Why Tech Will Buy an Automaker

by Michael Keane

As the struggle and innovations continue to develop in the driverless car industry, the idea that a tech company will buy an automaker is becoming more and more real.  A few things come to mind in forming this idea. The first one that comes to mind is company valuation and cash balances. Many tech companies that are involved in the automotive space are sitting on a lot of cash.  The second area that indicates the probability of this idea is that there are already partnerships and smaller deals between the tech companies and the automotive companies. Another area that brings this idea to fruition is finding the answer to the question of “What does the future look like in the space and who is best capable to lead this move into the future.

If you look at the tech sector and the automotive sector in terms of valuation, you will see that it is entirely possible for a deal to happen. The following chart gives a quick snapshot of valuations of different tech companies involved in the auto space as well as a few automakers. You can see the cash balances and valuations of the tech companies actually put them in a favorable spot to make a bid. Tesla’s market cap and Ford’s is now basically equal.

Company	Valuation	Cash on Hand	Amount Invested in Auto
Alphabet	$600 Billion	$86 Billion	New Company named Waymo
Intel	$167 Billion	$5.5 Billion	Just made a bid for Mobileye
Apple	$753 Billion	$21 Billion	Undisclosed Amount in Software
Tesla	$45 Billion	$3.5 Billion	Full Electric Car Company
Ford	$47 Billion	$16 Billion	Auto Company
Fiat Chrysler	$21 Billion	$18 Billion	Auto Company
GM	$51 Billion	$14.5 Billion	Auto Company

Large partnerships are starting to abound between the two industries. Recently, Intel made a bid for Mobileye. Ford has been in partnerships with Alphabet. GM purchased Cruise Automation for more than $1 Billion dollars last year and has a partnership with Lyft. Mercedes Benz recently reached an agreement with Uber with regards to a driverless car. With all this smoke around, the likelihood of a purchase continues to get stronger and stronger.  

While in the past, someone might not associate tech with cars, today you just can’t get away from the connection. Driverless eco friendly vehicles are the future. Big companies are putting large fortunes in play to make this happens. There will be some hiccups and disasters for sure. But don’t be surprised if you wake up one morning, pick up your phone (instead of the tv), and find that a car company has been purchased by a tech company.

**Disclosure - KDK Fund, a client of KeaneVCC, owns shares of Ford. KDK Options, another client of KeaneVCC, owns an April spread options trade on Microsoft. **

Is Your Company Integrated Enough

Value of Integration

By Michael Keane

Is your company capturing enough value from integration opportunities within its industry? Does your mission allow for an integration policy to be executed? Integrating the company with a vertical, horizontal or mixed strategy provides an opportunity to bring a higher level of value to your company, a larger customer base, and more influential position for the company within its industry.

In terms of vertical integration, a company could find higher value by owning more than one aspect from idea to sale of finished product. Large multinational companies regularly look to vertical integration for cost savings and market share dominance. A great example of a company that is vertically integrated is Apple. They have full control over their supply chain processes that give them freedom in their product markets. Even a partial vertical integration policy can affect value for a company.

In terms of horizontal integration, companies can be looking for other companies related to their industry in order to expand market share and create more value for itself and its customers. An example of a company that has a horizontal integration is Facebook. Facebook has recently purchased companies such as Instagram and Oculus Rift. Proctor and Gamble is another company that has many different products under its roof.

With new companies sprouting up with the growing entrepreneurship industry, integration might be one way for the companies to not just grow, but also for the brand to survive. Combining resources could ensure that a company outlasts any downturn in its industry or the economy as a whole. It is important for the company to educate itself on what is out there vertically and horizontally in its industry.

Forever Forward...

First Donation (Shriner's Chicago) of 2017

We have made our first donation of 2017. The recipient of the donation was Shriner's Chicago hospital (link here). We would like to thank our partners KDK Fund, KDK Options, and Bullied Comics for their help in making this happen. This is the shortest time period between donations and the trend looks good to continue.

KeaneVCC is dedicated and determined to give a percentage of revenue, NOT PROFITS, to charity. It forces doing high margin business. But the benefits have been great. To be clear, charity is a pillar of the business. We believe in our mission to use the business to find funding for deserving charities. Shriner's Chicago Hospitals is one of these charities.

KeaneVCC is working on a project looking to highlight and promote doctors, administrators, and researchers within charitable organizations (aka Shriners, American Cancer Society, etc.). Please feel free to forward information on anyone you know doing special work. 

Retail and Car Land Opportunity Going On Now

by Michael Keane 1/5/2017

Large Scale Real Estate Opportunity

There is a shift in consumer behavior that is providing for one of the largest real estate opportunities in a long time. There are two industries that currently take up a lot of real estate. Because of the behavioral shift in consumer behavior, these industries are seeing more and more dependance on line and less and less dependence with the on site areas of these businesses. Both are experiencing a tipping point right now. The industries are retail stores and car lots.  This movement should be seen as a great opportunity for developers, business executives, and urban planners.

Just today, Sears announced that they are closing an additional stores (Bloomberg link here). Macy’s also announced today that earnings are going lower. This is not a blip anymore. Consumers have spoken. They are needing stores less and less. This doesn’t mean consumers need the products any less and therefore is not a story on the companies themselves. But their need for paying for the massive real estate that they control is becoming less and less.

Car dealerships are another area that land usage will likely decrease as consumer behavior continues to be leaning more and more to online shopping. This is something that carmakers will ultimately enjoy as they can remove their costs from owning/leasing the land needed to sell these vehicles. Granted, some if not most of the cost is down to the dealership owner, but removing that cost could drive costs down for them without necessarily driving down revenue. Who knows, maybe buying a car will be similar to buying insurance.  

This has to be looked on as a major opportunity. One way Google was able to get to scale was to use the downturn in 1999-2000 and find cheap space for its servers. Are there any companies out there now looking for large scale space? Municipalities should be looking this as an opportunity to use the land for new schools, parks, and other public uses. Residential real estate will always be an option as long as jobs are present in the area. Oh, and what about that start up company that is being created new this space? When 1871 (link here) was created, it received a fantastic opportunity to use space in Chicago’s Merchandise Mart. Now, the building is in the process of being transformed into a tech juggernaut. Health care is also an area that should look to capitalize on this space becoming available. Research facilities should be able to be quickly set up.

There are some changes happening within the retail and vehicle sectors that will almost certainly be providing for the sale of buildings and land. Will there be another Google, 1871, or local developer out there ready to take the opportunity and grow their business? We certainly hope so.

If you or someone you know finds this article helpful, reply back to keanevcc@gmail.com and let us know how. We are always looking to promote and develop businesses.

How Good Is Your Survey?

by Michael Keane

Have you ever taken a survey and the right question wasn’t asked mainly because it entailed a third party product or service? I’ve recently been asked to fill out a few and I’m seeing a big gap and opportunity for building a better survey. That area opportunity is that each company can get a customer’s feel on how other companies products are experienced. Generally, most companies create surveys on just their own products. Hotels, restaurants, movie theaters, etc. have a massive opportunity in looking more in depth at the different products that they agree to sell or use to create the best customer experience.

One grand example is the hotel industry. The hotel industry is one where most of the products are from third party vendors. In the surveys I have received after a stay, rarely is there a specific question on a product or service from a third party vendor. At best, there is a catch all question at the end. With third party vendors’ products being so intricate in a customer’s experience, the hotel industry would do better with more in depth surveys being produced. .

Restaurants are another field that can improve on their surveys. Questions on the food can include where it came from, how it was treated and how it got to the restaurant. Questions on the furniture, seating process, and payment process should also be explored. There is a multitude of vendors and food providers that are looking for feedback on their product or service.

There is also a big opportunity in terms of revenue for these companies. With having the ability to affect the nature of the consumer market as well as non-direct vendor markets. By simply charging a fee to include other companies products on their surveys, a new and large revenue stream is created. Another stream of revenue that can be enhanced is the pricing that each vendor pays in order to have access to the host company’s customer base.

This type of enhanced survey will also give insight into whether or not a product or service should be kept or ended. Third party vendors will be continuously motivated to make sure their products and services stay in front of the host company’s customer base.  Including the third party survey will help do that.

Many good results can be had by opening up surveys to products and services of third party vendors. Companies in the service industry are well motivated to do so. There are opportunities to increase revenue, provide better services, and improve their image within their own customer market. The wrong survey might not hurt the business. But the right, informed survey can improve customer retainment and continued business success.

Bullied Comics release

Friends,

Today, with the help of Mascot Books, the first edition of Bullied Comics is now on sale for only $8.00!!! It is for sale on Amazon, and Barnes and Noble in an eBook version.

If you are looking for a reason to purchase a copy, here are a few:

- This is the beginning of an improving and exciting storyline that will help all kids with bullying. You can cement yourself as a part of pioneering this project forward.

- A portion of the sale of each purchase (not just profits)  will go to PACER's anti-bully center. They do an amazing job and deserve as much help as we can give.

- Each copy is only $8.00. There aren't too many other things that will provide as much value for this price.

- The author Dan Keane has a passion for this issue like no other. He is fully committed to improving kids lives through this comic.

- Dan's artwork is second to none.

Don't forget to tweet and Facebook message (tagging @bulliedcomics) that you made the purchase. It will create momentum and a random tweet will be chosen on November 1st and the winner will receive a free T-shirt from Bullied Comics and KeaneVCC. Make sure and visit Bullied Comics Facebook, Twitter and email (bulliedcomics@gmail.com). We are always looking for new partners and development help.

As always, thanks to all who made this moment possible.

Mike

Massive Influence of Wikinomics Series

by Michael Keane

Recently, I revisited Macrowikinomics, by Dan Tascott and Anthony Williams. This book was written in 2010, as a follow up to the successful 2006 book Wikinomics. They speak about how to get the world rolling again after the crash using massive upheaval techniques in specific areas including Finance, Industrialization Processes, Education, Healthcare, Media and Communication, and the public's involvement and manipulation of government. I originally picked up the book years ago as notes were given by many important heads of business and government including Mark Parker (Nike), Eric Schmidt (Google), Noel Tichy (University of Michigan), Klaus Schwab (World Economic Forum), and others. With a recent revisit to the book and think back through the development of business processes, it seems that a lot of people took this book to heart. There is massive development in almost all areas covered in this book either by existing companies/organizations at the time, or by newly created businesses/organizations. The one element that seems to be evident in most of the improvement is that there is a high level of collaboration (vertical or horizontal) within each space.

Is there something in your business that corresponds with this collaboration thought pattern. Would using technology and collaboration have a disruption within your industry in some way. Would a small change create the possibility for an even larger change?

I fully recommend MacroWikinomics. There is a new book on blockchain that will be on the list of books to check out. Bankers beware. You are next in the line of disruptors.

This is an opinion article. The opinions were fully unsolicited. Please do your own due diligence before acting on this article.