Investing In Zero Dollar Markets

October 15, 2013

We are excited to announce our seed investment in Tile, the world’s first crowd-sourced lost and found.  How big is the “lost and found” market?  Today it is a zero-dollar market, but everybody has experienced the pain of misplacing something—so clearly there is a problem waiting to be solved.  We invested in Tile because they are building a solution that elegantly enlists the rest of the world to help find your lost stuff, and in doing so Tile will launch a new market. (To watch Tile CEO Nick Evans pitch Byron Deeter on CNBC's PowerPitch click here http://yhoo.it/GMY1Kq)

BVP has a long history of making investments in areas where a casual observer measuring the market spend at that time would arrive at $0.  However, we believe that large markets emerge as talented and tenacious teams apply innovative technology to solve real problems.

In 1995, we invested in a zero-dollar market: selling numbers.  Very long numbers.  As the web was coming together, we predicted these new websites would need to verify their identities and communicate securely.  To enable this, they would need pairs of very long numbers that form the basis of public key cryptography.  We incubated Verisign in BVP’s offices as the first certificate authority that would issue SSL certificates (very long numbers) to enable secure web surfing.  Today, every secure website you visit uses this technology and the market is now much larger than zero.

In 2008, another founding team told us that making music is a magical experience that can bring people together.  Furthermore, they believed that the iPhone, less than 12 months old at that time and populated exclusively with Apple-created apps, could enable this social music revolution.  Another zero-dollar market.  We invested in Smule, the brainchild of founders Jeff Smith and Ge Wang from Stanford’s Computer Music Department, within weeks of Steve Jobs announcing that iPhones would allow 3rd-party apps.  Five years later, over 125 million Smule users have performed and shared 1 billion songs using Smule’s social music apps.

This notion of zero-dollar markets obviously extends beyond our own portfolio.  In 2008, the market for lead generation for black cars was very close to zero.  Uber was launched in 2009 to go after this zero dollar market by enabling the new experience of on-demand black cars hailed with a tap of an iPhone.  By thoughtfully applying technology to solve a basic problem for people, Uber has become one of the most interesting services for consumers as well as investors.

At BVP, our current $1.6B fund gives us the ability to make bets large and small.  This includes seed investments in zero-dollar markets as well as Series A rounds like PinterestYelp, and Skype that address existing markets.