Tuesday, 11 November 2014

Updates and follow-ups . . . . #Disruptive / #Cycling / #Investor

As promised, I finally managed to catch-up with a few of the companies I've recently seen presenting at BBY's Disruptive lunches. My promise to readers, companies and investors is to try and follow-up before making definitive judgements. Shooting from the hip always gets me in trouble, I've lost count the number of times I wished I slowed down and took a deep breath before gunning-up the revs on the IBCyclist analytical engine.

1. Mainline Power

M.D. Jonathan Clark kindly hosted me for coffee and a Q&A session at Mainline's office in Sydney. My practice is to save metrics for clients of IB Cyclist Consultancy, but having said that the following broad points apply:

Production logistics look likely to be a focus in the months ahead. Current lead times for the type of bulky orders that Mainline wins are challenging for them. The company is committed to reducing this time in the short term by about a third and Jonathan Clark seems optimistic on this coming down further over time.

Mainline reminds me of the Japanese and Korean engineering and heavy industry companies I used to look at in my role as a hedge fund portfolio manager. As a public company with a long track record, you're able to set terms for order flow that suit your balance sheet and financing facilities. Mainline as a relatively young company is closer to a sub-contractor that is required to be a "just-in-time" supplier. Typically if you're at that end of the supply chain you want to be able to weather time management changes further up the chain. Therefore, while having a relatively clean balance sheet they lack sufficient buffer to take advantage of opportunities that require extra business dexterity. This is not an unsurmountable problem, but something that needs attention and commitment on by the board.

I should also mention that the meeting gave me a chance to get a close-up look at the power track and the associated plug options. It was pleasantly surprising how well engineered the fitting between the plug and track was, almost reminiscent of that satisfying "door clunk" you get on better-engineered luxury cars. On an aesthetic note, the basic black or white track is fairly industrial in feel and appearance. The company has been trialling some of the 3-M adhesive wraps that we're seeing used to give car interiors and exteriors finishes that mimic anything from carbon fibre to wood grain. If this comes through I can see the architecture community being more supportive of the product.

Finally, a quick word on product cost. The power track is clearly more expensive than fixed power points. The like-for-like comparisons fail to take into account the flexibility that I wrote about in my previous blog. This flexibility is the key to the product. Strategically placed tracks should help fit-out companies and landlords alike in cutting down costs associated with tennant turnover.

I remain positive on Mainline's product offering and am available to discuss the various metrics I was able to glean with IBCyclist clients.

2. Lime Rocket

The feedback I got regarding my blog comments on Lime Rocket's crowd based games model were mostly concerned with how I'd failed to grasp the engagement aspect of the core app. Last night I went to the Toxteth Hotel in Glebe to check it out for myself. The Toxteth is a fairly typical inner-ring pub in a young-skewing area close to Sydney University. It's a neighbourhood that should be fertile ground for Gen X & Y types looking for good food and an entertaining night out.

BuzzyTV is the app you'll need to participate. The idea is that the various venue screens project the games onto them, presenting various possibilities. Choose the right answer quickly, and you get max points. Take too long and instead of 12 points (that was max for the games I was playing) you might only get two points. The points accumulate, and the venue owner has a feed of everything that's going on, and therefore can award prizes, etc., for the best players. Last night I counted three games on a loop, not ideal, but it's still early in development. I didn't see any rankings appear on the screens, so you didn't know how you were doing relatively to other players. Was it a glitch? Maybe, but it needs highlighting, as I gave up a bit when I missed a couple of answers due to technical problems.

On the technical side; the version I downloaded from the Apple App store is apparently older than that you can get on Android right now. The CEO Mark Gardiner leant my wife his own Samsung Galaxy 4 to try a new app, and it had a much sleeker, and dare I say more adult interface. The Toxteth didn't offer a WiFi link, so I was at the mercy of telco provider Optus. Mike's phone was on Telstra, and he got a 4G signal that allowed for quicker and faster syncing with the action on the TV screen. Optus had me on a 3G and kept dropping out. That is and isn't Lime Rocket's problem. As I said to Mike, the short attention spans of the crowd he's trying to capture doesn't give them much wiggle room for technical glitches. Ideally WiFi is the solution, and venues who want to make the most out of this need to fit it out as soon as BuzzyTV is available. If you're not convinced perhaps they could restrict the use of the WiFi link to BuzzyTV users by asking Lime Rocket to generate a password at venues that users can use when playing the game?

The app update for Apple should be available soon. I understand the team's frustrations with the Apple ecosystem, but they are not alone in complaining about the pipeline problems with the Cupertino mothership in respect of apps.

I remain sceptical of all the parts working in the short term. Mike told me of some of the new games and functions they are experimenting with, so let's just call what I saw version 1.0. I'm happy to waive my usual fees in exchange for a glass of wine and light snack for any client wanting a competitor for the evening at the Toxteth. BuzzyTV is available Monday and Tuesday nights.

3. InStitchu

Of all the companies and products I've looked at in the last 12 months, I get more questions about my InStitchu suit than anything else. My guess is the low (sub-$500) price point, promise of personal tailoring, and quick delivery time (4 weeks), has many readers wanting to try out the product.

I chose a fairly plain navy blue InStitchu suit, single breasted, two buttons with double vent. In addition, I opted for notched lapels, working cuff buttons and flat fronted trousers. The cloth is supposed to be Zegna, and to be fair seems to be of a high quality. I've worn the suit a half a dozen times in the last two months. From business meetings (I had it on during my visit to Mainline), to upmarket artists exhibitions I've had a few compliments. I don't advertise the fact that it's an InStitchu, so maybe I'm a clothes snob?

Noticeably the fit of the suit is what I'd call "Italian". Meaning it's fairly slim in the limbs as well as having a slightly pinched jacket torso. My first impressions two months ago was that the sizing was close to what I was used to at my regular tailor, and that remains the case after recent use. I know of another wearer who was a little disappointed with the fit. I'm not sure he'd bought many tailored suits, so probably wasn't as demanding as I've become when it comes to measurements. Of course, the whole idea of the InStitchu business model was to transition from standard fitting sessions towards body scanning. As readers know, the body scanner link to InStitchu didn't work properly in my case. As I've decided I like the product, I'm thinking of venturing back to the scanner booth and trying again. After all If you're looking at investing in this business because it's a disruptor, then you want to be confident what the team says works, does work.

So, the bottom-line grade on the InStitchu experience is a solid B. If the body scanner link can be shown to work I'd mark that up to an A-. If you're wondering what it would take for me to give an A+, think 3 week production time, product tracking and an option to go super premium on materials to some cashmere blends (with associated cost implications).

4. Other meetings of interest this week

On Friday, I'm seeing Alex Martell, a former fellow investment banker who's come up with an interesting app for we wine "tragics". This is yet another version of the crowdsourcing tilt we've seen of late. In the case of "Vinus", you photograph the label of a wine, and it identifies it and hooks you into others who may have had the same bottle. You then get to see people's opinions and ratings. It doesn't currently hook into a pro-database like some similar apps as it wants to make use of the wisdom of the crowd theory. I like the idea, but as a former wine snob, I am still somewhat reluctant to take the advice of a man or woman in the street view of my favourite beverage. To me, crowdsourcing the subjective is always a bit fraught with danger due the vagaries of fashion. Look, for example, at the "ABC" drinkers (Anything but Chardonnay). Offer half of them a good village cru Puligny-Montrachet and they'd find it hard to guess it's a 100% chardonnay. The same goes for Chablis with it's flinty minerals being a long way removed from the over-oaked $12 offerings that a lot of drinkers may be familiar.

I'll report back after I see Alex, and hear what he wants to accomplish with the app. Prima facie I'm positive on most of these shoot, identify and action apps.

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A reader sent me a mail recently asking me about my cycling. I've been so pre-occupied getting the consultancy up and running that I've spared blog followers the trials and tribulations of my recent cycling adventures. I can report though that eight days ago I, along with 9,999 other Sydney cyclists did the annual ride to Wollongong, some 90km's south of where I am now. It's a great day out, and even with a 30km headwind most people seem to have survived the ordeal well.


I rode the Cannondale Evo, though I was sorely tempted to add on the Campagnolo Bora's. The guys at Cheeky Monkey dared me to tempt the puncture gods and ride the tubulars, but I wimped out.

While on the subject of my favourite bike shop, it won't be long until my green repaired Evo goes off to Mark for the mechanical rebuild. Apologies to all those I've bored to death with tales from the dark side of eBay as I've attempted to equip my reborn steed with the finest Italian components at the lowest possible price. The last of said components is now on its way from Starbike in Germany. Overall I've estimated a 40% saving versus the equivalent regularly available components. Some of that, of course, is because I've been buying Campagnolo, which is not well supported by retail in Australia. There is, of course, the fact I'm rebuilding at the end of the European peak season, so many components are on sale as shops look towards the 2015 spec equivalents. Most of the time there's only minor changes. In my case, the hunt for Campagnolo's Super Record group components has been helped by an unusually high number, but aesthetically minor changes leading to heavy discounting of 2014 stock. I intend to have this done before Christmas, and would like to publish a blog and associated photos of the build.

Finally, as a treat, I thought those of you looking for a challenge next summer in Europe might be interested in the footage of a particularly interesting ride.


This is Mike Cotty, probably my favourite endurance rider at the moment. He's a long time Cannondale fan and now Mavic sponsored super-rider. That's 1,000km's non-stop over some of the most famous climbs in Europe. Before I saw this I wanted to ride the Stelvio, now I'm not sure. Dust off those air miles and feel free to contact me if you'd like to try some of that terrain. I can't promise to join you, but I'm happy to connect you to some good bike mechanics and excellent stopping points.

Ciao!

Monday, 3 November 2014

Disruptive Lunch: Mainline Power, Lime Rocket and Farmbot. Some sexy and some practical.

Too often when we think of disruptive business models our collective minds conjure up visions of computer screens, smart phones, personal sensors and scrolling lines of computer code. The Disruptive Lunch at BBY last Thursday reminded this blogger that although the use of software is at the forefront of many developments, there's still a place for some cleverly engineered hardware. Three businesses presented their disruptive models, and of the three Mainline Power was the most accessible, Farmbot the most Australian and, Lime Rocket the most Gen Y / Millennial.

Mainline Power offered a view of their power track system. The power track offers a flexible alternative to traditional power points, as it allows users to tap into fixed power at any point along the track. Additionally, the "plug" can be placed at a myriad of angles allowing the user to avoid the anguish of awkward plug/transformer situations where you're unable to use a socket because of restricted space. We were also shown their data module that uses power track to access conventional electric systems for the transfer of data.

video

Jonathan Clark, the Mainline Managing Director, gave a comprehensive and honest assessment of the product and business. I always enjoy it when management is honest regarding missteps they've taken. In the case of Mainline the business, according to Clark was somewhat unfocused in targeting its ideal consumer of the product. The problem with the power track system is that you could apply it anywhere a traditional power point is located. In reality, it's more an industrial, semi-industrial product because the main selling point is its scalability. Therefore, the Mainline team has refocused on the educational niche winning business in universities and schools where staff and students require facilities to recharge the now ubiquitous laptops and tablets they take from location to location. The above video shows the system. As much as I'd like to have this in my kitchen or ideal room, I prefer to think about the possibilities in situations where crowds gather.

In terms of the actual revenue numbers and details regarding current cashflow, Clark didn't elaborate, which probably is the fault of those of us not asking him about it during the question period. There were some examples of mandates, including a middle eastern high school. That school is the first of 35, with the inference being that if you get the first one right the likelihood is that further mandates will follow. The only competitor Clark mentioned was Singapore based and was a higher cost and complexity supplier. Mainline was quite open in saying they are looking for investors, preferably those with some insight into the building sector in general. I'll be following up with Jonathan Clark this week with a view to getting further information about installation cost comparisons, current order book and the size and type of financing they are seeking. Mainline Power might lack the sex appeal of some of the offerings we've seen recently, but investors shouldn't ignore the amount of infrastructure investment currently taking place across the globe.

Farmbot just felt very Australian to me. The emphasis on rural water supply management in the continent of such vast distances and limited rainfall seemed like something that should have come about a while ago. Having said that I know at least one blog reader in the agri-engineering sector who'll know doubt send me a mail with several examples of midwestern US companies doing a similar thing. Given that Farmbot says they have a number of very specific patents on various pieces of the technology involved in their offering I'll just deal with what was presented.



The Farmbot system uses fixed receiver stations that can pick up signals from sensors anywhere within 35kms. That's a lot of square kilometres and a good start for a system that costs about $150 per sensor and a subscription of $416 per year. I'm not sure whether that price of $416 is per user or per receiver station, but in any case it is cheap given the requirements of running a rural property in Australia. I didn't catch the receiver station installation costs, but I sensed that the business being reasonably new was still finding its feet regarding pricing. Apparently stations are up and running in the Hunter Valley area of New South Wales. I also didn't catch the number of sensors you could have per station. Right now Farmbot is concentrating on water management, but other sensors such as soil moisture and gate status are imminent. In the future, the list of sensor types is only limited by your imagination, but Farmbot lists:
  • intrusion alert sensors
  • traffic sensors (including number plate recognition)
  • river level sensors (flood resistant)
  • weather station (simple and advanced)
  • electric fence monitoring with fence power level / health measurement
  • electric power usage
  • general machine sensing
  • fuel tank levels
  • custom sensor platform for user specified or supplied sensors
I'd like to see some automation sensors added that activate systems, such as heating, cooling, etc. These would permit greater distance management possibilities for small farm owners.

So what else do get with your Farmbot subscription? The data is cloud based. Anytime a sensor triggers a warning the property manager gets an SMS with details. That message will provide a link to the owners account via a browser that provides the current status and historical data regarding the water source being measured by the sensor in question. All this should according to the company save $1800 per year for a property based on four water inspections per week, 30 minutes of travel and a 4 km round trip per inspection. It should cover its set-up costs by the end of the first year, making this a great system for industrial scale projects and management intensive semi-hobby properties. Personally I see this as an interesting solution for small communities of properties that lack scale normally to run commercially viable operations. Surely a single caretaker, manager could cover several small farms simply and quicker than what is now possible? Farmbot seems to be in Version 1.x right now, meaning investors might want to take a closer look at this one sooner, rather than later.

I'm going to try and see Lime Rocket's offering of venue based games this week in Sydney. As an early Gen X investor (over 40 years old) I need to see and preferably "touch" some of these social media type offerings. As the long time readers know, I usually join (Posse), subscribe or buy something (InStitchu suit) from companies that I see at this type of corporate event. I take the view that if you're going to give an opinion or provide an investment case to someone that you need to have some experience of the offerings.


Lime Rocket is difficult for me as it's predicated on the idea that venue crowds are more smart-device focused. This means you need to grab the attention of individuals if you're going to maximise their revenue per head in your venue. Simply put you want people to stay longer and spend more if you own or manage one of Australia's 60,000 pubs or clubs. I can understand that impulse, but electronic trivia games with prizes? I don't understand much of what Gen Y does, but are they going to embrace a night out spent hunched over a smartphone trying to remember the names of the Mutant Ninja Turtles?  Perhaps that's unfair, and exactly the reason I'm donning the jeans and Pink Floyd T-shirt and heading to Glebe in Sydney this week to check-out what Lime Rocket is doing?

I don't think it's any coincidence that Lime Rocket CEO, Mike Gardiner is ex-Tabcorp Australia. Tabcorp provides various gambling platforms for users in Australia. As someone who's spent time looking at the pub sector in Australia during the early part of the century, I was very concerned about the reliance these venues had on video poker machines to drive revenue. That gaming machine model fell apart when regulators and governments put a limit on the exponential growth rates we had seen in poker machine numbers. Lime Rocket looks to me to be taking up the gap between poker machine acceptability and the need for something that engages venue "goers". This, of course, is not a bad thing if you believe that it works and unlike many of the listeners at BBY on Thursday I wasn't as enthusiastic about this as some. Gardnier's team also hopes to provide their offerings to arena type venues on the "jumbo-trons" that we're seeing more often. I'm still of the view that at arena venues crowds gravitate to apps that allow them to pre-order food, upgrade seating or win prizes without the game add-ons. This blogger is not going to pretend that Lime Rocket is going to succeed or fail on the strength of one presentation. I am pledging to be at the Toxteth Hotel this week to see why I should be more positive. If you're a reader with a thirst for trivia or just a good beer, then contact me, and I'll happily compete to see who's got the juice when it comes to Lime Rocket.

Ciao!