upside ventures: business networks as an asset

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Biz Network as an Asset

UPSIDE VENTURES

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１ Overview: BNaaA

２ Learning: Power of Network

3 Upside: Linear vs. Multiple

4 Opportunities: Invest vs. Create

5 Strategies: Horizontal vs. Vertical

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OVERVIEW: BNAAA

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Overview: BNaaS

Biz Network as an Asset (BNaaA) “Investment Properties” (e.g. Ichiba shop)

Focus on building the network as an entityPeople to People (P2P)

Ongoing value growth while network expands to regenerate exponential return

Leverage existing and established business infrastructure and ongoing profit share model

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LEARNING: POWER OF NETWORK

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Power of Network

Billion Business – all built on a network

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Power of Network

Social Network is about people, not Facebook which is just a platform

Valuation

User base

Profit/Loss

Revenue

Linkedin Facebook

Comparison

Rakuten

RetailProfessional Social

21.6M 208M-64M

24B 115B 14B

Revenue/PL is based on FY2012 // Market Cap – Nov 8, 2013

972M 1.584B

Amazon

Retail

-39B

157B

100M1B

61B 4.74B

245M 137M

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Power of Network: Rakuten (Global)Globalization

More…

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Power of Network: Rakuten (ecosystem)

E-Commerce

E-Money eBook

Card

Banking

Securities Telecom

Travel

Portal&

ContentRakutenMembership

Database

・ Shopping mall・ Auction Customer Flow

・ Hotels and Facilities

・ Air Tickets・ Dynamic Packages

・ Stocks・ Bonds・ Trust Funds・ FX

・ Advertisement・ Streaming・ Downloading・ Recruitment・ Marriage

・ Credit Card

Rakuten Super Point

・ Payment・ Consumer Loan

Common ID

・ Fixed IP Telephony・ Mobile IP

Telephony

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Power of Network: Rakuten (empowerment)

[Major Global E-commerce Competitors]

Product Centric[Rakuten Ichiba]

Shop Centric

The Rakuten “Empowerment” model isvery unique and difficult to replicate

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Power of Network: Rakuten (empowerment)

Japan’s largest and the World’s 3rd* Largest Internet Mall

Merchants 39,000 stores*

Products 100 Million

2011 Sales \1 Trillion+

楽天会員数 78 Million+

(as of June 30, 2012, in Japan*

Global numbers higher)

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Power of Network: Rakuten (empowerment)

Rakuten Ichiba

1 Trillion Yen

Fashion Ichiba’s

Largest Genre

Global Strategy -

Vertical Expansion:- Biggest business

potential- Most “portable”- Expand

horizontially

• Fashion is the largest genre on Rakuten Ichiba• Top Genres: Bag, Shoes, Ladies Fashion• In JP-only, 80M members

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Power of Network: Rakuten (empowerment)

B2C vs. B2B2C

B2C

B2B2C – Scalable on a networkkey factor: highly driven merchants network

Massive 80M users

40K Driven Merchants

<1K Account Mgr

R

R

- Linear growth- Hard to scale

Sales 1 Trillion Yen

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How to win

Replicate the business model

Simplify and adjust to different context Leverage existing infrastructure / setup

Focus on building network across different regions

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UPSIDE: LINEAR VS. MULTIPLE

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Upside: Linear vs. Multiple

Business / career path

Retailing

Investment Banking

Consulting

Business Network

One-time ($$$)

Multiple

Recurring

Linear

Most services and retail businesses are based on 1:1 relationship with the clients or consumers. That demand much resources and time to grow and scale

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Upside: linear vs. multiple

Business / career path

RetailingInvestment

BankingConsulting

BusinessNetwork

MultipleLinear

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OPPORTUNITIES: INVEST VS. CREATE

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Opportunities – Invest vs. Create

Ways to capture value (e.g.)

Open Stock Market

Linkedinnetwork

Startups

RakutenMarketplace

CreatePrivate Investment

FacebookSNS

SMB

Franchise

VC / PE

Real Estate

“System” that generates value

ReturnInvest

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Return: Linear vs. Multiple

Benchmark with S&P 500 Index Total return (12.06%) vs Apple (175.6%)

http://ycharts.com/analysis/story/ten_biggestcap_stocks_just_two_outperform_the_sandp_500

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Return: Linear vs. Multiple

Highest S&P 500 Return is 15.96%; vs FB and Apple of multiples

http://ycharts.com/analysis/story/ten_biggestcap_stocks_just_two_outperform_the_sandp_500

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Investor: Value Proposition

Long Term Value

Risk / Stress

Return (Upside)

Scalability / Self-sustaining(High quality products with Self generating business model)

Min Risk / Stress free(Managed by top professionals; Full tranparency

Team / Network

Profit / multiple(Low startup cost, Highly profitable by multiple)

Elite team and network(Highly selective elite network fromtop schools and professionals)

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STRATEGIES: HORIZONTAL VS. VERTICAL

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Strategies: Horizontal vs. Vertical

Linear

Exponential

Singular

Horizontal Vertical

Retail

Investors

Shops

Horizontal

Vertical

Grow the network

DON’T focus on “Warm network”- Make this as a rule

X

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Retail: Product Strategy and Channel

Product Strategy

Online Channels

Salesforce

Selective Merchandising(Unique, high turnover and Vol, Strong Messaging)

Lifestyle Social EC(Targeted & Mass Vol at Wholesalee.g. Fab, Birchbox, Clozette )

Partnerships

Global Distribution(Hire local “business dev associate”e.g. Philipines, Jamaica, East EU)

Alliance / CommunityFreshii / Forever Living

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Horitzontal: (retail) Product Strategy and Channel

Fab – designer lifestyle product social commerce

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Horizontal: (retail) Product Strategy and Channel

Birchbox – membership subscription ecommerce

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Horizontal: (retail) Co-branding items

Co-branding merchandising opportunities – additional revenue/marketing

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Vertical: Network building

Investor

Shop Owner

Biz Developer

Invest microfund(Form business entity by fundingnew shops network and sales)

Operate and build (New shop for retail and expandThe network

Retail Sales

Manage and build(Expand downline network)

Focus on retail sales(Through strong salesforce,Convert them into new downline)

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Vertical: Network building

Establish strong foundation with highly motivated achievers and network

US JPAP

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Vertical: Network building

UPSIDE VENTURE

InvestorBiz Dev /Owner

Elancer

DriveRetail

Ivy League

Build Business

Entity

RetailSales

InitialCapital

Fund / Share Profit

Win-win-win

Identify downline

Convert into downline

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Investment / Return

Define profit target (30%-48%)

Define resources

Invest initial

capital

Identify market

Hire Sales

Develop network

Identify high potential sales

Concert into

Downline

Drive sales growth

Re-Invest profit to hire sales

(hands off)

Or take over to grow

network asset

Invest Develop Expand Build/Hire

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Q & A