flybridge Capital Partners. You can follow him on his blog.

$211,290. That was the magic number that the data suggested was the “success” threshold in hardware crowdfunding. The analysis also showed that people love 3D printers and that almost half the crowdfunded dollars went to 37 companies. That deep dive into 443 projects provided some insight into where consumers are spending their money (and time) in the hardware ecosystem but it felt like something was missing.

Crowdfunding dollars are only one source of capital for hardware startups. The other source, the one that gets even more attention, is venture capital. In the years since Kickstarter launched, venture investing in hardware has gone from non-existent to mainstream. CrunchBase data shows 115 companies tagged as Hardware + Software got funding in 2007 compared to 383 in 2013 – an increase of 233 percent.

While there has been some recent writing on how many crowdfunded hardware startups go on to raise venture money, the analysis of what categories of hardware companies raise money has yet to be done. In other words, it was impossible to answer the question “What parts of the hardware ecosystem do investors think are hot?”

Using the same data set as before (hardware projects raising $100,000 or more on crowdfunding sites as of late June 2014) and combining it with data from CrunchBase and Mattermark, I’m here with that answer.

Making It Rain
Of the 443 hardware projects analyzed, 94 have gone on to raise a total of $503.8 million from investors. Much like the crowdfunding data, the vast majority of these 94 companies ran their campaigns on Kickstarter: Just 17 companies, or 18 percent, of the total that raised money started on Indiegogo.

The category perspective provides a glimpse into where VCs are putting their money. The $503.8 million raised is broken out as follows:
Comparing this to the previous map, there are a few things to note. Most obvious is the domination of the Entertainment category, which received $188 million in venture funding, or 37 percent of all venture dollars that went to crowdfunded companies.

Across the board, many of these venture dollars went into a few “winners.” Specifically, of the $503.7 million venture dollars that crowdfunded hardware projects brought in, nearly 40 percent went to four companies: Oculus, Gramofon, Misfit and FormLabs. Fourteen companies raised more than $10 million in funding post campaign, bringing in $335.8 million. In addition to the “big four,” these were: OUYA, Lifx, Loop, SmartThings, tado, Canary, Peloton Cycle, Emotiv, Pebble and Scanadu.

The set of 94 raised venture dollars from a number of investors. Almost everyone you would suspect is represented, but the most prolific may surprise you. That would be HAXLR8R, which invested in 10 of the companies, although only invested $25,000 each time.

Leverage
The dollar investment measure is one way to understand how VCs think of hardware. An alternative way of looking at just how excited VCs are about various categories is exploring the relationship between crowd dollars committed and venture dollars raised. I call this leverage.

I calculate leverage as: Venture Dollars Raised / Crowd Dollars Raised. Leverage of 1.0x means that for every dollar the crowd put in, VCs put in another dollar. The higher the number, the more dollars (i.e. interest) VCs had in the category. The lower the number, the more skeptical VCs were compared to the crowd.
Now things get interesting. Remember, this measures investor interest relative to the crowd. As you can see, the wearable space, specifically wearables that are worn on clothing or attached to the body somehow, garnered way more love from investors than from the crowd: In the body wearable category, the crowd pre-ordered $3.5 million worth of product and investors later put in $37.6 million. From a leverage perspective, this even outpaced Gaming despite the fact that that category holds the largest venture bet from the crowdfunding cohort: the $91 million Oculus. In the 3D printing category, which consumers feverishly poured $25.6 million into across 50 projects, investors were much more tepid, choosing to deploy $26.5 million of capital across just five companies.

At a macro level, each crowdfunded dollar resulted in $2.71 of venture dollars invested and the Medical category faired best with $7.11 of venuture dollars per crowd dollar – although across a very small sample set of three companies. Next best is the wearable category mentioned above, where the sector had 4.76x leverage and 18 venture-funded projects.

What It Means
While investors are absolutely using crowdfunding success to vet hardware startups (the rate of investment across these $100k+ campaigns is orders of magnitude higher than the general startup investment rate) not all project categories are created equal. Your camera campaign is unlikely to be a home run with investors even if you hit it out of the park with the crowd.

Conversely, even a mediocre outcome in an automation campaign may earn the attention of investors’ wallets. It just goes to show, investors want to back companies that not only deliver what people want today, but also represent a compelling vision for the future.

I’ve shared the source data in Google Docs. Feel free to dig in with your own analysis.

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E-Businesses In Africa Have A Responsibility To Help Alleviate Internet Poverty

#GNN Tech- Editor’s note: Johan Nel is the country manager of Gumtree South Africa.
In Soshanguve, a township just north of Pretoria in South Africa, there was a small kiosk that sold fruit, cigarettes and snacks to passersby.

The owner of the kiosk had recently installed Wi-Fi and, soon after, placed tables and chairs out front.

And then her customers soon began to linger. They bought more items; they socialized. Her business became a hub, transforming from a corrugated tin to a kiosk and then to a cafe, growing 800 percent. The Internet anchored passersby to her business and made her and the community — see things differently. Operate differently. Shop differently.

Access to the Internet should be a basic human right. In today’s world, you are at a considerable disadvantage without it. Considering that most companies — even in the developing world — only accept scholarship and job applications via email, not having access to the Internet is tantamount to not having the means to dig oneself out of poverty.

Elon University asked 1,500 experts to compile their predictions about what the Internet will look like in 2025. What emerged — judging not just by their predictions, but also by past behavior — is that access to the Internet is essential today.

If we can’t get people connected, we are leaving them behind. Everything will be affected: our economy, our social environs, our education system. Better schools, more government assistance and reforms are mere stop-gaps compared to the online world that has endless, up-to-date information, tips and self-instruction. The Internet doesn’t discriminate; it doesn’t have borders; it doesn’t antiquate.

That doesn’t mean we tackle connectivity as a charitable initiative. In fact, we shouldn’t. Any business with an e-commerce or web-based community can draw a direct benefit when the unconnected are connected – if of course, you are willing and able to provide them with the tools they need. Connecting an unconnected operating environment should be part of your long-term business strategy.

In developing nations, we can only go as far as our (relevantly) small, connected market can take us. When you find yourself ranking at the top of your game, it’s time to change the game. The Internet is boundary-less, unlimited and full of potential — if your business  plays in the online space, it should be too. When you are expanding a network of Internet users, you are directly or indirectly expanding your own market.

For sites such as our own, that already own the bulk of the Internet population, we cannot grow if the Internet population doesn’t grow. That has to factor into our long-term business decisions. Ultimately, providing another business with Internet access benefits everyone, placing a stamp of goodwill and knowledge on a community that is priceless.

Perhaps being a market leader in 2014 and the coming years is also being a connectivity leader. Maybe it’s not the responsibility of governments and nonprofits to provide that connectivity. Perhaps, waiting for someone else to provide your customers with the connectivity they need to transact with you is the worst business decision companies are making.

E-businesses in Africa have a responsibility to alleviate Internet poverty, and the responsibility is to themselves.

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Investment Banking 2.0 Says “Hello World!?”

#GNN Tech - Editor’s note: Jacob Mullins is the CEO of Exitround, a software-powered M&A marketplace for buyers and sellers of companies.
David Gelles wrote in the New York Times this weekend about how large tech corporations have been conducting more M&A deals with less input from traditional investment banks. Because of my company’s insight into buy and sell-side M&A interest, I wanted to provide some additional insight into how we see the M&A world changing.

But first, a little history to explain this evolution: Investment banking is a 300-year-old industry; the first transaction on record was the British East Indies Trading Company merging with its largest competitor in 1708. Since that day, investment banking has been entirely conducted under human power. These people are arbiters of information, connecting people within a particular sector of expertise or geography.

In an analog world, this worked, as finding the most strategically relevant business has been difficult. But we’re in the digital age. Businesses can achieve awareness and distribution far easier than in the past, enabling strategic acquirers to identify them earlier, without the need for human subject-matter experts.

In the past, buying stock on a physical trading floor in New York required an insider personal network to consummate the trade. In the past, finding love required a close-knit network of friends and family to help you find that ideal match. In the past, finding the perfect home required paging through newspapers and walking through open houses. Today, structured data and intelligent matching algorithms have solved each of these problems.

In the past, buying a company required people with subject-matter expertise to help identify the right M&A target and all the related data and information you needed to make the decision. Today, intelligent matching algorithms and proprietary data sets that span the globe enable buyers to identify the right target within minutes and connect within a matter of hours. The world of investment banking is a-changing.

On one end of the market, billion-dollar deals are starting to move in-house at large, highly resourced companies like Google and Facebook, as detailed by Gelles. Similarly, in the long tail of tech M&A, transactions under $100 million, where 88 percent of deals are done, the majority of corporate acquirers may not be as resourced up as the tech majors to go it alone, or hire an M&A adviser. However, because of software innovation in the space, enabling efficient prospecting at a highly disruptive cost, access to highly relevant M&A deals is becoming democratized to even corporate development departments of one.

There are 1,205 sell-side companies across 36 different countries in Exitround’s marketplace. On the buy side, there are over 1,450 individual companies, each looking for very specific strategic targets for M&A and corporate development expansion. This matrix of over 1,700,000 potential M&A connections is far beyond the limits of a human being’s ability to connect the relevant end-points.

Structured data, machine-learning algorithms and proprietary data are revolutionizing the way buyers and sellers of companies connect, not only more intelligently, but also more quickly.

Today on Exitround, the average connection time between a buyer and a seller is 17.8 hours, compared with the weeks or months needed in a traditional M&A process. And finding that correct target comes by way of mathematical relevancy between the two companies, as opposed to coffees, lunches and sit-downs to “explore opportunities.”

All this isn’t to say that investment banking is dead. In fact, great bankers can be incredibly valuable to a process in negotiation, extracting as much value as possible for the client, deal structuring to minimize tax burdens and integration. But as with all other large industries, modernization and technology has finally reached the doorstep of Goldman Sachs.

Are they ready to open the door and say “Hello”?

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Men Initiating Change Is An Important Step Toward Eradicating Tech’s Bro Culture

#GNN #Editor’s note: Telle Whitney is the President and CEO of the Anita Borg Institute and co-founder of the Grace Hopper Celebration of Women in Computing. Connecting, inspiring, and guiding women technologists is her passion.
The conversation about women in tech is shifting as technology companies begin to hold themselves accountable. Recent moves, such as Google, Facebook, LinkedIn and Yahoo releasing their employee diversity numbers, show an intensified commitment to making real change for women technologists, but the sentiment is not industry-wide.

We often hear from tech leadership that they would like to hire more women in technical roles, but they continue to reference the lack of women in the STEM pipeline as the cause. Deferring accountability will not affect real systematic change.

We are saddled with a chicken and egg stalemate. The fact is, the tech brogrammer culture that startups are known for is a major reason for women being put off from working in the industry.

On HBO’s “Silicon Valley” – a show that often hits too close to home to be considered satire – one of the running jokes is the app Nip Alert, one character’s creation that helps locate women with large breasts. This app, of course, is based on real-life incidents in the tech industry, which crop up every day, and then are all too often swept under the rug.

When it becomes commonplace for technical conferences to include a twinge of sexism or to uncover a startup founder’s misogynistic behavior, it is a red flag that the startup fraternity culture is out of control. The tech industry’s “boys will be boys” mentality in the face of these recent events is taking a toll on diversity in the STEM pipeline.

In the face of all the negative stories coming out of the tech industry, it is no wonder that young women are not flocking to be the next target. Intelligent young women are generally uninterested in joining a frat house environment that stereotypes them in negative ways and demeans them regularly. A perceived lack of opportunities to flourish in a tech career may be keeping young women out of the computer science and engineering pipeline.

There is a way to enact a cultural change, and it starts with the men in tech. Women will continue to be vocal and push for change, but it is just as important for men to step in and speak up. This includes men at all levels of the technical workforce, leadership and especially at venture capital firms.

The tech brogrammer culture that startups are known for is a major reason for women being put off from working in the industry.

As it stands, many of the recent controversies in tech were met with silence and inaction from VC firms. When Julie Ann Horvath spoke up about the harassment she faced at GitHub, the only response from the company’s VC firm was a lonely tweet from Marc Andreessen supporting the founder who resigned.

There was no apology to Horvath and no indication of support for improving the work environment for women. Similarly, when the CEO of RadiumOne, Gurbaksh Chahal, was convicted of two misdemeanors for domestic violence and battery against his girlfriend, the drawn-out inaction of RadiumOne’s board of directors only resulted in his firing when the media firestorm became too much.

Even when laws aren’t being broken, the absence of women has failed to register as an issue for VCs, such as the lack of women on Twitter’s board just before their IPO in 2013. Silence in the face of incidents like these, especially from those who hold the purse strings, sends a terrible message to women technologists and young women considering careers in the field.

A culture that glorifies the boy genius founder and encourages a frat house environment in spite of all the warning signs is not a place where most intelligent young women feel they can succeed, leading them to pursue other careers.

At the Anita Borg Institute we regularly see men in leadership positions stepping forward to take part in the conversation. Over the past 20 years of hosting the Grace Hopper Celebration of Women in Computing, we often feature many of our committed board members, including Alan Eustace from Google, Mike Schroepfer from Facebook, Justin Ratner from Intel, and Rick Rashid from Microsoft. This year we have Microsoft CEO Satya Nadella as one of our keynotes. These men understand that changing tech’s culture is not just a women’s issue, it is an innovation issue.

Now is not the time for complacency. There are many actions men in the technology industry can take to show their support. The most important action is to speak up in opposition to inequality and inaction and to speak out in support of women technologists, especially when you see actions or messages that are inappropriate or condescending. Individual male support for women in tech will lead to a greater grassroots effect that will bring about a more accepting and innovative tech culture where all parties can thrive.

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When Payment Processing Becomes A Commodity

#GNN - #Editor’s note: Christoffer O. Hernæs is partner at Core Group, a Norwegian management consulting company. Christoffer is currently engaged by Sparebank1, one of Norway’s largest financial institutions; this analysis is based on public sources and is not connected to any client engagements.

One of the big subjects of discussion in the banking industry earlier this year was the publication of the Millennial Disruption Index, stating that millennials view banks as irrelevant and placing traditional retail banking at the highest risk of disruption compared to other B2C industries. Accenture’s Banking 2020 report confirms this and draws a parallel to the challenges the telecom industry faced 20 years ago and states that non-banks will take a third of incumbent banks revenues by 2020.

With the rise of mobile wallets, peer-to-peer payment, micro lending and various personal finance tools, the banking industry faces a new breed of competitors from the technology industry. Notable examples include eBay which has been in the payment space for a long time with PayPal, and is now strengthening its foothold in mobile payment by integrating Apples fingerprint reader into PayPal.

Google has tried entering the payment space with the discontinued Google Checkout and Google Wallet. Amazon is targeting the mobile payment space through acquisition of GoPago, as well as challenging Square with a planned launch of a similar payment processing solution. Facebook, on the other hand, is targeting the $500+ billion global remittance market.

The common denominator for the challengers is that the majority of the companies are targeting the payment processing space. Both Bank of America and Capital One say not to worry, since this is old news and it only disrupts the peripherals of the banking value chain. But the real implication as with any form of value chain disruption is the probability of payment processing becoming a commodity.

A catalyst for a commoditization of payment processing is the introduction of cryptocurrencies and new payment protocols like bitcoin and Ripple, which renders clearing obsolete and dramatically lowers the transaction cost for merchants. As a comparison, the transaction cost for payments through Visa/Mastercard/PayPal is ranging between 3-5 percent depending on the transaction size. The transaction cost for bitcoin on the other side is as low as 1 percent with continuing efforts to reduce transaction fees from the bitcoin community.

To accelerate the development Bitpay recently announced removed the transaction fees on the starter plan, offering free unlimited payment processing to merchants accepting BitCoin. With eBay considering integrating bitcoin into PayPal and Apple reentering bitcoin wallets like Blockchain into the App Store cryptocurrencies as a default payment method becomes an alluring option for profit-seeking merchants looking for cost effective solutions. This places the challengers in a sweet spot somewhere between the banking and the retail industries through digital wallets and disruptive payment platforms.

A commoditization of payment processing will require new business models where cash no longer is king, but analysis of the information gathered through transactions is the new competitive advantage in the digital payment processing space. Ovum’s report, “Loyalty and Location Based Payment Services” predicts that loyalty and analytics is the primary growth driver for mobile payments. It states that this will require new partnerships between payment providers, merchants and third-party analytics vendors like Oracle and IBM, where the latter already has entered a partnership with Monitise in order to deliver cloud-based mobile solutions for the financial services industry.

Starbucks is one example of the business potential in combining loyalty programs and payments and reports that mobile payments stands for over 15 percent of U.S. sales from the third quarter, and is considering selling its software to other merchants.

These changes to combined with increasing sector complexity due to industry convergence, capital requirement regulations, industry consolidation and diminishing ROE (Return of Equity) compared to before the financial crisis poses great challenges for banks in the years to come and creates a perfect storm seemingly favoring new entrants and the technology industry’s inherent ability to experiment and willingness to try and fail.

Despite an entrepreneurial spirit and independence from antiquated legacy systems, barriers to entry are rising. Glen Fossella states in an interview with American Banker that regulatory complexity and compliance demands will become such a growing burden for new entrants, that it is both faster and cheaper for incumbents to acquire or partner with startups. Square learned this the hard way and was fined $507,000 in Florida for operating without a license. He also advises banks to invest in startups, acquire and hire entrepreneurs or hire talent from technology companies.

The leading example when it comes to preparing for the rise of digital payments is Visa. Visa CEO Charles W. Scharf stated that the leading payment network is counting on new digital services to power future growth, although Visa presented an 11 percent rise in third-quarter earnings from global payments. One of these initiatives is the creation of Visa Digital Solutions with a wide array of offerings.

This includes the launch of Visa Checkout, the successor to V.me, Visa Cloud Payment Solutions and, more exciting, the tokenization service that substitutes traditional credit card numbers with a digital token. Visa also opens up for collaboration with developers and technology companies with these new services. In addition Visa revealed an investment in LoopPay, a mobile payments solution accepted at the majority of point-of-sale terminals.

Through these initiatives, Visa sets a leading example for incumbents in the payment ecosystem by showing a try-and-fail mentality, as well as long-term commitment through repeated mobile wallet initiatives, willingness to invest in promising startups as well as collaborating with partners to encourage open innovation. Banks and financial institutions should view Visa as a leading example in order to secure a position in the digital payment ecosystem.

And let’s face it. A bank will never be viewed as cool for the millennial generation. But banks represent safety for the consumer, and it is possible to make banking somewhat less boring through adapting new technology and acquiring new innovations.

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When Wearable #Health Trackers Meet Your #Doctor

#GNN - #Editor’s note: Ben Maximilian Heubl, is a tech blogger, a data journalist (data journalism ambassador for Infogr.am), digital health geek and technology advocate and speaker. Ben founded a European chapter of the non-for profit organization Health 2.0 and currently advocates for improved online health access via Zesty UK.

How interested is your doctor in health data that you’ve tracked yourself?

Wearable health and fitness devices are now hugely popular, and they certainly appeal to people who want to tot up their paces. But many people who have invested in trackers like the Fitbit, Jawbone’s UP bracelet, or the Nike+ FuelBand want to know: Can this data be used to give me more serious healthcare insight? Could it help my doctor to give me better advice?

There’s certainly going to be no shortage of raw data. With tech giants Google, Amazon and Samsung heavily committing to this space, ever more wearable health devices are going to be connected to your life. Samsung’s Galaxy S5 smartphone, for example, has a built-in heart-rate sensor, a pedometer feature, and the S Health app.

Apple, meanwhile, recently announced HealthKit, an expression of intent to take the tech war in health to the next level with a platform that, rather like the App Store, will support lots of independently created applications in tracking health and wellness.

But does that mean we’ll soon walk into our doctors’ office and find that the first thing they want to see is our statistics?

Dr. Dush Gunasekera, Co-founder & Director at the myHealthcare Clinic in London thinks so. He said he hopes that wearable health technologies will help doctors to work with patients more effectively, leading to better treatments and outcomes.

“In our clinic, we welcome and embrace innovation and online health access,” says Gunasekera. “Generally the more accurate data we have on our patients, the better we can help with their health problems. Sometimes a snapshot can be just enough to give us the indications of a problem, or to prevent us missing one. Systems like Apple’s HealthKit might be one of the answers to providing a better patient-doctor partnership. Also in our job, timing is everything and the more the patient supports our work, the more we can provide better treatment and advice.”

However, Gunasekera and other medical professionals also see challenges that will need to be solved if wearables are going to achieve credibility with the medical profession:

Accuracy is a big problem. Samsung’s tech has been shown to be inaccurate in its health readings while also delivering a fairly poor user experience. This doesn’t feel good to the scientist in every general practice. Worse still, regulators are taking an interest: Inaccurate instruments affect patient safety.

Doctors themselves need training. Practitioners may not need additional advice on interpreting the results, but they will need new skills to work effectively in a wearable world. It’s not just a case of dealing with a swathe of new technologies; wearables will change the doctor-patient relationship. How, for example, will the breaking of bad news change when a patient already has ample evidence on their wrist?

Privacy. Privacy is a big concern for consumers, and companies like Apple have worked hard to respect the privacy of customers, particularly in a field as sensitive as healthcare. But we do need some benchmark rules for tracked data. At the very least, tracked data should not be shared with third parties, and patients should be reminded that they take full responsibility if they bring their data to an office and share it.

The more reasons there are to use data, the more people will buy in. Build it and they will come! The wearable health field needs to find new ways in which wearables can make a direct impact. For example, the largest group of people calling in to the NHS 111 helpline are mothers with young children looking for health advice or reassurance. Perhaps a big future wearable health application is the monitoring of children. Maybe we’ll soon be buying wristbands for whole families.
Data visualization provided by infogr.am


UK health technology startup Zesty has more than 1,500 healthcare professionals on their online health booking platform. It asked some of their private doctors how they would feel about patients turning up for an appointment with a suite of data in tow.

“We have spoken to many of our private general practitioners in London and the majority of them welcome the new opportunities offered by wearable health devices,” says Lloyd Price, founder of Zesty. “Some of our practitioners, like Dr. Gunasekera, are truly passionate about the opportunities presented by wearables and we want to help more practitioners to explore the potential. We also intend to approach companies like Apple and Samsung, so that patients can book healthcare appointments on their smart watches while presenting their tracked health data to health professionals at the same time.”

Apple just won a patent revealing that the company has actually been developing a smartwatch similar to the much-rumored and eagerly anticipated iWatch.

Dr. Bayju Thakar, founder of UK’s virtual health consultation startup, Doctor Care Anywhere, says that virtual GP consultations could benefit from additional tools such as wearable health devices. A doctor himself, he says that virtual GP consultations will soon reach a tipping point when late adopters understand and trust the service. With trust increasing towards wearable health technology from the doctor’s front, this point may come sooner than we think.

A recent UK report found that patient complaints to the General Medical Council had doubled in five years. Like all horrible headlines, this can be interpreted in many ways. In fact, part of the reason for the increase is that there are now more opportunities to feedback on GP services, including simple online methods.

Certainly, the doctor-patient relationship is in flux. Wearables will be another influence on that relationship, although even Dr. Gunasekera says that the technology has a long way to go. Wearable health won’t fix the NHS, but it can help remove uncertainties and keep patients motivated to participate in their own care. The sector just has to achieve the same degree of professionalism as the rest of clinical practice in order to gain true acceptance.

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