Please enjoy ARK Disrupt Issue 122. This blog series is based on ARK Brainstorming, a weekly discussion between our CEO, Director of Research, thematic analysts, ARK’s theme developers, thought leaders, and investors. It is designed to present you with the most recent innovation takeaways and to keep you engaged in an ongoing discussion on investing in disruptive innovation. To read the previous issue, click here.
1. Subscription Businesses Are Booming
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Everywhere we look, subscription businesses are booming. AmazonAMZN announced a few weeks ago that its Prime service hit 100 million subscribers, while NetflixNFLX now has 125 million subscribers, SpotifySPOT has more than 70 million paying members, and AppleAAPL has 240 million accounts paying monthly for iCloud and Apple Music.
Subscription is not a new business model, so why is it booming now? The answer lies in the internet. Subscription businesses thrive if the cost of customer acquisition is below the lifetime value of the subscriber. On the internet, businesses can reach customers easily and cost-effectively, with brands catching fire overnight if they go viral. Startups with creative ideas can reach consumers as effectively as established companies. Importantly, they are not limited by geography thanks to the internet’s global scale. Finally, monthly subscriptions are more user friendly than micropayments which require a decision with each payment.
Now several new subscription businesses are emerging: StitchFix for clothing, Medium for writing, Blue Apron for food, Lyft for transportation, among others. In each case, the one-two punch of mobile and digital payments is making customer acquisition and monthly purchases almost frictionless. That said, these newer subscription businesses are in early days and will need time to prove their viability.
The internet should reach five billion people in a few years’ time, pointing the way to a one billion+ subscription service during the next five to ten years. Exciting days ahead!
2. The Cost of a $200 Remittance
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This week, the World Bank published data on annual global remittances, which increased 7% to $613 billion in 2017. Low- and middle-income countries accounted for the majority of remittances, $466 billion. The top beneficiaries were India ($69 billion), China ($64 billion), the Philippines ($33 billion), Mexico (($31 billion), and Nigeria($22 billion).
The growth in remittances last year occurred despite their high costs, which still average 7.1%, well above the 3% that the World Bank has targeted for sustainable development, as shown below. Blockchain technology could provide a solution to this problem, potentially freeing up $25 billion and adding significant momentum to the formal remittance market while taking share from the underground market.
The Cost of Sending $200
Source: World Bank Migration and Development Brief 29.
3. The Subscription Business Model Enters the Industrial World
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Digital subscription models are taking off, but physical subscription models are in their infancy. ARK believes that robotics could provide a compelling subscription opportunity. While Teradyne’sTER collaborative robots are relatively inexpensive at ~$30,000-$60,000, compared to traditional industrial robots at ~ $120,000, the upfront costs still can be an intimidating to a small manufacturer investing in automation for the first time.
Turning the capital expense into an operating expense, subscription models could give manufacturers the opportunity to test automation with very little risk. Two private companies, Ready Robotics and Hirebotics, are addressing this opportunity in the robot space. In a recent article, the Washington Post highlighted the need for automation, given the significant labor shortages cropping up in the US.
This week, Teradyne enhanced its collaborative robot offering with two new acquisitions, Mobile Industrial Robots (MiR) and Energid. As shown below, MiR makes easy-to-use collaborative autonomous mobile robots (AMRs) designed for industrial use cases. Unlike Amazon’s Kiva robots, MiR’s have LiDAR to map surroundings in factories where floorplans can change frequently. Energid’s motion control software also should help improve Teradyne’s Universal Robots capabilities.
4. Mammoth Biosciences Launches Diagnostic Tests Powered by CRISPR
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One of the inventor’s of gene-editing, Jennifer Doudna, announced that she and a group of researchers from Stanford and UC Berkeley intend to leverage CRISPR technology for molecular diagnostic tests. Operating in stealth mode until last week, Mammoth Biosciences can detect living organisms involved in anything from infectious diseases to soil biomes, and aims to provide affordable and reliable diagnoses in minutes. UC Berkeley granted Mammoth Biosciences exclusive licenses for CRISPR Cas12a, also known as Cpf1, and Cas13a, nucleases that target DNA and RNA.
On paper tests the size of a credit card, Mammoth’s consumers will provide samples of their blood, urine, or saliva. Then, they will take smartphone photos of the test strips, download Mammoth’s app to transmit the information, and then check for results within 30 minutes. If a virus or biomarker is present, the test strips will change color.
Mammoth Bioscience’s technology could transform a number of sectors, among them the following:
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