Brandon Donnelly

Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

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Tag: tech

  • Rules for location data

    The CEO of Foursquare — Jeff Glueck — published an interesting op-ed in the New York Times today, calling on Congress to regulate the location data industry. Currently, there are no formal rules in place.

    In case you’re not aware, Foursquare is one of the largest independent companies operating in this space. I have written about them many times before on the blog.

    Here’s an excerpt from Jeff’s op-ed explaining why this matters:

    But location data can also be abused. Bounty hunters were able to buy the current location of a cellphone for $300, Vice reported, because telecom companies sold the real-time location of phones to shady companies. And apps that track location data may turn around and sell that data, revealing someone’s every movement — whether it is to a retail store, an abortion clinic or a gay bar. Bloomberg Businessweek recently reported on a company with thousands of cameras selling car locations to debt collectors and others; there is no “opt-in” involved, and it’s illegal in all states to cover your license plate.

    I am writing about this today because I think it’s relevant to city building. Location data is inherently spatial. It is how we exist in cities. So it shouldn’t come as a surprise to any of you that this is valuable information — hence why it is being abused.

    Here we have a company advocating for more, not less, regulation. They, of course, want it to be sensible. But I still think it says things about the current location data environment. To learn about the specifics of what Jeff is proposing, click here.

  • TikTok’s revenue is apparently over $7 billion

    Last week, audio clips from an internal Q&A session at Facebook were leaked and published by the Verge. These meetings have historically always been private. In what I think was the right move, the company then decided to publicly livestream a subsequent Q&A session — you know, to show that they had nothing to hide.

    The media tended to focus on Mark Zuckerberg’s comments about the threat of Facebook being broken up by regulators. #BreakUpBigTech. Lots of people are also attempting to glean what this leak might signal about the company’s current corporate culture. But there are lots of other interesting soundbites.

    Here’s an excerpt from Zuckerberg about the Chinese social media app, TikTok:

    So yeah. I mean, TikTok is doing well. One of the things that’s especially notable about TikTok is, for a while, the internet landscape was kind of a bunch of internet companies that were primarily American companies. And then there was this parallel universe of Chinese companies that pretty much only were offering their services in China. And we had Tencent who was trying to spread some of their services into Southeast Asia. Alibaba has spread a bunch of their payment services to Southeast Asia. Broadly, in terms of global expansion, that had been pretty limited, and TikTok, which is built by this company Beijing ByteDance, is really the first consumer internet product built by one of the Chinese tech giants that is doing quite well around the world. It’s starting to do well in the US, especially with young folks. It’s growing really quickly in India. I think it’s past Instagram now in India in terms of scale. So yeah, it’s a very interesting phenomenon.

    TikTok now has over 1.4 billion installs outside of China according to TechCrunch. And in the first half of this year, it supposedly booked more than $7 billion in revenue (though most of it came from China). The company is also saying that it posted its first profit in June of this year.

    All of this is, indeed, “a very interesting phenomenon.”

    But it’s even more interesting because this is probably the first consumer-facing Chinese internet product with massive global adoption. And it has Facebook paying attention. They’re now the ones who have to play copycat — their version of TikTok is called Lasso. Of course, it’s not nearly as popular.

  • A taxonomy of moats

    Jerry Neumann’s recent blog post on the “taxonomy of moats” is a great summary of the ways in which companies — and perhaps even cities — can protect themselves against competition.

    Here’s an excerpt from his introduction:

    Value is created through innovation, but how much of that value accrues to the innovator depends partly on how quickly their competitors imitate the innovation. Innovators must deter competition to get some of the value they created. These ways of deterring competition are called, in various contexts, barriers to entry, sustainable competitive advantages, or, colloquially, moats. There are many different moats but they have at their root only a few different principles. This post is an attempt at categorizing the best-known moats by those principles in order to evaluate them systematically in the context of starting a company.

    And here is his taxonomy of moats. He identifies four main sources:

    As a sidebar, consider how this might also apply to cities.

    Scale, for example, matters a great deal. We know that as cities get bigger, people tend to walk faster, have broader social connections (the relationship is super-linear), and be far more productive and innovative.

    If you’d like to read Jerry’s full post, click here. And if you’re interested in this space, I recommend you also check out Fred Wilson’s recent post on, “The Great Public Market Reckoning.”

  • Patch Homes announces $5mm Series A round to grow fractional home equity platform

    There are a number of home equity startups in the marketplace today.

    A few years ago I wrote about an alternative product to HELOCs or home equity loans, called Point. And earlier this year, I wrote about a startup, called Landed, that is helping “essential professionals,” such as teachers, with their down payments. They’ll contribute up to 10% of the value of a home in exchange for a share in any future gains, or losses.

    Today, another startup in the space — Patch Homes — announced a $5mm Series A round. From what I can tell, it appears to be similar to Point in that it involves the fractional sale of home equity. Though, to be clear, the model is distinct from the fractional homeownership that is popular in many high demand vacation destinations. Here’s a bit more on how the product works (source):

    The Patch model enables homeowners to “tap into” their home equity by selling 20–40% to Patch’s affiliate, Patch Capital, which shares in both the upside and downside. The homeowner remains in control of her or his home for the life of the relationship and exits via a sale or refinances in 7–10 years.

    While this product is not for all homeowners, it provides a new and important financing option. The Fed estimates that home equity ownership in the US is $15 Trillion. It makes no sense that the only financing options are additional debt or a complete sale of the property. Patch gives homeowners the option to de-lever their personal balance sheet or otherwise raise cash. Clients have used Patch proceeds for numerous reasons, the most popular of which are to pay off debt, increase liquid savings and finance home improvements.

    I am not surprised to see this gaining momentum. The biggest benefit is that it gives you partial liquidity (i.e. cash up to $250,000), without having to sell your property or take on additional debt service payments. It’s equity, not debt. Fred Wilson, an investor in the company, calls it fractionalizing home equity.

  • Death of the standalone camera

    I took the above photo on my Fujifilm X-T3 at the Museum of Contemporary Art here in Toronto. Obviously, it is a cast of David Bowie’s head. I’ve been using Fujifilm’s X cameras for exactly 3 years now and have already gone through 2 different models. I love them. But Om Malik’s recent post on why the future belongs to computational photography is, in my opinion, entirely accurate.

    For most people, taking photos on a standalone camera and dropping them into Lightroom is not only far too much work, but also unnecessary. Here is a chart from Om’s post showing total worldwide digital camera unit sales (in millions). Sales have fallen off a cliff from about 10 years ago and now look to be on the verge of dying.

    What is obvious is that we are all now just taking photos on our phones. Thanks to better chips, sensors, and software, the future of photography looks, again, destined to be computational. Apple is set to announce its new iPhone 11 (or whatever it will be called) this week and already the rumors point to a dramatically improved camera.

    This change in hardware has also changed our relationship to the photograph. We now take photos for the purpose of real-time sharing, which is another point that Om makes. When I post photos of things that have happened in the past — as I often do — people are commonly confused: “Where are you? When are you back in Toronto? Wait, is this a #latergram?”

    This has made photographic memories feel ephemeral. Once the moment has passed, we forget about them. They get drowned out in new real-time images and shares. As a society we are taking more photos than ever before. Not surprisingly, this lowers the gravitas of each individual one.

  • The new decentralized workforce

    A few weeks ago the WSJ published an article about Toronto’s growing tech talent pool, arguing that its base now rivals the top US cities, but that it may not be an entirely good thing for the city’s ecosystem. I wrote about it here.

    This morning venture capitalist Fred Wilson published a post on his blog talking about the necessity of scaling tech companies in lower cost locations. It’s a good follow-up to the above article/post.

    Here’s an excerpt from Fred:

    Last week I heard some shocking numbers about salary levels for certain kinds of engineers in the bay area. I checked them out with a few of our bay area portfolio companies and they were more or less corroborated.

    The tight technical labor markets in the bay area, NYC, and a number of other regions in the US are making it hard to scale software businesses without burning massive amounts of cash.

    He goes on to argue that (startup) companies now need to think about scaling in other/remote locations sooner than they ever have before — basically as soon as the company hits about 50 engineers (or 100-200 employees).

    Many companies are now working with a distributed workforce. Supposedly 2/3 of the global workforce now spends at least one day of the week working remotely. I almost never work from home, but I do get how this is possible.

    So what is happening is that engineering talent is spilling over into secondary markets out of necessity. There’s an economic imperative to colonize. But I would imagine that, at least initially, most of the economic benefits accrue to the colonizer.

    Photo by NASA on Unsplash

  • Risk, uncertainty, and opportunity

    For two reasons, I really like Fred Wilson’s recent blog post on hypothetical value to real value. Firstly, it is structured in the way that I think good blog posts are structured. He starts with a personal story (about this son) and then uses that to take a position and impart some knowledge about the venture capital industry. It makes for a more engaging read. Secondly, I like how he describes the journey and spread between hypothetical value and real value:

    Venture capitalists and seed funds and angel investors make or lose money on the journey from hypothetical value to real value. And when the spread between the two narrows, the money we make is less. When the spread increases, the money we make is more. It is easier to drink your own Kool Aid in the world of hypothetical values. You handicap the odds of winning more aggressively. You trade ownership for capital at work. You accept the new normal. Real value doesn’t move so fast. Because it is right in front of you. You can see it. So it is not prone to flights of fancy. I try to keep this framework front and center in my brain as we meet with founders and work to find transactions that work for everyone. I find it to be a stabilizing force in an unstable market.

    All of this is related to the notion that you make real money when you’re right about something that most people think is wrong. Because that would be hypothetical value. If it were real value, then everyone would simply believe it. It would be “right in front of you.” And this is pretty much true of all competitive marketplaces, including the real estate industry. Risk and uncertainty create opportunity.

    Photo by James Sullivan on Unsplash

  • Is Toronto’s tech ecosystem too US-centric?

    The Wall Street Journal’s recent piece about “Silicon Valley invading Toronto” is, in my view, describing a generally positive outcome.

    We are one of the largest cities in North America (the exact ranking depends on where you draw the urban boundaries).

    We have more enlightened views around foreign and high-skilled workers (I was given a short window in which to leave the US after I finished my first graduate degree there).

    And we have a large and highly educated pool of tech talent (the salary differential discussed in the article looks to be, at least partially, a result of the weaker Canadian dollar).

    US companies are gobbling up office space in Toronto. And presumably, this is one of the reasons why 139 new flights were added between Toronto and Francisco over the last two years. (Source: WSJ)

    However, I do agree with the remarks from people like Jim Balsillie (Blackberry) and Harley Finkelstein (Shopify) that a better outcome would be the creation of more massively successful Canadian tech companies.

    As Finkelstein points out, there’s a big difference between 100,000 square feet of space for the HQ of a new and growing Canadian tech company and 100,000 square feet for a new branch or satellite office.

    The stats we read in the papers about the number of tech jobs being created in Toronto generally don’t speak to composition. Where in the value chain do these people sit? Where is the value accruing?

    The intellectual capital is here. And we should be doing everything we can to foster and finance new homegrown ideas and businesses.

    Image: WSJ

  • WordPress buys Tumblr for (only) $3 million

    Last week it was announced that brandondonnelly.com/ (which is what I use for this blog) had purchased Tumblr for around $3 million. This is, of course, after Yahoo had purchased it for $1.1 billion in 2013 and later wrote it down, having never figured out how to monetize it. Yahoo lost its shirt on the investment. I am sure you’ve probably seen some of the headlines and searing commentary online:

    I used Tumblr every day for more than 5 years. I started this daily blog on it because I had already been using it to share and collect photos. At one point Tumblr had more active users than Instagram and Pinterest combined. But eventually it lost its way. Yahoo (and later Verizon by way of its acquisition of Yahoo in 2017) didn’t know what to do with it.

    And so at the beginning of this year I said goodbye to Tumblr and switched this daily blog over to WordPress. A big part of that decision had to do with the fact that Tumblr was never really designed for long-form blogs like this one and its mobile support was even more appalling for this use case. It was impossible to write on an iPad. Switching was the right decision. I should have done it sooner.

    But now Tumblr is owned by brandondonnelly.com/. At $3 million, it feels like they're almost starting again from scratch. Maybe they'll figure Tumblr out. Or maybe they won't.

  • The reversion of European cities

    This recent Economist article makes the argument that, despite the recent (and sometimes annoying) proliferation of electric scooters across Europe, we probably shouldn’t be that grouchy about them. And that’s, “because the rise of the electric scooter is part of a broader and welcome phenomenon: the gradual retreat of the car from the European city.” By way of one example, by next year, Paris will have grown its bike lane network by 50% in five years.

    The article ends with the point that, while this may seem like a “revolution,” it’s actually a “reversion.” European cities such as Paris and Antwerp (examples from the article) were both built before the advent of the car and were never really designed for it, although Haussmann’s wide avenues certainly helped. All of this gets back to a point I tried to make over the weekend with this post about driving and parking, and the relevance of urban form.

    Reversion is a lot easier than a revolution. And for most North American cities, a revolution is what’s needed if we are in fact serious about a post-car future.

    Photo by Z Klein on Unsplash