Cosmic VC

Amazon shareholder letter circa 2000

2011-12-07T09:20:00.001-05:00

Classic innovation vs efficiency thinking

Per Scott Devitt from MS

In the 2000 shareholder letter, Mr. Bezos stated, ""Price performance of processing power is doubling about every 18 months (Moore's Law), price performance of disk space is doubling about every 12 months, and price performance of bandwidth is doubling about every 9 months. Given that last doubling rate, Amazon.com will be able to use 60 times as much bandwidth per customer 5 years from now while holding our bandwidth cost per customer constant. Similarly, price performance improvements in disk space and processing power will allow us to, for example, do ever more and better real-time personalization of our Web site.

In the physical world, retailers will continue to use technology to reduce costs, but not to transform the customer experience. We too will use technology to reduce costs, but the bigger effect will be using technology to drive adoption and revenue. We still believe that some 15% of retail commerce may ultimately move online."

Efficiency vs Innovation

2011-12-06T13:27:00.001-05:00

It seems that about every nine months I visit my Yahoo mailbox (Yahoo has the largest installed base in the US with 282mm identities and is second to Hotmail worldwide). On my most recent visit, I was greeted with an extensive upgrade. The home screen was touting a 2x speed improvement, better spam control, new social features and unlimited attachment storage; with a whopping 100Gb limit/attachment (in cooperation with YouSendIt). All these adjectives sounded great. Indeed, it's much improved, and it's as if the team went down a check box of features in a methodological way and executed in an efficient manner. Yet, sadly, like much of Yahoo today, it offers little in the way of real innovation or insight. It lacks passion.

The stagnation of Yahoo, while incredibly visible, is not a solitary event, in fact, after reading Jane Jacobs' Economies of Cities and Carlota Perez's Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages (thanks to Fred Wilson for suggesting it) there's a real science into why Yahoo is a shining example of markets ruthlessly punishing companies losing their innovative way, while not embracing the next logical developmental milestone; efficiency. Microsoft, as an example of successfully crossing this chasm. It is hardly innovative, however, under Steve Ballmer's leadership, it's undeniably an efficiently run organization.

Markets experience overlapping cycles. For example, we have the ebb and flow of financial markets, represented by the financial exchanges and innovations from fleet footed vendors spurring the advance/decline of production markets. Each are related and often complementary, but with different foundations and drivers. Carlota Perez highlights that new markets are financed through production capital (much time and innovation and relatively little money), funding the ways and means of production. Later, financial capital (facilitated by the banking industry) supplies the means for massive deployment and broad sharing of wealth (ignoring for this discussion inevitable bubbles). While Jane Jacobs points to the drive to efficiency as the antithesis of innovation. Using the growth of cities, and the failure of planned urban renewal as examples, she gives a series of cases of how central planning stifles innovators.

From the outside, I assumed that when Carol Bartz was brought on board at Yahoo, she would be a terrific hire. A no nonsense manager with a purposeful perspective, it seemed that she would bust through the layers of bureaucracy holding back the Company from building on its success and innovating within the social and mobile waves hitting the industry. The Company under her leadership did pare down the bureaucracy and had clear lines of authority, but it lacked a fundamental and axiomatic truth. In this industry a company must evolve and innovate in order to prosper. Yahoo did neither.

Press reports about numerous Private Equity players preparing bids to acquire Yahoo are logical. With an abundance of Financial capital available, they surely will bring efficiencies new owners will demand. I just hope, that building on the failure of Ms. Bartz, there is a remnant of the culture that made this a once proud company and they uncork the beauty of Production capital which is so sorely needed.

Do It Yourself (DIY) vs Do It For Me (DFM)

2011-10-20T15:50:00.000-04:00

Two unrelated events over the past few weeks highlighted for me an acceleration of change in the application and infrastructure ecosystems. Until I 'upgraded' to iOS5 on the iphone, and Apple killed the independent Siri application, I had been running Siri on my 4. Its feature set (along with Dragon Go!) is billed as a voice assistant, really a software layer that sits across a myriad of databases and retrieves the data it thinks you are looking for. Rather than opening a specific application and conduct a search, the application interprets and parses verbal instructions, searches various databases and returns an answer it thinks solves the question at hand. The application essentially provides a service for me (DFM) which replaces manual searching (DIY).

A multitude of examples abound for DFM services which range from Box.net (storage/back-up), Google or Yahoo News (algorithmic filtering), to Amazon's suggested items to buy. Many are assuming the role of gatekeeper or curator for the personalized serving of information or commerce options.

I was exposed to another example of DYM in the techie world while attending PuppetCon with Cloudsmith's management. Firms such as Puppet Labs are shielding administrators from layers of complexity via their automated IT management solutions, which enables IT professionals to manage dynamic cloud infrastructures. Companies, such as Twitter and Match.com, could not provide the massive global solutions they offer without folk like Puppet. Creative programmers and business folk are leveraging the latest infrastructure advances to mask complexity, enhance access, and increase utility. A killer combination.

Each time we get an advance in processing, bandwidth, storage or displays, programmers busily optimize/advance their programs by packing in more and different utility for users. It's one reason why older devices seem to degrade over time; the upgraded applications are no longer designed for their device and, the last generation(s) are ill equipped to keep up.

Here's a video of Eli Pariser describing the potential downsides to enhanced filtering. It's really informative:

Techstars NY

2011-10-19T09:23:00.001-04:00

Yesterday, one of the NY based technology incubators, TechStars, hosted a session for its most recent 12 graduates to present their companies to a group of 500 investors, peers, and company executives. It was one of the most impressive young company events I have been to in many years and highlighted a few NY-centric points:

This generation of companies is far different from their brothers/sisters of a decade ago. In a similar venue (though before incubators) just about every presenting company would have highlighted a business that was perched, precariously it turned out, on three fragile letters....CPM. This group of entrepreneurs were starting companies that ran the market gamut, ranging from infrastructure to application and business to consumer.
The number of second time entrepreneurs, with pedigree from great companies was notable, as were the dropouts from Penn and the one high school coder
The scope of early relationships/investors with Google, MSFT, Amex and Accel was impressive

Here's a brief summary of the presenting companies, in order of appearance:

Contently- marketplace which connects writers with brands. Thesis is that every brand needs to produce their own content. Issue is to ensure they get high quality content. Contently manages the matching, workflow and payments. Organizes the market, like Bitwine, and is compensated as a % of the deal. Have 2,000 writers in market now. AMEX Open Forum is now a partner (not sure what this means).

Ordr.in- restaurant ecommerce like a Sabre for food. GOOG ventures is a seed investor.

Urtak- A polling infrastructure (think Q+A which you can embed on your site). The company objective is to organize the world's opinions, while increasing engagement (and providing metrics) on the sites which use their infrastructure

MobIntent-A tool for the creation, optimization and management of mobile ad campaigns. Mobintent simplifies the workflow across medias and claims 3x uplift in cost/click over Admob

Spontaneously-mobile application to enable people to meet friends at the last minute; or a tool to manage your free time

Piictu-a visual network based on a mobile app. Photos are now a foundation for interaction rather than static images. Piictu creates a network around the photos. 130k downloads in 8 weeks. Users spend 2.5 min each app session. 62% of users post photos. SoftBank, BetaWorks and RRE were seed investors

Sidetour- 'Peer to peer market for experiences'. For example, booking a luge track session with an Olympic competitor. Or to paint graffiti with an artist. The company earns a 20% fee for running the marketplace. Avg price per booking has been $60/person with 6 people per session. Foundry and RRE are investors

Ambassador-social referral platform to help brands create and manage (incentivize) ambassadors. Www.getambassador.com Have an API which integrates into your site and they handle the tracking/management.

ChatID- let's companies engage with consumer via chat, but does not have to be on the company landing page (e.g. talk to a Sony rep via the BestBuy site). Feels like a LPSN competitor, but is more broadly architected to work across many chat front ends. Co-founder is on the XMPP (Jabber) committee. It works from any device and on any site. 70% of companies have chat on site, but conversation must start on their site, until now. The chat market has silos of incompatible systems, their click to chat, keeps customers on site, while engaging with multiple vendors.

Wantworthy-avg woman spends 25 minutes browsing shopping sites/day for entertainment. Company's objective is to pioneer 'time shifted buying' via a portable wish list invoked from a widget downloaded to your toolbar

Dispatch- centralized cloud management. Drag and drop amongst your services and share content www.dispatch.io In a world where I am now using five different cloud services, having one unified layer, with social sharing capabilities is compelling. I have signed up for the beta and anxiously await its release.

Coursekit- social network for education. Going after Blackboard. A place for students to download files, and stay to discuss/share content. Free download for individual teachers.

Platform philosophy

2011-10-13T08:36:00.002-04:00

Attached is a great post from a Google Engineer, Steve Yegge, which appeared in SAI today. The author is extolling his managers/team to think of GOOG+ (and other applications) as a platform which enables others to write to it, creating a win/win for all (though not necessarily a proportional win/win).

A new set of ears and eyes

2011-09-12T13:15:00.000-04:00

Over the past couple of months, I have noticed a series of iOS applications which utilize the camera attached to a phone or iPad that bring order to the 'chaos' around me. In each of the applications the image taken by the camera is compared against a specific database of objects (or GPS location) to give search results without ever invoking a browser. For example:

Zagat updated their search capability with an eye icon on the top of the application. If you scan your camera around a street, up comes the summary restaurant rankings, with no clicks, and no 'formal' search invoked

Fooducate uses bar codes to give you nutritional rankings, and suggestions, for packaged items

Skin of Mine uses pictures of your skin (moles, spots, etc) from your camera to search against their database of skin disorders and either analyzes the issue, or offers to put you in touch with a professional for a consultation. Nice lead generation for the derm folk, and a streamlined process for the consumer

LeafSnap, referred by my farmer friend Ron, enables you to identify various trees by snapping photos of their leaves.

Google Shopper, is a mobile search tool that relies on a camera for searches on items outside of their 'Featured items'. For some items, such a books, no bar code is required, as it scans the image of the cover and matches it against their database. It's really amazing to see it in action and it's GPS abilities increases its relevance. eBay also lets you search for scanned products via RedLaser (acquired last year) or its own application.

I suspect that camera and/or voice enabled applications such as Siri (acquired by Apple) or Dragon Go! are now well along the way of fundamentally changing a user's interaction with their computer/phone/tablet. From past experience, we know that when the user interface substantially changes, such as with Windows, various browsers, or the iPad, tectonic market shifts follow.

Random bits

2011-03-04T16:38:00.000-05:00

Interesting people have raised a number of points that I need to think about:

1. Now that Facebook has 600 million members, and has an ARPU (Average revenue per user) of $3.00 I suppose that majority of future revenue growth won't be centered on new member acquisition, but on ARPU. Shifting their emphasis to establishing a platform has energized a development ecosystem of tens of thousands. Inevitably, they will have to declare which applications (e.g. payments) will be subsumed into the platform. I would not be surprised if they want to grow ARPU by 5x over the next three years.

2. Vendors in the online commerce arena are innovating at a tremendous pace. The LA Times utilizes Groupon to power their platform, the NY Times is working on their own group buying product, and local papers, such as the Bergen Record have entered the market too . To top it off, MSFT has partnered with The Dealmap, which aggregates group deals by city. Moreover, Paypal is now offering 'exclusive' sales to customers via Ruelala Customers, (e.g. SMB's) now have a raft of choice and group buying margins surely will compress....no doubt more innovation is on the near term horizon

3. With the FTC about to open hearings on privacy, many behavioral advertising companies, which rely on cookies, will be under pressure as sites cleanly give viewers the opportunity to opt out of being tracked. At the same time, many sites are investing greatly in adding engagement tools, which enable far greater on-site profiling. It just may be this is the best thing that happened to many of the now protesting vendors.

4. Isn't it fascinating that people often choose less quality and greater price? For example, streaming video offers less quality than DVD's, MP3 is has lower fidelity than analog systems, and digital cameras have less resolution than analog. Luke Williams of Frog Design, has a number of provoking thoughts about innovation and the way that changing behavior is paramount to success by new vendors. He says that companies that concentrate on incremental change are eventually doomed (I felt he was talking about MSFT).

The next day

2011-02-22T12:54:00.000-05:00

Over the years, I've participated in many theoretical academic debates over which is more important; the CEO or market. It's similar to the 'nature vs nurture' parable which modern genetics has resoundingly answered (both).

It's true that rising tides lift all ships, but it takes a captain to determine when to sail, as well as choosing the proper port to leave from and to enter. I've come to greatly appreciate CEO's and the myriad challenges they have in the day to day implementation of company plans and strategy development. Coming off a few board and new prospect meetings only highlighted this appreciation. Let me share a few of 'the next day', after the board meeting issues these CEO's are dealing with:

1. The pivot- Six months ago this company introduced its product to the market. A beautiful looking social application which has garnered a fair amount of traffic, but basically zero uptick to a paid version which fuels their 'freemium' business model. Angel cash is getting tight and a new module, enhancing the value of the base solution will race against the clock. Build momentum to attract new capital or shut out the lights.

2. The approach- After working 4 hard years and creating value, this company has been approached to be acquired. The CEO is moderating disparate shareholder interests where some want to defer a sale till greater value is earned, some want to sell now, and a few shareholders are agitating for a large financing round.

3. The team- The CEO hired what seemed like a wonderful senior officer, introduced him to investors and integrated him into the organization. It's six months later and he thinks it's a bad hire; the fit's just not there.

4. The acceleration; or 'what's next'- Business is great, metrics are up, team is happy. But (and there's always a but) all agree we will see slowing growth in the next 18-24 months. Got to find another market or add more value to existing customers. If no solution is found, we should exit soon.

These may seem like distinct issues, but a CEO faces these, and many more, multiple times in a year. If there's a blind spot in her vision, it will surely be exposed and may very well likely maim the company. The best CEO's address the issues rapidly and move on to 'next'.

Lowering the 'Why not 'barrier

2011-02-10T17:55:00.001-05:00

I had lunch with John Frankel the other day. John is a prolific investor in early stage internet companies through ff Asset Management and a person with well formed opinions about where to invest. Next to his office is a magnificent building. I was checking out its history and architecture via Wikihood on my iPhone when John spied me in the middle of my research and it sparked a discussion on how it was possible, but so difficult to do this same research only 4 years ago. Though possible, it would not have been real-time, would have taken multiple applications to perform, and by the time I realized what was necessary to pull together the project (and a project it would have been), I would have run out of patience and been onto my next task.

John calls this the Why barrier. He goes on to explain that the layering of API's, proffered free of charge, has created the opportunity for so many applications to offer so much to so many for such a 'cheap' price that the reasons to not gather information, or use an application are falling every day. Apple has passed 10 billion downloads in its App Store, with 7 million downloads in the last 12 months. Moreover, it's only getting easier to find and download applications, a trend he sees only exploding as inter connectivity, and the vast data exposed and collected, married with GPS data, only increases application utility.

Why not?

COO

2011-02-07T09:26:00.000-05:00

I met with a young pre-revenue company last week and asked the founding CEO what his post-funding plans were to augment his team. He replied that the key hire required was a COO to free him from the day to day details so he can concentrate on strategy and business development. It was a fair resonse, moreover, COO is an ambiguous title, a role that shifts from company to company. I think of it often as being employed as a VP who is first amongst CEO report equals.

The meeting got me thinking about the role of a COO in such a young company. I probably have a faulty memory, but outside of co-founders dividing up titles (e.g. you take Chairman and President, I'll take CEO and Director), I can't recall any successful early stage company employing this structure. I think there are a few important reasons for this:

1. Young companies need flat organizations. Too many reporting layers slow response time in an era of agile development and fast market shifts.

2. Companies need a singularity of leadership associated with vision and execution. This can be achieved with co-founders, but it's really hard, post founding, to bring on board a 'co-leader'.

3. The CEO must dive into all the details, filters hinder her ability to get a visceral feel for what needs to be done. If the CEO is not detail oriented, or has a blind spot for a key company function, odds are that is the area where the company will suffer.

Tension in the shift from application to platform

2011-02-01T08:53:00.000-05:00

Facebook announced that all Facebook games must use Facebook Credits starting July. This is mandatory, and I am sure there are great reasons for the standardization of its proprietary currency on its proprietary platform. To somewhat ameliorate the pain, and as a carrot to match its stick, Facebook will offer prominent placement on the games dashboard as an incentive to make the switch.

From an economic perspective, and similar to the tax paid to other proprietary platforms (e.g. App Store), Facebook takes a 30% share of all purchases. Some key games are not yet using the credits system as Zynga’s CityVille (100MM users), has its own in-game currency. Time will tell if this will become an exception, or a war.

Few software companies, led by MSFT, have navigated the tricky waters around the shift from offering mostly solitary applications to offering a platform integral for other vendors to build upon. Facebook made this transition in record time with the introduction and rapid adoption of the Open Social graph. It has been a stunning success as within nine months thousands of companies have written their applications to tap into Facebook's data flow and add value to tens of millions of users. This transition firmly established FB as the defacto standard for social computing; its Operating System...it's 'dial tone' is now unique and unchallenged.

With this success comes a fundamental cultural issue for FB and its ecosystem. Now, instead of concentrating its efforts solely upon the satisfaction of its users (and customers), FB has a litany of 3rd party developers, serving as a proxy for millions of their users, to satisfy. As the shifting sands of 'interests' between FB and its ecosystem change, tension will arise. For example, it's not at all unlikely, in fact highly probable, that FB will emerge as the most acquisitive software/internet company of this decade. With so many broad and mostly untapped markets (e.g. social commerce to name one) available, it is natural that the company's growth focus will shift from garnering more users, to monetizing them. This shift, or flashback from application to platform to hybrid model, will place FB in direct competition with its ecosystem.

FB Credits comes on the heels of Facebook Messages, a unified application which links texts, chat and email together. Perhaps, of great utility for its users; certainly a great threat to independent vendors. For those of us who watched the MSFT 'movie' and are witnessing Apple's ascent, all should expect FB's platform to expand wider, eclipsing many adjunct segments.

Back to Credits, Zynga may have sufficient critical mass to withstand the assault today, perhaps, it should be the foundation of an application arm within FB in the not too distant future? In any event, I expect prudent CEO's to build applications, and investors to concentrate diligence, on whether there is expected to be sufficient value for members, whereas an independent company can they build its own social graph; yes, connected to FB, but wary of its intent.

Great Steve Jobs interview from '09 on Flash, "courage of convictions",phone left in bar...

2011-01-21T17:42:00.000-05:00

The Fisch Bowl

2011-01-20T09:14:00.000-05:00

Carl Fisch is a teacher at Arapahoe High School in Centennial, Colorado and put together this wonderful presentation on the pace of change.

Sharing the wealth

2011-01-18T16:58:00.000-05:00

I received 5 emails this AM promoting different crowd enabled discounts for restaurants, nail salons, and kids birthdays. Each invitation was for the benefit of a small business which I had never before frequented. It got me thinking.

It's amazing the shift we have seen in the past three years in company creation. We are witnessing history's fastest growing firms across multiple segments:

Entertainment company- Zynga

Communications company- Twitter

Commerce company- Groupon

New market (social networking) with a huge leader, Facebook

Delving a bit deeper, it seems as if the elusive riches to be garnered by providing useful marketing and lead generation services to the 4+mm Small and medium sized businesses (SMB) will finally be cracked. We have seen a glimmer of this opportunity with the success of Constant Contact (CTCT). This public nearly $900mm market cap company has served more than 150,000 customers with its ubiquitous e-mail marketing solutions. Historically, the three largest obstacles to success in the market were architecting a truly easy to use solution at a reasonable price, surmounting the high cost of customer acquisition, and dealing with high customer turnover (churn).

In the past two years multiple local oriented options have become available to businesses, led by search (cross platform) and display; but now expanding to social, email, group buying, affiliate, and mobile advertising programs. Each has great merits to help SMB's reach their potential customers more efficiently. Though not directly competitive, each market will also vie for the same marketing budget allocation. I suspect we will see a dramatic shift/rise in SMB spending; first away from local print and later split amongst print and more accountable mediums.

Short video on Why Facebook was valued @$50B

2011-01-06T05:00:00.002-05:00

The numbers are huge, especially the new friend requests and invites:

Generation skipping

2011-01-05T12:05:00.000-05:00

Goldman was once the gold standard for technology banking. They had lead relationships with IBM, lead the Microsoft IPO, then missed the Internet when Rick Sherlund left for an ill fated Hedge stint and saw Morgan Stanley's Mary Meeker grabits mantle.

The Facebook deal puts them back in the pole position. Using capital as a weapon, smarts as currency and courage in its convictions, Goldman has bought and clawed its way back to the top. The deal highlights entree, exclusive distribution and a great ability to connect the dots.

They missed a generation, but are back.

You'll love the video link:

A guy walks into a gym and

2011-01-05T05:00:00.007-05:00

sees a pharmacist, a jeweler, a publisher and a toy store owner.

This is my weekend basketball game restricted to non-athletic, trash talking never-beens who enjoy communal grabbing, sweating and cussing. Losers hit the sideline and talk business and Sunday's chatter was really illuminating.

The pharmacist is using Constant Contact for e-mail communications to customers ($30/month for 1500 mails). He's fixated on maintaining market share vs the big boys as CVS and Costco are mere short drives away. His challenge is to attract new customers, while differentiating his store with a service oriented mantra and he's experimenting with $100 thank-you coupons for people who refer friends who fill prescriptions at his store.

The jeweler has an online presence which lists inventory, but no prices. He does not want his walk-in customers to know they can get better prices from him on-line. He has no lead generation or prospect tracking system. He's really interested in figuring out what to do as more of his customers are flocking to eBay and Blue Nile.

The publisher puts out a quarterly free advertising supported glossy hyper local tome that concentrates on fashion, home/landscaping, and charity functions. His 2 person sales force doubles as editor and photographer. They have limited online presence as he's just not sure how he would drive traffic to the site and whether readers and advertisers will have the same positive sensation looking at the layouts online vs holding the glossy paper. Nonetheless, he's trying to figure out how to value a premium domain name, in the heart of his geography, which just became available. Asking price is $10k and unique organic traffic is in the upper hundreds per month.

The toy store owner has a monthly online ad budget. He's just shifted 50% of his spending from GOOG Adwords to Facebook. The ability to target his offers by gender, age and geography has produced encouraging, albeit early results. He's looking for a central dashboard to monitor all his programs (mail, GOOG, FB, and email).

It's so clear that small business owners are grappling with a sea change in the way they reach and maintain their customer relationships. They are willing to experiment, but feel like the sightless in a savage land. What is clear is that Groupon's early success is but the tip of the iceberg that will float many entrepreneurial ships carrying small business owners into the digital age.

The circle game

2011-01-04T05:00:00.001-05:00

I met with a few fellow software/internet investors and the oft discussed topic of the 'web is dead' long live mobile applications came up. Elad Baron of PlumWillow also brought up the subject recently.

In the '80's application software heralded the death of timesharing. Then, in the late 90's desktop software was declared dead as it was thought browsers would support rich applications delivered by huge pipes. This did happen but these cloud based applications provided a different type of an experience, one that was more information and real-time oriented. Information at my fingertips was redifined and broadened; it was now the world's information. This had the effect of slowing the growth of desktop software, but not obviating the need for it. The market expanded in a way that forecasters didn't expect and grew much larger than most dreamed.

The rise of mobile applications are again changing our computational behavior. From my own experience, I am spending less time on my desktop and more on my fingerheld PC (aka a smart phone). I have 52 applications installed on the device, yet this pales compared to my kids and many of my peers. These applications are for the most part quite different from a generation ago in that they rely upon the internet to be valuable. A combination of instant updating, 'social' awareness, and GPS functionality has greatly expanded their utility. In fact, it's getting more difficult to determine when I am in an application or when I'm using the web to search through Yelp, my mail, or to read the news.

It seems as if the market is again expanding in unexpected ways. It's 'dead' if the area you have focused on has stopped growing, or is shrinking. It's a new world, if your market is growing.

Looking forward again

2011-01-03T12:26:00.000-05:00

I've just completed my annual exercise of looking at the new technology devices/applications I have adopted during the just completed year. I don't think it's as expansive as last year, but quantity may not be the indicator of the extent of the platform shift we are seeing as fingertip held computers exploded on the scene last year. At last count 700,000 'smart phones' were being activated each DAY based on the Apple, RIM and Android platforms. Gone from the conversation, but still trying are are Nokia, MSFT and Ericsson. Each frantically trying to carve out a reason for existence in a market which is passing them by.

Here's the cosmic new list:

1. I became an Apple fanboy. First it was the ultimate convergence device the iPad. It united my TV viewing, news reading, and communications. To the dismay of my wife, they united at all hours in my bedroom. Jobs is right, the device is magical and his comments on the introduction when he said that he's not sure how it's ultimately going to be used, gave great insight into how an entrepreneur's passion can win...over the bean counters.

1a. The applications on the iPad, with its gesture based control, are magical too. Of special note are Star Walk for astronomy, The WSJ, NPR, Google Voice and my favorite, DoodleJump. Of course, Findmy phone willbe the one that will save my bacon.

2. After a brief fling with a Samsung Android device powered (though the right word is crippled) by Verizon, I adopted the iPhone. It's really extended the internet to my mobile fingertips and, unlike Blackberry usage, it's now 80% web/application based, rather than 80% mail used. Ever notice how folk in elevators now are buried in their screens and no longer look at shoes?

3. Facebook Social graph introduced in April and has transformed the application into a platform which is integral to the success of a host of follow-on applications. So far, I've enabled 22 applications to interact with my Facebook social grid. It looks as if the 'social dial tone' is the operating system of this decade.

4. Played with many applications in Google Labs. The list expanded from 5 pages to 7 pages of tools, trifles and applications

5. Dropped using the Kindle as the iPad implementation is good enough

6. Installed Adobe Photoshop Elements 9. Amazing to see how a version 9 of anything can be so replete with bugs as to be practically unusable.

7. Began using bar codes to get more information/prices on items. Scanbuy Redlaser and TheFind are the three I use most often. They are so different and each has its strength/weaknesses.

8. Watched my daughter create an outfit, get comments from her friends, then purchase a pair of shoes on PlumWillow

9 . Geo location based capability is no longer unique many of my applications have them and if they don't they shortly will. Leading the list of most useful is Yelp's implementation.

10. Donated my daughter's Nintendo DX. Fingercomputing, and it's drive towards 'permacheap' applications and functionality has obsoleted this device.

A Lion in Winter

2010-12-08T08:40:00.000-05:00

Carol Bartz gave a freewheeling interview at the 92nd Street Y last night. I like her straight forward style and think it was what Yahoo needed to untangle itself from too many weak strategic initiatives which left the once proud company listless. The jury's still out on whether, after two years of clean-up, she can ignite a growth story. I suspect, the answer to this will be her legacy at big purple. Following are selected snippets from the conversation:

Vision- "To be the supplier of the Internet of 1" She went on to explain that, with over 240mm web sites it's impossible for a person or a company to effectively gather information. She views Yahoo's primary mission to be the curator of information and add further value by personalizing it in a format that maximizes the relevance for the user and the value for the advertiser.

Timing- She was a bit defensive on the period of time it has taken for the company to show real positive revenue growth (1.6% trailing 12 month rate) and noted that it took Steve Jobs 7 years to reignite the growth engine at Apple click here to see APPL's chart to see that, outside the '00 bubble, the company was basically flat from '87-'04. Be that as it may, she's optimistic that the initiatives in place should get them back on the growth track shortly.

Competition- She views Facebook as their #1 competitor. I was surprised by this as I don't view FB as a curator of information from other web sites

M&A- She confirmed they did try to buy Facebook 4 years ago. The bid was $1B and the ask was $1.5B. She was not asked, and did not comment on the rumors that they bid on Groupon last year. AOL was mentioned a few times and her dismissive response was "hahahhaha". When looking at transactions, they first look to buy users, content, then advertising technology and finally engineers.

For comparison, here's the trailing revenue and profits for the top 5 public internet companies:

Company Trailing 12 month revenue Profit margin %

Yahoo $6.5B 16

EBAY 9.0 29

AMZN 30.7 4

GOOG 27.6 29

AOL 2.6 NA

Here's a link to an edited version of the interview

Conversation with a pirate

2010-12-07T15:42:00.000-05:00

I had a chance meeting yesterday with a young lady in the local neighborhood take-out joint. While waiting for my order she saw me playing with my RedLaser barcode reader on my iPhone. She took hers out too and asked me if mine was jail broken. Mine is pure Apple, so I didn't have anything to really contribute as, she enthusiastically showed my hundreds of her free downloaded applications and a customized interface screen (ATT replaced with her name).

I suppose I'm a bit naive as I never realized the pirate infrastructure was so well formed for the device. Of course, I also did not know that Apple provides tools for jail breaking as noted on GigaOM. Cydia is a GUI for jail broken iPhones and an extensive repository (aka a store) for applications (mostly free). It's incredibly popular with 170,000 people liking it on Facebook

One reason for the popularity is free. The other is a spate of really cool hacks, a top 10 list is noted here.

Great Expectations

2010-12-07T05:45:00.005-05:00

With all that's being written about investment bubbles, I have been thinking about a key difference between '10 and '00 in New York. The foundation of my thinking is based on a wonderful book on Urban Planning by Jane Jacobs "The Death and Life of Great American Cities".

In this seminal work, she explains how a city's lifeblood is its diversity. She highlights diversity in its broadest sense, diversity of housing stock, income levels, pathways to commute to work, etc. In short the combination of diversity and people density leads to a dynamism that makes cities great. I believe this thinking can be extended to markets too.

In '00 the NY Internet economy was precariously perched, like an inverted pyramid resting on three fragile letters; C P M. We had an advertising centric model that collapsed with the implosion of advertising based metric. Today's market is stunningly different. Of course, we have a host of firms in advertising related businesses, however, it's a diverse group of video, infrastructure, SEO, and PPM oriented technologies. But it doesn't stop there. Complementing the advertising arena are paid mobile applications, free to play gaming, communications and payment firms. Adding to this are destination sites in commerce, banking and pharma. You get the picture, diversity in its broadest sense of business models, customers, technologies and infrastructure.

In the past decade a combination of diversity and density has emerged that's led to a dynamism which is making the NY internet market great. Of course, markets will continue to ebb and flow, but with thousands of young companies, complemented by thousands of GOOG, AOL and Gilt Group employees makes today far different than yesterday.

A tale of the tape and the ghost of '06

2010-12-01T09:33:00.000-05:00

Groupon is the fastest growing commerce company the world has seen (33mm subscribers, est 2010 revenues $350mm). Similar to Facebook, it has little proprietary technology, yet has emerged as the preferred place people are using to connect with local commerce. Also, similar to Facebook, pundits first denied the opportunity, derided the founder, sniffed at the VC valuation, admired their success, and are wondering how they missed it.

I think Groupon is now, in part riding the 'we missed Facebook wave'. They deserve it as in an environment where demonstrated growth, a dominant market leadership position in a huge untapped market is at a premium, it's no wonder GOOG is rumored to be in deep discussions to acquire the company. I am just surprised that other companies, noted below are not visibly in the fray....especially after they all 'missed' Facebook (well, Yahoo did try in 2006.

Market cap Growth %

MSFT $216B 25

GOOG $177B 22

Amazon $79B 39

Ebay $38B .5 (no typo)

Yahoo $21 2

3/5 of a mile in 10 seconds

2010-11-30T06:14:00.011-05:00

Following are some numbers which have a common link (posted after the video).

Coca Cola 19,806,778
BMW 3,793,208
Walmart 2,572,429
Microsoft 204,500
Google Chrome 4,094,906
ExxonMobil 213

The above numbers represent the number of people who 'liked' these corporate pages on Facebook. Social based applications have obviously exploded due to their ability to connect people on a common social dial tone (it's happened so fast that 'Facebook' still comes up as a misspelling in Blogger). It's now obvious that this dial tone is rapidly expanding its coverage into the business sector too. Tens of thousands of applications are tapping into the 'open social graph' concept introduced only in April '10 and bringing incredible depth and value to their extended relationship chain. It took less than 5 years from the introduction of the browser for virtually all companies to establish a web presence. I can't imagine it taking more than 12 months for the same to happen using Facebook's social graph.

This is a huge opportunity; using relationships as the base to rewrite the rules used by vendors of services ranging from communications to commerce and search. Moreover, it's being embraced by a community of 500 million strong. Of course, the graph is fraught with many risks (beginning with control of the dial tone by one vendor)...but it's an ecosystem with the potential to be far deeper and rewarding than that supported by the Google search utility and its army of one lonely algorithm.

Think about it, Google, for all its incredible success mostly stands alone. There's little relationship (and zero passion) between me, GOOGLE, my applications and my personal ecosystem (Buzz has been an abysmal and rare non-beta failure). Instead, GOOGLE is surrounded by a cadre of companies employed by the likes of you, me, and Wal-mart, determined to legally break its black box search ranking via search engine 'optimization'. We seldom, if ever, spend any energy or resources to improve GOOGLE as its mostly a remote abstraction. On the other hand, we are, and will volunteer to become far more invested in our personal and professional dial tones.

A short tale of three cities

2010-11-29T10:46:00.000-05:00

Rumors of a $+3B Groupon acquisition have been rife over the past few weeks. The attractiveness of the company is centered around their pioneering an efficient 'call to action' for local advertising, which is such a positive win/win for advertisers and consumers that the 2 1/2 year old Groupon's revenues have surged to more than an anticipated $500mm this year.

With this background of how innovation is creating a virtuous cycle of value creation, I thought it would be worthwhile to take a 30 day 'innovation' look at three of the internet's larger players:

Let's start with AOL. It's mission is "To inform, entertain and connect the world" and touts its brand as something that "stands for creativity". In the past 30 days, here's the innovation they've announced:

AOL Disrupts the Inbox with Project Phoenix by AOL Mail

ADTECH

AOL Grant Program

Yahoo's vision "is to be the center of people's online lives by delivering personally relevant, meaningful Internet experiences".

Yahoo is in the midst of a multi-year turnaround effort and Bloomberg ran a piece here where they mentioned Yahoo's interest in buying Groupon and voicing concerns about the company's direction and growth prospects.

Here is their product related announcements from the past 30 days:

Local Offers (Groupon competitor)

Contributor Network An extension of their Associated Content acquisition for self-publishing

As a contrast to it's senior brethren, here's what Facebook's remarkably similar mission is:

"Facebook's mission is to give people the power to share and make the world more open and connected." As background, more than 4 Billion messages are sent through FB every day.

Two important product announcements made in the past 30 days were the outline of their imminent messaging product and a commerce engine "Deals" which fits with their 'check-in' facility 'Places'.

FB Messaging

Facebook Deals

Finally, a tribute to Leslie Nielsen..RIP

Bulls, Bears and Bubbles- how wrong we can be

2010-11-18T06:19:00.000-05:00

Yesterday, I posted on the 'investing bubble' which many participants and analysts feel is building today. We obviously won't know if they are right for a couple of years. This thinking sparked me to dust off the Sequoia Capital presentation which they presented to a gathering of portfolio companies during the height of the financial crisis in October of '08. It was well thought out, reflected the cold sentiment of the time, and lauded by the press and pundits.

It was also dead wrong advice. It missed the 'change' in the financing environment, missed the 'social' business model basics of building an audience and missed the drivers for exit (growth vs profitability). In hindsight, the time was right to be contrarian; use capital to fund innovation to gain market share and seize expanding opportunities.

Sequoia is a great firm with decades of success behind it. Sometimes, smart and informed people just get it wrong.

Here it is:

Sequoia Capital on startups and the economic downturn

View more presentations from Eric Eldon.

Bulls, Bears and Bubbles

2010-11-17T06:45:00.002-05:00

Much has been written recently about whether we are approaching, or are already in an investment 'bubble'; it's enough to conjure the ghosts of '00. Rather frightful musings, but I think it's valuable to refrain from blanket 'bubble' statements, and instead look beneath the waves at some market fundamentals to determine if the valuation spikes we are seeing is the cause, or the effect of market shifts.

The technology industry is an ocean of trial and error, failure and success. Participants learn lessons, test theories and derive principals. Such principals often are not transportable across shifts in markets and technologies. For example, the harnessing of 'eyeballs' was the watchword of '99, the cussword of '02, and the mantra of '10. There is no economic inevitability of a company's success or failure. Market conditions, execution challenges, and competitive hurdles contribute to a sea of uncertainty which must be navigated to achieve success. Much of the industry's uncertainties can be tied to a decade of overall failure, where, despite some shining moments, we have produced negative returns for investors.

In large measure, we are still paying for the disappointment the technology industry gave shareholders at the beginning, and the end of the past decade. The public markets continue to punish companies with a skeptical attitude towards financing the next generation of leaders. The probability of securing Company investment/shareholder liquidity via an IPO is, and has been, a difficult path. According to VentureDeal, a scant 6 software/digital media/internet companies went public during the 1H '10, resulting in $612 million raised. (A contrarian view, recently posted by Bill Gurley is here)

Moreover, the venture market is shrinking. Here's a quote from Mark Heesen President of the National Venture Capital Association:

“With funds sizes getting smaller and fewer firms raising money, we are experiencing a
period of time in which venture capital investment is consistently outpacing fundraising,
creating an industry that will be considerably smaller in the next decade”

With this background, you would expect a universal slowdown in funding by venture firms. But that's not happening, and in some areas, the bidding for investment is reaching a pitch that sober people, such as Fred Wilson are lamenting:

"I think the competition for "hot" deals is making people crazy and I am seeing many more unnatural acts from investors happening. If it were just valuations rising quickly, I'd be a bit less concerned. But we are also seeing large deals ($5mm to $15mm) getting done in a few days with little or no due diligence. Investors are showing up at the first meeting with term sheets. I have never seen phases like this end nicely."

Moving to a lower level in the funding food chain, I recently did an analysis of the NY Angel and Micro funding environment. I tracked 24 funds/groups which have completed 406 seed/first round transactions in the past 30 months. Assuming that 20% of these companies graduate to an institutional expansion round, and 20% of these again raise a growth round, then NY will have a requirement for more than $800mm of expansion capital in the next 18 months. All the while the institutional investment pie is shrinking. Perhaps, people are looking at these investments the same way as they invest in the lottery?

This begs the question of who is being irrational? Are funds/people over investing in mirages, or are the institutional backers of venture funds not seeing the full picture? While it will take hindsight, viewed from at least two years out to judge these actions, a few things are clear today.

1. Self-publishing/expression by the masses can and is no longer a questionable value proposition. It's being monetized today and has huge potential for tomorrow. Facebook, at least for now, has done the industry a service by establishing the de facto social 'dial tone' platform for others to plug into. In doing so, they have created massive wealth for shareholders and a huge opportunity for fast followers. Unlike Amazon, eBay, AOL and Yahoo, their ecosystem seems to leave opportunity for others akin to MSFT's OS in the '80's.

2. Tapping into the social dial tone enables companies to hyper-scale. Union Square Ventures has done an admirable job finding, nurturing and realizing great returns for shareholders by executing on the social trend. For example, courtesy of Compete.com here's the traffic graph for Zynga

And here's one for Tumblr

Finally, Twitter's growth has been widely documented (here's the Wikipedia post with citations)

'Twitter had 400,000 tweets posted per quarter in 2007. This grew to 100 million tweets posted per quarter in 2008. By the end of 2009, two billion tweets per quarter were being posted.[citation needed] In February 2010 Twitter users were sending 50 million tweets per day.[25] By March 2010, Twitter recorded over 70,000 registered applications, according to the company.[26] In the first quarter of 2010, 4 billion tweets were posted.[citation needed] As of June 2010, about 65 million tweets are posted each day, equaling about 750 tweets sent each second, according to Twitter.[27] Twitter has experienced rapid growth as noted on Compete.com, Twitter has moved up to the 3rd highest ranking social networking site in January of 2009 from its previous rank of 22nd.[28]'

To date, Twitter has raised $57mm in three rounds of fundraising. The last round, completed in September, and reported by Bloomberg to raise $100mm valued the company at $1B

In May '08 the company raised $15mm at a reported $80mm pre-money

In February of '09, Twitter raised $35mm. The pre-money was not reported, but company benchmarks were 29 employees, minimal revenue and 900% growth year over year.

The first round of capital was raised in July '07. I can assume the valuation was not more than $10mm.

3. We have seen a first wave of social commerce embodied by the 'flash' commerce sites such as Gilt group and Groupon. I believe the stunning success of these firms will be dwarfed by successors who harness relationships, in a positive way, to recommend and sell goods and services. Think of Amazon or Ebay's star system, but from people you actually know, respect, and can easily verify. This arena can support many firms with a large market capitalization, and a host of successful 'satellite' firms too.

4. Predictably, most of the leading Web 1.0 Companies have become stagnant. Just compare the innovation behind the concept for Facebook's new messaging product, vs AOL's way overdue facelift of 'you've got mail' as a prime example of incremental vs fresh thinking. The incremental product advancements of AOL, Yahoo, eBay et al (with the notable exception of Amazon), has opened the gates for this new generation of entrepreneur and funding sources (e.g. Spark, Union Square, Andreessen Horowitz) to ride and expand upon the social dial tone within established, large markets.

5. The mobile web, better screens and upcoming tablet form factors will fuel a dramatic increase in engagement and time on site. Key metrics which will accelerate the move of advertising from desktop to phones/tablets.

In the past few years, we have seen great innovation in the three bedrock internet arenas; Communications (Twitter), Commerce (Gilt and Groupon), Community (Facebook and YouTube). The only laggard bedrock segment is search. Wolfram tried something new, and a host of others are challenging GOOG, in much the same way GOOG challenged Yahoo, which vanquished Alta Vista and Lycos.

Putting the pieces together....

1. I really do not see a bubble in the growth/expansion arenas. Instead, there's a stampede of homogeneous players looking to invest in a few hypergrowth companies. Valuation here involves more art than science and the law of supply and demand trumps all. Definitionally, with so few transformational opportunities, the few which achieve hyperscale will be valued quite dearly. The NPV and efficient market theories of Finance 1 go out the window when you are presented with companies with less than 30 employees, growing 900%/year, are in multi-billion dollar markets and only requiring minimal capital to fund its operations. Phenomena like Twitter are special, and deserve to be treated so.

2. The market today seems balanced in the more 'normalized' 50-100% growth per year expansion stage firms. I do, however, suspect valuations will decline in this arena as less capital supply will meet enhanced capital demand. Of course, if Bill Gurley is right, and a vibrant IPO market is around the corner, this segment will ignite and be the biggest beneficiary of the public largess (heaven knows, the industry can use a refresh of middle market M&A buyers).

3. The Angel/Microfund arena seems to be too active. While many fresh and innovative opportunities have arisen, they are in danger of being overwhelmed by too many 'me too's'. Consistent with history, but magnified by scale, I expect the vast majority of firms funded by Angel groups and Microcap firms to fail. The combination of too little capital and too little innovation are a killer cocktail.

4. Great returns were garnered by investments made in the ashes of '00, Venture firms will find great opportunities recapping worthy opportunities from #3 above. They could, and should 'steal' start-up capital as this category will be less risk, lower hold time, and equal reward to their start-up brethren.

Yahoo's culture and it's outcome

2010-10-29T06:54:00.000-04:00

Paul Graham highlights that a company's culture, set by it's leadership team, are one of the key intangibles that determines sustained success.

You never see this in an analyst report.

Demo of unlocing the implicit web from the MIT Media Lab via TED

2010-10-28T14:08:00.000-04:00

The last couple of years has brought great strides at unlocking 'implicit' information for the display and consumption by people in an 'explicit' way. An example is the way Facebook/LinkedIn display friends of friends, so that you now know who knows whom, and have pointers from to to knowledge. In the video below, the folk at MIT's Media Lab demonstrate a wonderful computerless way to access, store and display information.

PlumWillow in the NY Sunday Times

2010-10-24T21:09:00.000-04:00

Hello, goodbye

2010-09-28T12:17:00.000-04:00

Yesterday, the CEO of a fast growing fashion site, Polyvore, (which the team at Plumwillow closely watches) announced she was leaving the Company. She led the organization for all of 7 months.

Well connected and experienced in managing fast growing operations, on paper she must have been an ideal fit. As was the former president of Google's Asia/Pac and Latin American operations she must have been vetted by such well respected Polyvore VC's as Matrix and Benchmark, it makes you wonder how did this happen?

I've made this type of mistake before too. In my case, the error was in placing too much emphasis on background and experience, and not enough weight on fit with the current culture and team. I have found that when an 'outsider' is brought into a leadership role in a fast growing situation, it's so tempting to come with a perspective that the growth is 'in spite of doing so much wrong'. Rather than embracing the things that are going well, arch focus is turned to being a change agent. Lacking context, this can be a dangerous approach to having the founding team follow your vision and execution. It leads to a growing cancer which must be excised. Either the founders, or the new recruit must go.

In Apple's case, they fired Steve Jobs. Eric Schmidt deserves great kudos for navigating this dynamic at Google. John Shirley did the same at Microsoft.

MobilEco Summit

2010-09-21T08:28:00.000-04:00

I attended/spoke at this series of round tables put on by Plugged In Ventures. Speakers from Google, MSFT, the WSJ, Time, and Hot Potato were there too. Following are some of my recollections of interesting observations:

Mobile adoption by brands is being slowed by lack of access to reliable data which is compounded by the difficulty of combining with legacy CRM systems into a holistic data store.

Mobile ad spending is still in the 'experimental' bucket for major brands. Initial euphoria over landing a major brand should be tempered by the fact that today, thousands of mobile vendors are now vying for less than 5% of the budget.

Mobile, is the 'connective tissue'. For advertisers, the promise of combining buys across multi-mediums is alluring (e.g. per Time, Inc, 2/3 of their sales invoices involve cross platform buys:

*in store promotions
*TV
*radio
*magazine
*applications
*messaging

Google says that 1 in 5 searches from computers are location related; 1 in 3 on mobile devices.

The tablet is a wild card, participants were split as to whether behavior is more like a phone or a computer. The WSJ says that its tablet subscriber behavior is most similar to physical reading, than the phone.

For corporations building a mobile application is a fraction of the cost commitment to maintaining, tracking and updating the ecosystem associated with it.

With the recent debate over whether the web is dead (supplanted by the resurrection of applications) many comments were made about the role of applications. As expected, with nearly 300,000 applications in Apple's application store, distribution/discovery were cited as real issues. This discussion brought me back 10 years to early internet and debates on how will people find your site....probably the same solutions.

Steve Jobs is right to not pollute the iPhone with Verizon

2010-09-16T17:55:00.001-04:00

I have had second thoughts about moving to the Android based Samsung Galaxy phone on Verizon. In fact, I made a mistake and will soon drop it and am destined to become yet another iPhone fan boy. Let me explain why.

For the past 9 years I have been a Blackberry user but as my usage moved from one centered around inputting data (email) and towards consumption of information (the web), it was time to move to a device with a modern browser, a robust application store, and a screen supportive of reading average web sites without performing unnatural contortions.

I watched the Android's market share explode as they steadily improved their OS and was enthralled by the Samsung Galaxy demo where they showed the Avatar movie in great splendor. With all that love, however, I was brought face to face with the Verizon UI monster. It takes three separate steps to reach your first main application screen, there you are greeted with a 4x4 of 16 icons, none requested by you, and none removable by you. For me, only 4 had any relevance.

Tetris, at one point was of keen interest to me, however, to have a free to play and pay to version on my page one...with no option to kill it is far worse than Dell loading my PC with removable 'crapware'. Joining Tetris, is ThinkFreeOffice, VCast Music, NFS Shift and other 'essential' applications that are designed to make Verizon money, while polluting my experience. People may not like Apple for deciding what's good for you by denying companies permission to post in the Application Store, however, I contend that it's far worse to have someone dictate your applications and leave you with no recourse.

I won't even get into the reality that Bing is the default browser and you have no obvious way to switch providers. This is sorta counter to what Android is all about; open software, choice, the bazaar over the cathedral. Android's freedom to customize met it's Master.

While writing this, I received a call from ATT wireless, it was a survey about why I left. In the midst of answering the questions, I interrupted the surveyor and asked her to refer me to a salesperson as I have reconsidered and want to reinstate my standing. Well, to no surprise, it was not her department and I was given an 800 number to reach a rep.

Sigh, back to the frying pan from the fire.

Ironic

2010-09-13T12:48:00.000-04:00

While the number of venture capital firms shrink, and a double whammy is upon the industry as the dollars allocated to the asset class are reduced at a greater amount, we seem to be in the midst of a profound change in the Information technology industry which is poised to create great value for users and shareholders too. As the micro revolution dwarfed the mainframe market, and the internet blew the doors off the micro software equity returns, the shift to mobile and social seem predestined to greatly eclipse its ancestors.

Here's some data from Morgan Stanley Research to support the magnitude of the shift:

The tablet forecast for '11 was just raised from 37mm to 50mm units; this is a market that really did not exist 6 months ago.

Tablets are slowly cannibalizing PC's in the consumer market and vitualization is attacking the enterprise numbers (albeit with 375mm units expected to ship in '11). Importantly, iPad users view 3x the page views of iPhone users, a rate which is nearly equal to the page views presented to desktops.

Bberry internet usage is 10% of iPhone usage...

Daily Android phone activations have reached 200,000 worldwide, Yes, daily.
Daily iPhone activations have reached 150,000 worldwide...daily iPad shipments are near 100,000

Per IDC:

In the past 7 quarters, Android's mobile market share has gone from zero to 16%; Blackberry is 18%;Apple is 15% (They are the only folk only on one network.....it's really hurting them now and the opening of the platform to Flash and other applications is but a minor course change).
Symbian (Nokia) is the leader with a 40% market share....but it's in free fall.

Oh, MSFT is mired at a 7% market share. Worse than that, I can't imagine folk are downloading a host of their applications or web properties to non-msft devices. Despite massive internal investments, they've lagged for 5 years and, if they don't act, will lose the window (hehehe). Therefore, I really expect them to use their capital to change the game, and to do it quickly; and smartly.

The platform changes predestine application shifts that are even greater. Today's New York Times speaks to the shift from the web back to applications. Mining location, relationships and history to deliver relevance is a real win for all. Exposing the 'implicit' web is scary, yet energizing. I suppose you don't have to look much deeper than Coca Cola's page on Facebook to see the unrealized potential. 13mm 'friends', and a whole new challenge how to create a win/win for these relationships to thrive.

Gossip and whining

2010-08-30T12:53:00.001-04:00

My ex-business Partner Eli once said something that really struck me. We were discussing 'back-channel' gossip that was swirling around a company we invested in and he observed 'if you find that people are approaching you with gossip, be careful, as it probably means you enjoy hearing it and passing it on'.

This was a wonderful observation and led me to an insight around whinning. We've all experienced the 'I wanna' garden whining best illustrated by 5 year old children, they really have little effective means to communicate what they want/need so on some level it's ok. However, I must confess that I've been guilty of the adult variety too. This is when you are stuck on something (for me, usually business oriented) and find yourself complaining to most comers. It's not that the hapless folk you lay your burden on are really interested in the topic, but it just feels good to 'express' yourself.

My college freshman nephew recently lectured me on this topic and his implicit advice was that the bothersome situation is my own gosh darn fault. You see, 'stuff happens', so he explained, and it's not the 'stuff' that's really significant, but what is important is what you do about it and how you react to it. If you are going to sit back and whine, then you deserve the outcome as you sat back complaining, rather than solving the issue. Whining, so he explained, is a sad excuse for inaction.

"Solve it and tell me about how you did it" is far more interesting and rewarding than sad complaining.

He's right.

A losing fight

2010-08-26T09:44:00.000-04:00

My buddy Elad once told me something that's so true and obvious, that it's surprising to see his point played out time and again. He said that it's foolish to fight against fundamental technology trends. Yea, it's as obvious as predicting 7 quarters ago that Android would be heading to the #1 market share in smart phones, Intel would buy McAfee, and Gilt would be valued at more than $1B

The latest RIM product, the Torch, is a hybrid touch screen and keypad device which compromised the keyboard to the point of making it meaningless and has a screen that's at least one generation behind the competition. It's not competitive, but it's totally understandable what drove their product decisions. They are a company defined by its keyboard, it's their reason for being. Every reviewer for the past decade lauded the company for its sleek design and competitors strained to equal it. The problem is that RIM is now fighting against a fundamental technology shift.

Screens are getting much better (the Samsung Galaxy series is amazing...a blow away). But there's more afoot here. A relatively new program, Swype, fundamentally changes the metaphor for text entry. It's not perfect, but it is a step above pecking, has much better predictive words than previous generations and highlights another innovation sphere.

If you look at the innovation sphere's around the smart phone (or what's really a little computer that dials), you see processors, screens, communications and software. You do not see any meaningful innovation around physical keypads. If anything, they are getting worse as vendors strive to incorporate the above. The hybrid devices we see today, with full qwerty keyboard,s are an interim generation, akin to 8 track tapes in automobiles...and destined to last as long.

Jim Balsillie, RIM's CEO is an incredibly resilient and driven executive. Many folk know that you don't pull on Superman's cape, and you don't mess with Jim. For RIM's shareholders, I hope this still holds true.

Tom Kelly of IDEO on Innovation and design

2010-08-21T07:42:00.000-04:00

A counter intuitive approach to solving problems from the CEO of Ideo

Aliens approaching

2010-08-09T13:13:00.000-04:00

My RIM is dying. The trackball is shot, the battery holds a fraction of its charge, the tiny screen scratched and, well, Froyo is here (on Nexus now). Froyo, also known as Android 2.2, is the seventh update to Google's Android OS since its launch in October 2008. That's better than an update per quarter. Performance, the UI, SDK's, adoption and just about any measure you use to gauge success are there in spades.

Of greatest import is that I now understand my use patterns for smartphones. I purchased the Bberry as it was best in class for texting, BBM and mail. Inputting information easily was paramount. Now, however, I desire a phone that's a great output device as I consume far more information than I input today....and the gap is growing as it's fueled by video, social applications and real-time news/event postings. Therefore, my next device needs an up to date browser, superior connectivity (goodbye ATT) that's fast and secure and a killer screen. RIM's Torch is a step in the right direction. Unfortunately, they needed to take a fundamental leap from the input to the output age.

When it was first introduced, I must confess to being more than a bit skeptical about Android. I was concerned that it was outside GOOG's core competence and a testing toy (like Wave turned out to be), that the mobile carriers would bastardize (fork) the OS, and the developer community would test and test, without committing. I was wrong. It is a real alternative to Apple and the Android devices are now outselling iPhones

The beauty of the iPhone and the curation by Apple are important points too. Unlike many of my peers, I sorta like Apple approving software as it adds a level of security that I'm not adding code that will mess with a device which is really important to me. Moreover, as we are moving towards being a Mac household, universality of devices is a big plus. Also, the App store is great; so easy to navigate and install a myriad of applications.

With that said, however, I am looking a couple of Android phones. It seems as if the ecosystem is similar to the old GM adage 'there's a phone for every pocketbook, or primal function required'. The pace of innovation is just so much faster on Android devices. Apple's schedule for yearly hardware upgrades and semi-annual major software updates fits them, and many consumers quite well. However, it does not match the speed to which the mobile market is morphing. Heck, Google is already talking about their roadmap for Android 3.0. I like the pace of innovation; I love the transparency/road map. They are talking my language.

Escape velocity part II

2010-07-31T13:24:00.000-04:00

I sent the previous post about my frustration with my new computer to the CEO of Velocity Micro. Admittedly, it was a plea for help and on Saturday at 1PM, 15 minutes after sending, the CEO sent me a note back inviting me to call him to discuss/help resolve the issue. Wow.

He agrees that I probably have a bad drive, and that's not good news. However, there's a real person on the other end who really cares and wants to help and seems really committed to building great product and a good company. His attitude exactly mirrors that of the sales and support reps I have worked with at Velocity. A good customer driven culture is in the air.

This customer's benefit of the doubt is given to Velocity. Next step is to send them my hard drive and, hopefully, get a new one (with my data re-installed) rapidly back.

Kudos to the CEO (For the skeptics, I am not just kissing up on this one).

Escape Velocity?

2010-07-31T12:28:00.002-04:00

I set out to buy a new PC last week and intended to buy a Dell. However, their 'advisor' chat was so bad that I figured if they can't answer a simple question in the selling cycle, the support must be even worse. By the way, the selling issue began with 'are you a business or consumer account' and ended with them transferring me to someone who asked the same questions as the previous person, then barraged me with questions about past purchases, before I was cut off as the chat failed.

Seeking refuge, and a better quality experience I went to Velocity Micro and bought a well reviewed Z35 with a 1Tb 7200 rpm hard drive. Unfortunately, the system arrived with a drive that sounds like horses galloping. I called customer support who had me take off the covers, disconnect drives, interfere with fan(s), and take off the front panel. The tech was really helpful and polite and diagnosed the offending issue as a faulty front panel. They immediately sent me a new one; unfortunately, it did not solve the problem. the horses are still galloping, just like Caligula heard them.

Today, an outsourced technician arrived to diagnose/repair the issue. He noted the galloping sound and told me "this is a fast drive which the chassis is not properly designed to handle". Not what I wanted to hear. But, I am not sure he's right. At least I really really hope he's not right. He can't be right, I just spent too many hours transferring data from my old system onto this one, for him to be right. As they say, I am now invested. I trusted a company that seems to take its products more seriously to do this to their customers. But, the alternative is that they shipped me a bad drive when their brand image is all about quality components, and extensive pre-ship QA.

This is a problem that should not have happened. I am frustrated that I've spent too many hours on this issue and am [ ] that close to returning it and taking my chances with Dell again. Or, maybe, I should throw my lot in with the Applehaulics in the household.

BTW, Velocity only has support M-F 9AM-10PM (these are posted on their site for caveat emptor)

Flipping it around

2010-07-27T05:44:00.001-04:00

I am now the lone MSFT holdout in the family.

I recently upgraded from a Dell XP based machine to a Velocity Windows 7 based system (shame on Dell for having such a terrible site with horrendous advisor workflow; otherwise I would have bought their XP 7100), I am now an Island in a sea of Apples. It happened over the past year, first with phones, then laptops, iMac's and now iPad's. It got me thinking about a broader trend we are seeing.

For the past couple of decades, technology paradigm shifts have rested on a three legged stool:

* Processing power (e.g. Moore's Law)
* Bandwidth speeds
* Software innovation

Each leapfrog one another but, when two move radically, you tend to see a wave of innovation that augers a fundamental change in the information technology business. The now ubiquitous move to 3G wireless, coupled with broadband to the home are rapidly moving many applications to the 'cloud'. This move is coupled with innovations in software development, led by open source movements ranging from the LAMP stack to Wikipedia to Google's Android. The pace of innovation is staggering.

The great strides in bandwidth availability and reliability, plus the progress in advancing the software infrastructure is impressive, however, it seems to me that these are the forerunners of a bigger phenomena we are about to see.

Oftentimes, advances in processing power have been nearly invisible to end-users. Sure, photos edit quicker, but for the most part, absent gamers, the mainstream has not seen wonderful improvements in computing capability. Mom still has a devil of a time dealing with this stuff. Except if you use Apple computers. A large measure of their success, certainly in stark contrast to MSFT, is the massive investment they have made in making the interaction between their customer and their devices as seamless as possible. The iPad is magical. It powers up in no-time and the gesture based User Interface defines intuitive. This takes serious processing power to pull off. While many vendors in the Wintel orbit have invested billions of dollars in software 'plumbing' and expanded features, Apple has poured their money into changing the 'face' of computing.

The intuitive nature of gesture based computing has been embraced by more than 100,000 programmers offering more than 225,000 programs on Apple's Application Store. But I think the innovation is just starting. Having recently downloaded an iPad product Flipboard or seeing the interaction between me and Zinio, the standardized, yet now static Windows interface, that served us so well for nearly 2 decades is now obsolete. This is a change as profound as MS-DOS moving to Windows.

Of course, Apple does not have a monopoly on gesture based computing. We are seeing a two horse race between an open Google OS based world (Android and soon Chrome OS), soon to be flooded by a myriad of computing devices from phones to tablets to systems, vs a 'curated' (e.g. closed) world of Apple. HP will soon join the fray with recently acquired Palm OS based systems. I suspect MSFT is not too far behind.

The effect of investing processing power in making more intuitive User Interfaces will be to greatly broaden markets, upset the status quo in existing industries, and fragment users in Hatfield vs McCoy camps. Fortunately, due to widely accepted standards (e.g. HTML5) we won't step back into the tower of babel. Instead, we are poised for a great leap forward.

Brilliant video

2010-07-02T22:33:00.002-04:00

Ants

2010-07-01T12:59:00.000-04:00

My neighborhood tennis joint is blessed with clay/dirt courts and, during this time of year, ant hills are a common site along the service lines. Marching over to verify the mark for a line call, I was struck by the way these little guys scamper around in a seemingly irrational way; wondering how they get anything done in a world of such micro disorder. Yet the length of the court has at least 15 ant hills, perfectly aligned; order amid seeming chaos. It set me to thinking about what we are now seeing in the Internet Commerce space.

Today brought news of an investment in fast growing Modcloth by Accel and First Round. Yesterday's news brought the acquisition of Woot by Amazon. Earlier in June, Ebay bought bar code scanning infrastructure from Red Laser. Of course, funding stories abound from places such as Gilt, Ideeli, and elsewhere.

On the surface it seems as if there is a mad ant scramble in the commerce side of the internet. Hmmm, I suppose there is a mad ant scramble in the commerce side of the internet. I think it's justified. Let me explain.

In an area I've recently been looking at (and a microcosm of the vast commerce arena), teen commerce, enjoys less than 6% of all apparel sales online. It's a number that is probably appropriate given that most of the leading commerce sites were built and implemented prior to the social revolution, massive broadband acceptance, mobile search (which is fundamentally changing as people increasingly tend to search from within applications, as opposed to via the browser), real-time alerts/buying, and the prevalent use of video for presentation of items. In other words, the legacy sites were implemented more than two years ago. The change in the infrastructure and supporting technologies, individually, may seem like ants running about, but stepping back, there's a method to the building.

We are at the beginning of a fundamental platform shift in commerce. It has the appearance of a random ant walk, but I am convinced there's a method to this capitalistic ritual. The leading economic indicator I can point to is the rut that same day store sales are in, coupled with the double digit growth of internet sales by the same brands. I don't think we are in an economy induced retailing rut, and think the move away from physical stores will accelerate as the innovative factors mentioned above are adopted by mainstream sites, optimized by independent vendors, and embraced by savvy consumers. Now, I don't think remote sales will totally replace physical shopping, nor do I think the 95/5% ratio is justified.

Consumers are benefiting from better prices passed along to vendors who are far more inventory efficient, but the benefits extend beyond 'permacheap', into enhanced selection, real-time curation by your peers/experts, emotive real-time offers, far more efficient promotion and many other attributes which passionate entrepreneuers will uncover.

And the winner is....us

2010-06-09T16:10:00.000-04:00

Last night I was given the opportunity to judge the Sam Zell Entrepreneurship competition sponsored by Techaviv and held at Nixon Peabody in NY. The IDC School, located in Herzliya Israel, has an entrepreneurship school named for Sam Zell and each year they graduate 20-30 students. Their senior project is to create a new company; many go on to extend their thesis into careers.

Given Israel's penchant for cultivating technology entrepreneurs, it's no wonder that 4 groups selected to travel to the US and present their early stage companies had internet related ventures. Not to bias you, but I was really impressed by the people, quality of ideas and implementation, the audience participation and the organization skills of the Meet-up host, Yaron Samid.

It's interesting, and upon reflection, not surprising that three of the presenting companies shared social based internet applications, while the fourth is concentrating on internet video. The presenting companies were:

Hobnob (not yet live)- Are developing a mobile application optimized for real-time networking around business events. The application searches your social networks, finds people of relevance nearby and then moves into scheduling mode.

The Gifts Project recently launched (Angel funded by Yosi Vardi). They enable people to come together to buy gifts. The business is around an affiliate model with a recommendation engine that grabs data from the recipient's FB profile.

Wibbitz converts static web content and converts it to an interactive video. Initially targeting the newspaper industry as customers (I really liked this company, but not the target market, preferring to instead go after a market with budget....e.g. I think it would be great for commerce sites)

Trip Angels an online social way to tap into a network of locals to assist in planning a trip. Quite similar to Bitwine in terms of the thesis (e.g. Ebay for services), but in an area where garnering traffic will be prohibitive. With that said, impressive folk presenting.

As noted before, the school and students should all feel proud about a job well done. Watching the presentations gave me a chance to reflect on a couple of things:

FB social graph is rising a sea wave of acceptance. The dream of the implicit web seems to be at our doorstep. An environment where implicit relationships are exposed, and linked in ways only limited by your imagination. On one hand, this is terribly exciting, on the other hand, with so many companies linking to my 'social dial tone' will it make me long for the days of simple phone interruptions? Perhaps, a cloaking device will be the next big hit.

Another point is the changing nature of company creation in Israel. Heretofore, entrepreneurs with rich technical training endeavored to push the technical envelope by developing chips, languages, bandwidth optimization; really anything that required brainiacs to master an algorithm. Now, the best and brightest are building sites to find travel buddies, or give group gifts. Computing power has advanced so far, so quickly, that there's little value in lessening the complexity of building consumer systems. Of course, Enterprise environments, certainly in the Financial Services field, where milliseconds are an eternity remain a rich consumer of traditional infrastructure enhancements.

Finally, being on the panel with Avner Ronen of Boxee and Tal Chalozin of Innovid shows how deep the Israeli ex-pat technology community has grown in NY. There is a vibrant up and coming generation of 20+ and 30's aged experienced entrepreneurs who are serving as mentors here. It's wonderful to see.

Mobile

3rd and 1

2010-06-04T09:43:00.000-04:00

I played tennis with my shoe selling buddy Jack the other day. He's an in the trenches fighter (in a good way) who regularly sends me to a head sagging defeat. But in doing so, he shares some street wisdom garnered from growing up in the Bronx and earning a living each and every day, totally dependent upon his personal results.

On the court, he missed an easy shot to a wide open court and, in great frustration, yelled 'Jack, it's 3rd and 1, why did you go for such a showboat shot, all you needed to do was get the ball into the court'!! That got me thinking, this is business.

Business Insider had a great chart showing the market share of computing devices (including smart phones), in year 2000, today and projected for 2011. It vividly shows the way smart phones have paved the way for a platform software shift away from MSFT and towards Apple/Google/RIM. In my mind, this chart is the result of strategic, and product thinking that contrasts a 3rd and 1 mentality from a go for the long gain.

For most of the decade '00 MSFT product planning has been around an incremental extension of the Windows platform to other devices. The thinking was wherever there's a processor, there's a need for a double tapping invoked Windows operating system for your Tablet, phone, set top box,automobile, etc. For many reasons, the device was made to fit Windows and not optimized for the market's potential. The environment of the day, exerted absolutely no pressure or reason to invest in, or to undertake a task, that required thinking about a new metaphor. The market share numbers in any of these markets did not justify the risk to earnings, 'forking' of development, or mission clouding that go with taking a long shot. After all, phones were not like the existential risk Netscape posed to the desktop franchise. No need to turn the ship and embark on an 'embrace and extend' product driven strategy. For devices, extend was good enough. For Microsoft, it was 3rd and 1 thinking.

On the other hand, post IBM PC, Apple (until the later half of the decade) has been forced to think out of the box and to go for the long gain/game changing play. A 5% market share is just not a sustainable business. They have built this franchise by fundamentally disrupting existing markets (e.g. the moribund mobile arena), or by creating a new market (iTunes). With the impending announcement of the next generation iPhone, it's appropriate to look at its success being as much attributable to its initial ground breaking design, as well as the drive to continually improve the device by offering enhanced value for the customer.

As an investor in many young software/internet companies, I often look at ideas and try to focus on whether the prospects real value represents a fundamental new way of doing things (a market), or does it represent a nice enhancement to an existing market (a feature). If the later, then it's greatly exposed to being rapidly subsumed by larger players and the potential/mindset for a near term exit is critical. As an example, I think the market will shortly determine if Foursquare's location based implementation represents something fundamentally differentiated, or is it really a '3rd and 1' feature that will be subsumed by Yelp, Facebook, and a host of others. Time will tell.

Stepping out

2010-05-28T06:31:00.000-04:00

I had the opportunity to attend the 15th annual Ira Sohn Investment Research conference the other day. The conference, in NY, brought together many leading lights in the hedge fund segment of the private equity business; an area of the world where venture seldom treads. What attracted me was the combination of a great cause (proceeds for pediatric cancer research) and a line-up of all-star speakers including David Einhorn (known as the courageous guy who took on Lehman), Sam Zell, Steve Rattner, and David Tepper.

Unlike the venture business, where you often don't know if you placed the right bet for a few years, the hedge arena gives more immediate verification of your thesis and execution. Trades have two sides, and one is often, but not always wrong. This industry is full of colorful and polemic figures. I will concentrate the points shared below, along the lines of the extremists (which were roughly 2:1 over the rationalists). This does not make their views any more correct, but certainly makes for more interesting reading.

Here's the highlights:

Jonathan Jacobson of Highfields Capital Management

Expressed that the current Obama administration is "anti-business", therefore, he is factoring in adverse legislative risk into each of his investments. He reaches his conclusion about the administration when looking at the 'interference' in the Automotive industry, followed by the Health plan, into statements affecting the Energy and Cable markets. Not even Soft drinks are immune from the opening salvos in an escalating 'class warfare mentality'.

Sam Zell, legendary investor and Chair of Equity Group Investments feels the president was elected under a change mandate and is executing such a strategy. He feels the changes being put into motion are 'huge and extreme' and we are entering a time of great volatility due to it.

Daniel Arbess of Perella Weinberg sees an upcoming debt crisis predicated by massive government overspending and now duress in the credit markets. His opinion is that investors should short weak currencies (just about all Western currencies are weak) and go long on China. His thesis is that we are seeing a rebalancing of the world's economy between west and east. Consumption is increasing in the west, while productivity is declining. An activist and heavy handed government, referred to as "Government comes to a market near you" is interfering with market forces and we will see great negative ramifications when built up market forces overwhelm this interference. He noted that 70% of Wal-Mart's inventory is comes from China; he wants to invest in companies that sell things made by emerging market economies and sold to the west. To those long-time readers, another example of permacheap.

David Tepper of Appaloosa Management contrasted the previous comments with a perspective that people and markets do adjust to change. He's not prone to extremist perspectives, as evidenced by the successful investments he's made in distressed companies that have adopted and prospered.

David Einhorn of Greenlight Capital gave a wonderful presentation entitled "Good News for the Grandchildren". For full disclosure, I think he's a courageous investor whose a great, and sometimes highly contrarian investor (here's a copy of his Q4 '09 letter to investors). But, back to the presentation.

He is disappointed that the Administration has 'socialized' losses in the housing market. Now, there's an expectation that if many people live to excess, they will be bailed out by the government and this action was a bright line to cross. He really sees little political restraint or incentive for government to operate in a rational way. For example, last year studies by the Pew Institute noted that government salary scales, for the first time, exceeded that of comparable workers in the private sector. Despite enhanced job security and great benefits, the pay is higher. It only makes sense to him in an environment where, for example, one-time and shovel ready stimulus spending went towards preserving government jobs, while adding little to the private sector.

He sees the US Civil Service arrangement as galloping at a rapid pace towards that of Greece, where workers are paid 14 months salary for 12 months of work. The open question is 'how long will the credit markets fund this'..... insanity? The rating agencies have proven themselves to be both behind real-time events, conflicted, and guilty of shoddy research. Government numbers also can't be trusted. He cited the way the Government calculates inflation as a point to ponder. This calculation has changed numerous times in the past two decades, always to the advantage of the current administration who is able to boast of high(er) GNP. low inflation rates, and a rising stock market predicated on suspect numbers.

Today, we seem to have passed the worst of the financial crisis, but the Fed is holding interest at close to zero rates as a political, not an economic decision. Another market distortion; another moral hazard. All strangely similar to past failures of the government to intervene around LTCM,the S&L crisis,the '07 equity crunch and onward. The Government is now in the habit of saving people from their foibles (except for Lehman), and this distortion only encourages bad bets and irrational behavior.

We may reach the point by saving the Sovereign nations that are 'too weak to fail', we may be setting up the economies that are thought of as 'too strong to bail' as needing rescue, but by whom?

Apple just may be right on this one...Adobe Elements

2010-05-20T11:01:00.001-04:00

I have spent the last few evenings preparing a photo montage for a family event and have been using my trusty Adobe Elements 7 program. It's a user friendly photo editing/storage program that is lighter than Photoshop and more featured than many web based programs. However, much to my surprise, it comes with a huge, customer unfriendly feature.

Let me digress a moment. Over the past decade, many software/web companies have pursued a 'freemium' business model, whereas a user receives some crippled functionality, in a 'try and buy' mode, towards a hoped for later conversion to a paying customer. Adobe has pursued a similar strategy, preferring a limited time free offer, then charging $79-$99 for this program. They also offer a companion program, referred to as a companion program for video editing called Adobe Essentials. Essentials adds tools for enhanced photographic effects, enlargements, etc.

What Adobe does NOT tell you is that if you happen to prepare a slide montage in Elements, you can only output it to a CD, and only in the .wmv format. Outputting to a DVD is a crippled feature that requires a purchase of Essentials. I can see how this decision was a classic product management debate where one side said something to the effect of 'gee,we can get all this upgrade revenue by hooking the customer with all their data, giving them a crippled output facility that will force an upgrade. Oh, and let's be 'careful' about messaging it in the product as the focus groups didn't like it.

The other side of the argument would have highlighted how this will probably attract more revenue but is totally customer hostile. Customers expect real value for the incremental purchase price and this feature is such a no-brainer that we will only upset our customers and present a really bad picture to the press.

Adding to my frustration, and that of many of my peers is that when you try to download Premiere you are caught in an Adobe/Akamai endless loop of problems. Why Adobe decided to put someone between themselves and their customer who only adds to the problem is beyond me. In fact, it gives great justification, from a users perspective, why Steve Jobs is loathe to do the same with Flash.

Too bad the wrong guys won these product battles at Adobe....probably the same folk who decided not to support the Mac 5 years ago.

Any suggestions on the best way to wean me from my Elements addiction? Household moving to Mac's shortly....

Home, home on the page

2010-05-19T12:40:00.000-04:00

During a bout with insomnia, invoked by the foolhardy move of beginning to play with my iPad around midnight, I came to a realization that after hitting nearly 15 sites, I had yet to encounter a 'real' homepage. Instead, I was surfing between installed applications, or going from social induced link to link.

As an investor in PlumWillow, I was looking at various commerce affiliates who sell or promote apparel from brands. When on their sites, you search for an item of interest and are most often sent to the brand site to complete the purchase. As I was in browsing/learning mode, this just kicked off another round of browsing and hitting various promotions which sent me to 'personalized' inducements to buy various products.

With my eyes wide open, it was time for news surfing. I now usually do this via applications installed on my device which offer a customized (David Rosenblatt ex-Doubleclick called it a 'curated') experience. On a PC I tend to go from homepage to homepage, but on Apple mobile devices, I go from personalized application to application. It's a different, and for me, a much better experience.

With eyes reddening, I turned to the social 'link' sites, Facebook and Twitter for a more micro perspective of what's happening and to whom. This brought to mind a statistic that I have not verified but will repeat. Supposedly, the head of commerce at Walmart said that 30% of his traffic never sees his home page. I believe that, and think that this number will only rise as sites optimize/personalize to give their visitors a better experience...and themselves more revenue/time.

Strange bedfellows?

2010-04-29T10:20:00.000-04:00

Yesterday was a really interesting M&A day. Palm's acquisition by HP and Siri's acquisition by Apple seem to redraw battle lines across many historic boundaries.

Siri is a mobile application that's pursuing a lead generation, transaction oriented, business model. The application uses natural language, speech or written, to refer you to places, things or actions. Rather than being a search engine that refers you to information, it's more of an action engine, that short-cuts search. Combined with it's acquisition of Quattro Wireless, it seems as if Apple is girding for a fundamental change in which we interact with phones and search. Rather than going from web page to web page, an application to application metaphor is building. It is really similar to our relation with Facebook, where Facebook Connect, and its native applications keep someone engaged for extended periods, within a common framework. If search is invoked, it's within an application and, due to the deep vertical nature of the apps, offers incredibly relevant results. Better than GOOG can naturally aspire to.

This application to application metaphor is also easily translated to the mainstream computing market with tablets, or netbooks, being a natural bridge between the two. I have been using Siri for the past few months, and though impressed with the promise, must opine that today the results are just barely competitive with a host of similar applications, such as Tellmewhere, Searchit, and AroundMe. Don't be surprised if one of these are next in line to be acquired too.

I don't think this change replaces traditional search, but if adopted, will clearly cap the time spent searching via a traditional search engine. Combining Quattro and Siri has great potential to move advertising dollars away from search results and into applications. Now, if Apple can only figure out, or have the desire to open this up to more platforms, perhaps, they can be the MSFT of this decade. Or, paying homage to Dave Winer, perhaps they should just publish an open API and let anyone use it on any platform.

Palm's acquisition is noteworthy, not for the innovation, or leadership that's being shown, but for how far the industry is moving away from Microsoft. I simply can't imagine, 5 years ago, any PC maker building, or buying any operating system, other than Windows. Heck, even selling a dated version of the OS was enough to get you into scolding water. But now, HP is boldly saying (it takes revenues of $120B to be bold) they plan on using the soon to be acquired WebOS as a foundation for a series of computing devices that will take it beyond phones.

I am not sure that we really need yet another OS, but if HP can follow up it's tag line of "Let's do amazing', it may be worth playing with a few of those devices. On the other hand, till writing this post, I must confess that, for the past 15 years, I never would have associated 'let's do amazing' with HP.

Finally, speaking about Amazing from an unexpected source (besides the 'Amazin' Mets winning 9 straight), grab a look at this MSFT link to their work on Natal (courtesy of my buddy Zak). If they can really commercialize this, Redmond will again assume a lead part of the conversation.

http://www.xbox.com/en-US/live/projectnatal/

Burning down the house

2010-04-28T09:34:00.000-04:00

Goldman Sachs has been in the news much more than they would like and are bound to stay in this uncomfortable position for sometime. I have no idea whether this scrutiny is justified, or not, however, the age old conflict of interest monster is resurrected yet again. Over the past 20 years, much of the profits of Wall Street have shifted from gathering data, transforming it into information, which is then actionable by the firm's client. Today, much of the benefit from this data flow inures to the Wall Street firm, acting on its own behalf. With full disclosures, there is nothing wrong with this, and in many ways, it's the capitalistic way of life. But that does not make it right when you, as a client, find yourself on the opposite end of a trade, a transaction, or a bid from your advisor.

It's a trust issue. Plain and simple. In these cases, clients are not too interested in 'Chinese Walls', bolstered by regulations, when fundamental issues of self-interest arise when your competitor is your advisor. It gets your gander up enough to even think about uttering praise for the plaintiff's bar. Perhaps, all jokes aside they do serve as a conscience for the 'little guy'? At least, we know where they stand.

The subject of self-interest and trust comes up frequently in the venture business. One area, in particular, is around a M&A exit. Let me explain. Assume, as a VC, you have backed a CEO who owns 10% of the company and is 50% vested (with full acceleration on an exit). A private equity buyer approaches him and, with your consent, enters into sale discussions. The PE buyer, seeing the wonderful job he's done, puts on the table a wonderful CEO compensation package that post transaction refreshes his equity package (with options set at a value that reflects the acquisition cost).

The CEO, who works for shareholders that includes the VC firm(s) has a huge conflict of interest. He is charged with maximizing returns for existing shareholders, including himself, but has a MUCH greater incentive to gain personal liquidity and 'roll the dice' for another payday by serving a new group of investors. His self-interest is a conflict that the buyer recognizes and in many ways counts on to secure a favorable transaction. It's human nature.

If you've been through this before, a way to save the CEO and shareholders much angst, is to appoint a director as the point on valuation and structuring discussions. Remove the haze of conflict and replace it with a 'clean' transaction where everyone knows where self-interest lays. Understanding that most M&A approaches never reach consummation, it's also a good way to save the Company from much distraction, and the relationship from Burning Down the House.

Simple twist of fate

2010-04-14T14:11:00.000-04:00

Coming back to the platform/application debates swirling around Twitter et al, I recall the old rhetorical question which my ex-partner Yuval Rakavy used to cite: what differentiates a smart person from a wise one?

The simple answer is that the smart person knows how to get out of the problem that the wise person would never get into.

When entreprenurs build a company that, by definition, has a single point of failure, they are vulnerable to a litany of potential catastrophic events. They may be regulatory, a systemic vertical industry failure, or a competitive blow. In the mobile space, the Telecom players were notorious single points of failure, and wiped out billions of dollars of capital exercising their prerogatives over a decade, blocking innovation.

Today, entrepreneurs and investors have much to gain, and lose with involvement with Apple, Facebook, Microsoft, et al. It's really imperative that they plan for the single point of failure to actually fail. If no fall-back exists, be prepared to have a war story of how great things were going, until....

Platforms and applications and tensions; Oh My

2010-04-12T09:15:00.001-04:00

Much has been written and said over the past few months about the 'nefarious' intentions associated with three high profile conflicts. The Apple/Adobe rancor, Twitter's war with its developers over its acquisition of Tweetie and Google taking on its parters with the launch of its own Android powered phone.

Taking a step back, the presence of these debates signals a healthy and evolving ecosystem, fraught with turbulence, opportunity and danger. I really can't ascribe 'nefarious' intent to any of the actions taken. It's all about corporate self interest and fiduciary duty and far prefer this environment to a staid world which developers have abandoned. For example, I am sure that a once proud firm formerly at the center of such debates,Yahoo, would just love to recapture this type of caring attention.

Two decades ago, Microsoft showed us all how a drive for ubiquity in applications can be leveraged into a platform that offers value for users, partners and shareholders. When applications become ubiquitous (Facebook), they inevitably morph into platforms as supporting firms, usually with the cooperation of the platform owner, drive to fill in opportunities left vacant by the mothership. But danger lurks as the platform evolves, it consumes those who are too close to the ever shifting center. Twitter, showed that in spades last week with the acquisition of Tweetie. For now, I use Tweetdeck, who must unleash some great innovation to keep ahead of its former best friend for life.

Likewise, the Apple/Adobe debates are really not about optimizing user experience. It's really about legitimate corporate interests and has many twists and turns that were well documented in this blog post at Daring Fireball. I have a suspicion that if Adobe can show Apple how it's in their corporate interest to support Flash, then an accommodation will be reached. For now, the whining really is not an adequate substitute for good product management.

Dave Winer, who with Living Videotext knows these battles so well (here's a copy of the letter he posted where MSFT terminates their Letter of Intent, as they decided to buy his competitor, PowerPoint...full disclosure,I was involved in this transaction). He notes, and I agree, that the closest place in the software/web world you will find to a utopian world is in open source stacks. I am not here opining on what is better or worse, but I can't escape the reality that these stacks are usually ubiquity driven, without the profit incentive that drives self-interest to pitched conflict. Of course, (with apologies to Los Angeles) all is not LALA land in the open source world. Groups do pitched battle and debate rages, but common sense usually takes hold before mutual self destruction is assured.

Spitballs and the signularity vs diversity

2010-04-05T07:27:00.000-04:00

Last week I had a spirited conversation with Yaron Samid, a co-founder of Pando, and now the founder of an interesting new company, CrowdSpot, which will launch later in 2010. Yaron is a spirited serial entrepreneur who, not surprisingly, rightfully prides himself on thinking differently. Our conversation was around business models and rapidly centered on the merits/trends of free/freemium vs free/don't worry about revenues (yet).

On the call, I found myself advocating a position with great certainty (as my friend Peta says 'always certain and sometimes right), citing a raft of new companies that are pursuing a certain course of action, popular today, but was in deep disdain a few years ago. Now, I can cite all the great reasons why things have changed, and today a company just 'has' to adopt the popular, but, on reflection, the reality is closer to what I tell my daughter; 'popular does not mean right, or good'. With the rich mosaic of niche markets available to technology companies, there's plenty of room to craft a customer winning solution that just happens to be different from common thought.

Looking at many of the successful princes of the software and internet businesses, the founders reached plateaus by not doing what's popular, but by thinking business different. For example, Apple's wonderful creativity aside, a great reason for the success of iTunes is it's business simplicity around $1 a la carte songs. Microsoft commoditizing, and greatly expanding the desktop market with its low cost productivity suites, and now Google leading the way with free web based applications.

Each of these strategies, were initially criticized by the status quo seekers, and each was wildly successful. The reality of our crowd behaviors is that we mimic success and strive for the popular, adopting a singularity of execution, until someone launches a spitball that happens to stick. Thereby, shining a light on a different way that, with success, becomes a new singularity to many to now follow.

Middle Fiddle

2010-04-01T10:43:00.000-04:00

It's tough being a middle fiddle. Whether in birth order, batting order, or a nearly impossible position to build equity in the technology space. Take phones for example, on one hand, you can get a simple 'dumb' Nokia 1661 unlocked phone for $39 on Amazon, on the other hand, the Apple iPhone 3Gs 32GB is $299 (with a media plan). In between lives more than 500 models (just on Amazon), all fighting for the 'we are just like the iPhone but cheaper', or we are 'just cheaper' space. It's nearly impossible to build a sustainable revenue stream, and even worse to build, or sustain, a brand (e.g. Motorola). Moreover, being in the middle doubles the number of deadly competitors who seek to maim or destroy you.

The same is true for markets. It's hard to have more selection than Amazon and to be cheaper than Ebay in the commerce world. It takes a fundamental different approach (Craig Newmark) to mine diamonds. I love the rewards entrepreneurs and shareholders earn from their innovations. Whether by mining new markets (friend, check-in, or follow someone/someplace recently?) or by destabilizing a somnolent arena (online Flash commerce and retailing).

We are at the crossroads of tectonic shifts in technology markets with new hardware platforms, mobile, open source and world markets beckoning consumers and corporate customers not far behind. Just be careful to not be caught in the middle.

Feeling social and wanting dollars

2010-03-25T13:11:00.000-04:00

I participated in the Social Media and Monetization Roundtable put on by Plugged Inventures. Some of the participants (apologies for not having a complete list) included:
David Lifson, CEO Postling and ex-Amazon and Etsy
Eric Goldstein, CEO Amplify
Kate Gutman, VP Digital Revenue Riders Digest Interactive
Matthew Milner, VP Social Media Hearst Digital
Sarah Tevel, Associate Bessemer Ventures

As expected, the session was about the tie between creating an audience and the potential for creating near-term value (as opposed to equity value) from such aggregation. Here were some of the pithy statements which caught my attention:

"I think of sites, such as FourSquare, as small/medium business CRM"

"Social has escaped the marketing department and is now touching all parts of a corporation, ranging from ranging from development to sales through support"

"Flash commerce, through sites such as Groupon and Gilt will expand beyond fungible goods and into services and consumables"

"People who embrace social sites early tend to be 'me' focused and are deeply affected by psychic rewards. They provide the kindling that bring initial value to the later participants who seek instant gratification from the value of 'we'

In addition, emerging companies mentioned that brought nods of 'yea, cool' were:

Formspring.me
Pushkart- Measuring social worth (and tying it to commerce)
Blippy- Uses credit card information to link folk to share and discuss things they are buying
Media 6 Degrees- Social targeted advertising
Groupable- Match sponsors with groups of people with common interests
Dotomi- Taking a personalized approach to display advertising; differentiate through remarketing

As a member of too many, or perhaps, not enough social networks, I am caught up in a cycle where my identity is fragmented amongst many domains.

Words

2010-03-19T02:17:00.007-04:00

Like many of you, I have been spending much time looking at various sites with a social aspect. I am struck by the 'tribe' like way words are embraced to solidify the identity of site members as part of the targeted demographic. It's akin to the way groups of off-line friends/family develop cue words that serve to bond them closer. Thinking about this, it's no wonder teens don't really like Twitter, to many of them the concept of 'Follow' is just so totally creepy.

It's really interesting looking at the words associated with many of these sites and the way they offer 'connecting' are really are not generic, but designed to capture and amplify the relationship amongst members:

Facebook Friends; become
LinkedIn Connections; many or which are
Twitter Followers; who are parents of
MissBimbo girls, and siblings of
ClubPenguin buddies

Sticks and stones

2010-03-18T12:13:00.000-04:00

Mom was right about many things, but she was wrong about this one. I have been an initial investor and board member of Payoneer for the past three years. The Company, under the leadership of its CEO, Yuval Tal has performed admirably through the start-up twists and turns, and now the exuberence of torrid growth .

The company started its life offering debit cards to teens. Yuval figured that commerce was going to explode for teens online and it would be a natural outgrowth of this trend for parents to move allowance dollars from cash to stored value cards. Thereby, enabling teens to shop online, with limited downside liability and no downside link to their parents credit (e.g. parent card numbers will not be floating around the net). When he launched the business, there were two metrics we kept a close eye on; fraudulent applications, and cost to convert leads to card holders. The initial thesis was the internet would bring incredible efficiencies to the market. Boy, were we wrong!

We bought some Google media and found fraudulent applications ran >60%, driving the cost of leads to a level that was not even in the ballpark of being economical. Fortunately, Yuval was able to find a market, that had a crying need for a stored value solution; affiliate payments. Today, Payoneer is a preferred way that hundreds of sites pay their affiliates. For example, iStockphoto, Elance and Odesk all use Payoneer as a way to transfer funds to their affiliates. His team has now expanded beyond affiliate payments to several wonderful verticals where the customer need is pronounced.

Recently, Payoneer has been in the news owing to a situation where they were, at most, tangentially involved. It's been yet another CEO trial by fire. For me, it again highlights why I invest behind people. They bring you to markets and there's no replacing the passion of a founder.

Gothamedia venture panel

2010-03-15T10:24:00.000-04:00

Roused from a cold house, with no phone service, electricity or water, I spoke on a round table this AM with a few folk from the NY venture community. The session was hosted by Gene DeRose, serial entrepreneur, former CEO of Jupiter Media and now founder of HouseParty .

Panel was noteworthy by the number of areas of agreement. I don't think people were being polite, but with such industry turbulence, perhaps, we are now better listeners and open to considering different things. Here were some highlight quotes:

Howard Morgan, First Round-We have built our fund to optimize for the sub-$100mm liquidity events that have traditionally dominated the transactions in the technology space.

David Pakman, Venrock- Many entrepreneurs are building companies with wonderful potential, but that does not mean they will be good investment opportunities for institutional investors

Larry Lenihan, FirstMark Capital- We are not religious about technology, markets, or stage. We will invest where we think we can earn good returns

Danny Shultz, DFJ Gotham- Social media market feels like a winner take all area where Facebook has run the table

Moogis redux

2010-03-12T12:00:00.000-05:00

The Allman Brothers Band are back in NY for their annual concert run; moved from the Beacon in deference to the circus- a sore point highlighted in the photo screen displayed behind the band- and playing in the magnificent United Place Theatre (former home of the Reverend Ike). It's also been a year since I've checked out Moogis, the live streaming/on demand repository of the ABB shows, created by drummer Butch Trucks. I thought this would be a wonderful time to see how the technology, experience, and pricing have changed in the last year.

* cameras have moved from 750i to hi-def 1080i
* per an interview, they said their streaming costs/mb are down by a staggering 75%
* my personal infrastructure's been upgraded with an addition of a LD-390 Blu-Ray with built-in Wifi. This is connected to my big screen and I use Tversity as the media server
* A yearly subscription is $150/year (till March 11th?)

Looking at the forums, it seems as if there are some member issues that need resolution.

Hoping there's some blue sky behind the clouds (if you watch, check out fiddling with the resolution on the lower right corner of the video. The degradation in viewing quality is staggering as you move from 360-1080i. I suspect the issues in the forum are not Moogis related, but due to 'cloud' congestion....as if that makes subscribers, looking for great live streaming experience, feel any better).

Smiles are viral

2010-03-11T10:07:00.004-05:00

Umair Haque, the author of Black Swan, has written a wonderful piece where he looks at the issues around the initial release of GOOGLE Buzz and draws some conclusions.

Here's some snippets and comments:

1. Today's services (I think he means web) are built to 'fail fast and cheap'. In many ways today's web companies are as 'disposable' as razors; their applications can be built inexpensively, using freelance talent and rented infrastructure. If traffic comes, then the entrepreneurs have a company, if not, then...well, next.

2. The rise of social based applications, a new category, is leading to a resurgence of best of breed applications; not burdened by a melange of features that force design compromises that result in the type of mediocre products we see in so many desktop and server based applications. Mature computing environments inexorably lead down the integrated path (e.g. the desktop) where, best of breed companies, have been decimated by 'integrated' solutions. It will be interesting to watch the rapid evolution of Facebook as they seem to be on the vertical integration path. Google, which at one time, disparaged such integrated activities, has been singed with their 'falling off the wagon' Buzz integration with Gmail. Let's see how long it takes them to be again seduced by the 'leverage' temptress. Perhaps, having such a great depth of integration opportunities is what's hindered MSFT from being a great web company.

3. 'Thin value is not sustaining'- You get to this thought by clicking through to a previous post describing how phone operators make hundreds of millions of dollars by forcing 15 second greetings on mobile phones. It's a feature purely designed to make money while pissing off customers royally. Therefore, it's not sustainable and the profits become an equity destroying habit that creates an umbrella for disruptive competitors. 'Thick value' the type of utility or experience you can't get elsewhere that saves you time, money, or is just plain fun is the heart of just about any successful company. A couple, or a singular thing really matters to your site visitor (I really try to stay away from the drug induced term 'user'). Get it right by maximizing their utility. Smiles are incredibly viral

4. Be generous in your product design- Don't hesitate to give value to your visitors, even if that value is used beyond your site. Let them use their data or 'connections' elsewhere. Notable in practice today with the massive adoption of Facebook Connect.

5. Simplify- It wasn't so long ago that printing companies measured their revenue derived from computer software instruction manuals in the hundreds of millions of dollars. Now it's close to zero. Today, we have the '8 second rule'. If a site can't engage my daughter in 8 seconds, she's gone...

PlumWillow

2010-03-10T10:04:00.001-05:00

I've been working with a committed founding team, led by Scott Stone, towards building a site that enables teens, mostly girls, to have a wonderful on-line shopping experience. Scott's team believes that online shopping is mired at only 5% of total apparel sales, in large part because the experience is 'oh so 80's'. Grab a look at the shopping experience at Homedepot and compare it with Abercrombie. It's really a commerce, and not a shopping experience. We hope to change that. The Wall Street Journal had a brief write-up here.

As in most start-ups the highs have been euphoric, the lows depressing, and the frequency of each rapid. The company is not yet encumbered by customers or partners, so things are rosy and everyone has their heads down towards a late Spring launch.

Though it's a new Company, let me share some things that have happened that starkly contrasts with early stage investing/start-ups from a mere 3 years ago:

1. Architecture- At no time were proprietary tools/foundations considered. The architecture is LAMP flavored based, but with two key caveats:
* The database will be a NoSQL flavor. So many folk have highlighted the inefficiency of SGL based systems in webscale applications that we were persuaded to go to the edge on this one.
* When building consumer applications, LAMP is not enough. We spend many hours concentrating on the LAMPF component. Facebook Connect is just so incredibly important/scary that figuring out how to work with, tweak, and be in compliance took more time than determining the components to use.

2. Infrastructure- Everything, and anything you can't carry is outsourced. Applications are GOOG based, phone is Skype, servers are virtual, etc. Expenses are totally variable and service can webscale.

3. People- We have been fortunate to find incredibly talented, equity oriented, and passionate folk in NY. Meetup is the lubrication for physical social connections. We could spend our days and nights attending all the interesting sessions held each week here.

4. Professional help- Many quality lawyers have 'special' deals for start-ups, and paying for good help won't consume your budget (less than 3% of $ raised in a seed round).

5. Angels- Most that we spoke with prefer investing at the venture stage (post-revenue). A few, notably Jon Whelan, really dug into the product and offered great feedback that influenced our product design greatly.

6. VC's- We have not been looking for VC $, but for insight. We received good feedback and offers to help. Once we do our job and get the product launched, we'll see if the offers were sincere.

The team is now busy coding, cutting and adding features, and engaging with their audience. No one knows if 'lightning' will strike, but we are encouraged...and wondering....

Nonlinear

2010-01-28T16:03:00.000-05:00

Over the past two weeks, I have spent considerable time in beginning of the year board meetings, as well as speaking with a number of entrepreneurs about the prospects for their companies. In the course of these conversations, I was struck by the linearity of just about all the plans: constructed with a firm belief in rational, predictive growth that approximates a straight line.

Of course, we live in a multi-variate system where nonlinear events (aka chaos) is the norm. It's logical to plan in a linear manner, but only as a guide as Black Swans are more common than we think. It's a rare person whose mind works in a Black Swan way recognizing that shifting sands of technology, competition, and individual execution most often lead to nonlinear performance; for good or for ill. During '08 and '09 the venture industry certainly had its share of nonlinear events that more than made up for the wonderful '99-01 years.

While the planning process is important to determine asset allocations and to culturally be sure team members are marching towards a common objective, I have come to believe that an integral predictor for success is how well a management team deals with unpredictable events, and how well investors and board members, often under time/financial/opportunity pressures, advise them in the process.

I suspect the recent announcement of the iPad represents such a nonlinear moment. Publishers seem to think it represents a grand new opportunity while Sony and Amazon face steep new competition to core initiatives. Investors are wondering if it bodes well for the burgeoning mobile opportunity, or represents a desktop extension used within WiFi comfortable walls.

Time will tell whether the best laid plans will lead to success for these vendors, or if it will be the power and insight of the re-plan that's the ultimate differentiator.

Everyone has a plan 'till they get punched in the mouth- Mike Tyson

2010-01-19T07:19:00.000-05:00

Much has been made of the upcoming war brewing over market share for the real personal computer; the one you wear, put in your pocket, where you store your most intimate photos and videos. Yes, the device formerly known as your phone is the latest step in a continual line of cheaper, smaller, more 'personal' devices that date back to, at least the 1975 introduction of the Apple 1. As of now, it seems as if the latest battlefield will be seriously joined by, at least 6 mega-vendors coming from 3 directions:

The computing field: Microsoft and Apple (sort of sad that IBM has abdicated its computing relevance for the mainstream consumer and will sit this one out, while DELL continues to plan and test their market entry)
The web: Google
The phone: Nokia, RIM and Motorola

The platform shift from desktop to mobile, or for some vendors from phone to the 'new' personal computer, is as titanic (threat/opportunity) to these vendors as the shift from mainframes to mini's then to micro computers was to IBM, DEC, DG, Motorola, and the BUNCH. Most of these now forlorn Princes faced extinction with little grace when they were unable to navigate the shifting landscape. The impact of new distribution, pricing, business models, digesting dynamic market needs and an accelerated pace of innovation stress the culture of incumbents to the breaking point.

In this light, Apple's transition from a desktop centric vendor in 2006, to one where the Mac line accounts for only 38% of revenue and less than 14% of unit shipments (in '10 they should break 100mm shipments of 'stuff'...Nokia ships >450mm units), while not missing a beat, is a staggering achievement. I would bet their acquisition of Quattro wireless portends another evolution of their business model, one that prepares it to do battle with folk who 'give away' their IP, in return for harnessing and directing attention.

When navigating new waters, I think company culture and communication of a meaningful strategy plays a large part of a firm's success potential. Therefore, I dug up SEC filings for these titans to revisit what they share with shareholders/employees about their strategic directions. It makes for good reading and should help you in handicapping the race:

Apple business strategy (per their '09 10k):

The Company is committed to bringing the best personal computing, mobile communication and portable digital music and video experience to consumers, students, educators, businesses, and government agencies through its innovative hardware, software, peripherals, services, and Internet offerings.

Google business strategy (per their 10k)

Our mission is to organize the world’s information and make it universally accessible and useful. We believe that the most effective, and ultimately the most profitable, way to accomplish our mission is to put the needs of our users first. We have found that offering a high-quality user experience leads to increased traffic and strong word-of-mouth promotion.

Microsoft's business strategy (per their 10k)

Our mission is to enable people and businesses throughout the world to realize their full potential. Since the company was founded in 1975, we have worked to achieve this mission by creating technology that transforms the way people work, play, and communicate. We develop and market software, services, hardware, and solutions that we believe deliver new opportunities, greater convenience, and enhanced value to people’s lives.

Motorola's business strategy, (per their 10k)

Motorola seeks to be a leading supplier of wireless handsets and mobile experiences to customers globally. To
accomplish this objective, our strategy is focused on simplifying product platforms, enhancing our mid- and
high-tier product portfolio, and strengthening our position in priority markets.

Nokia's business strategy (per their form 20-F)

Our mobile device market share is driven by our ability to have a competitive product portfolio with
attractive aesthetics, design and combination of valueadding
functionalities and services for all major
consumer segments and price points. Market share is also impacted by our brand, manufacturing and
logistics, distribution, competitive cost structure, pricing and how we differentiate our products from
those of our competitors. We believe that product differentiation will be based increasingly on service
innovations and how these services are integrated with devices to improve the user experience.

Research in Motion (Annual report)

RIM helps users all over the globe connect to the specific people, information and
media that makes their worlds go round. The success of BlackBerry products
and services is driven by passionate employees, outstanding partnerships,
distinctive technological expertise, a commitment to quality and a culture that
embraces innovation, customer service and operational excellence.

And for your viewing pleasure, a Rocky take-off:

Buy then bye

2010-01-13T14:51:00.000-05:00

A recent post in BusinessInsider highlights that Facebook is experimenting with a payments platform as a way to further spur commerce happening on Facebook. Here's the post

I think there's a huge and untapped business opportunity that has yet to be mined around the transactional side of the internet. For example, in 2009, less than 5% of all retail sales were online. AMZN, with its $22B in Revenue and $50B market cap pales in comparison to Walmart's $404B revenues and 210B market cap. So, Walmart's monthly revenue is double that of Amazon's yearly gross. Think about it.

I don't think the relative lack of online commerce penetration is due to consumers/businesses hesitant to complete transactions over the internet; Paypal's total payment volume in '08 was $60B, but instead, we ought to look at:

1. A poor shopping experience, modeled after the days when consumers were narrow band connected. We ought to give consumers more of a brick and mortar shopping experience, but where a crowd is a positive instead of a negative. Scott Stone, the founder of a new commerce company (which I am backing) calls for an end to the 'buy then bye' commerce experience

2. Stored value cards are slicing through the demographic mosaic with teens and now Tweens. Amazon's innovative PayPhrase program facilitates parents setting up an online allowance for their children. Better to have a stored value, where parents have the ability to monitor disbursements, than to hand over cash for a trip to the mall.

3. Returns- Pioneered by Zappos (and again Amazon) whereby returning goods purchased through the site, or via an affiliate is as easy as eating pie.

4. Trust- Returns and payments are only part of it. Security is the big elephant in the room. My personal data, credit card information, and purchasing history is safe with you. I will never hear of someone stealing a laptop from the IT manager of a site I visit, which happened to have my data on it.

5. One size does not fit all. My kids moved from Club Penguin, to Stardoll, to MissBimbo. A natural progression that was optimized for the demographic each step along the way. All they want to do is have some fun...

More about people-Tony Hsieh of Zappos on hiring

2010-01-07T16:02:00.000-05:00

People

2010-01-07T15:37:00.000-05:00

The folks at Business Insider posted an interesting Netflix presentation on why they are so focused on hiring, and retaining "A" players.

Too often we have to plead guilty of settling for good enough as various pressures reach cause the kettle to boil. Not all companies are built for this type of culture, and not all practice what they preach. Nevertheless, it's a provocative read, both the article and the presentation.

Looking forward by scanning back

2010-01-04T01:36:00.092-05:00

I've been reading many of the 2010 prediction lists. So many folk have done such a great job thinking about the future of the web/IT, I thought it would be interesting to list the web/IT oriented things that I have done recently that were not in place for me 12 months ago.

1. Signed onto PC using Chrome browser...faster than Firefox, but crashes Gmail more often. Can't wait for HTML5 for the next generation browser experience and saying goodbye to another layer of installed software as the browser sucks away more market from the software domain (as MSFT did in the 90's).

2. Sifted through 27 overnight e-mails. The majority were social oriented (Twitter following, FB friend requests, LinkedIn stuff). Amazing how quiet the house is with the shift from phones to texting/social. Thinking about how noisy offices were in the 90's (remember the noise containing containers on printers) and how the Enterprise is going to embrace many of the social tools with a vengeance that will bring a smile to long suffering shareholders.

3. New FB Friendfeeds this AM were 2x the e-mails received....and the gap is growing by the week

4. Looked at Tweetdeck, where the number of new Tweets from people I follow were 2x the FB feeds...got to filter these better. Craig Newmark...too many squirrel photos and bird posts!!!!

5. Scanned my 3G BBerry for BBM's and Chats (4 overnight). A device optimized for an aging metaphor (mail)

6. Took the wife's 3G iPod and spent an hour catching up with Meebo, YourVersion, Twitter, FB and chess with nephew (who wants a piece of me). No doubt there is a big role for a big screen Touch like device in my life (iSlate?)

7. Using TVersity to stream web content to the big TV (installed N router with a Wifi enabled LG BlueRay player)

8. Scrolled through GoogleLabs, now 5 pages long (including 1 1/2 pages of graduates) to see what could complement my move to GOOG apps for '10. GOOG is an innovation machine; too bad MSFT is in maintenance mode...the IBM of 201x

9. Interrupted my daughter's Hulu watching to do homework (no TV in her room, and doesn't ask for one)

10 For the first time, mailed driving directions to an inanimate object (my car)

11. Forwarded a Skype call via GoogleVoice.

12. Ordered another book on my Kindle; can't wait for it to evolve to a more open platform as it follows the rest of 'Amazon as a platform'

13. Lost a bet to my son (is Philadelphia a top 5 US population city?). Verified via WolframAlpha. This computational knowledge engine (just another way to say search for things that require some computations). This is serious technology. Hope it evolves to find a market.

14. Reached 575 family members and traced the family tree back to the Austrian Hungarian empire in 1825 via MyHeritage.com

15. Experimented with Geo location apps; FourSquare, GOOG Latitude, Loopt and Gowalla. GEO and profiling will capture intent to bring me better shopping, unlock more 'implicit' social relationships, and continue the shift from a 'pull' driven internet to a highly relevant 'push' experience

16. Though it's a stretch for '09, as the Apple App store is now 16 months old...its success has changed the software business (cratered prices, shifted web platform to mobile, and unleashed a tsunami of programmer creativity), while extending the web to your every second fingertips.

17. Sent a message to Scott, Yair and Laurie, co-founders of PlumWillow, a new and potentially exciting e-commerce company I am pleased to be investing in.

Feel free to expand this list with your personal '09 'Newbies'.

Wishing a great New Year to all my Friends and Followers.

Hey Hey..Oh My?

2009-12-12T04:00:00.092-05:00

I had a spirited conversation with Elad Baron, CEO of Bitwine, yesterday about the effect of real-time search, coupled with proprietary data stores (Facebook + Twitter come to mind). Bitwine, Elad, and his members live in the 'now' and soon to be 'now' world, so he follows this closely.

The conversation was spurred by Google's announced partnerships with Facebook, MySpace and Twitter for real-time updates to their search results. So, the real-time web has naturally spawned real-time search which unlocks another avenue to mine demographic/profiling information with intent. Probably a good thing for advertisers, definitely a positive for shareholders, and if advertisers get great results, it will accelerate the downward pricing trend for purchased 'bytes' (e.g. software, music, information).

But isn't it revealing that, in an era where billions of dollars are being spent on SEO and buying keywords to 'direct' traffic, Google (and MSFT's Bing) need to ink deals with vendors for access to data within their built proprietary applications? It's the inverse of the 'norm' where companies, beg, borrow, or steal (yes, that is SEO) search engine mind share. The world's gone upside down...or perhaps, reverting back to the status quo.

On one hand, it's great to see so much timely information available and innovators building oodles of shareholder value by adding utility for many in the value chain. On the other hand, we need to think about emerging from an era of proprietary applications, with attended vendor 'account control' to an era of proprietary data prisons, again with vendor 'account control'. We ought not only to be wary of the effect of data prisons, but also the impact on exposing so much data, often from quite young folk. For example, Facebook's recent 'update' of their privacy settings brought an outcry of protest from the ACLU, the Electronic Frontier Foundation and others.

It seems as if Twitter's yet to be announced advertising plan just may be the tipping point for a data vs access battle royale. Crawlers vs content. Unlike the traditional content business, however, in this case the content, or personal profiles/links are really proprietary, at least for awhile, to the content sites. Till recently, FB members could control who has access to their profiles, on the other hand, Twitter was far more 'open', enabling people to mine profiles of unrelated 'followers'. Postings to FB had a more intimate feel, Twitter for more universal content. Each building an ecosystem that balances breadth with depth, united in their interest to mine user data. These ecosystems are linking with each other, perhaps leading to a cacophony of time slicing for viewers, and maybe a lessening of the emerging power of the closed data systems.

John Battelle takes a look at the implications of an element of the strategic battle looming between FB and Google, as it pertains to the exposing of member data. So, it's fair to say that MSFT, GOOG, FB, Twitter, et al are preparing to, as Tiger reportedly said 'go ghetto' on access to the data which members entrust to their repositories. I would not be surprised if one of the scorned players, and surely there will be scorned players, raises a new front on the 'fair use' debate, broadening it from bandwidth, to data.

It's unclear if 'there's more to the pictures than meets the eye'

Time, again and again

2009-12-11T10:56:00.000-05:00

In the past couple of weeks, while having a number of meetings with bankers and financial folk discussing the environment for Company exits, Fund fundraising, and valuation dynamics, I have also committed to a new investment in the commerce arena (more about this in a later post). Of course, the tenor of these meetings is quite different, but a common thread runs through them 'what's the prospects for future company performance' and its close sibling, 'what's the dynamics within the industry segment'?

The software and internet industries are known for shifting paradigms, false prophets and explosive adoption that create wonderful opportunities that, when they hit, truly are globe changing.

Marking a new decade is an arbitrary reference to the passage of ten consecutive years, with little significance beyond noting ten years passage from the previous arbitrary point in time. Yet, there is a perspective gained by the look back, if nothing else as My smart friend Larry says 'pattern recognition is one of the important things a VC brings to the table'. He's right.

Ten years ago, billions of dollars were (mis)spent around the Year 2000 'bug', Microsoft was touting Window 2000, the U.S. District Court Judge Thomas Penfield Jackson ordered Microsoft to be split in two, Apple was pushing iTools and iCards, and AOL was skewered by reviewers for it's latest 'upgrade'...'AOL: You've got bugs'. While we were busy debating all these issues, from nowhere came Facebook, Google, the iPod/phone, and the Wii. Disruptive Black Swans all.

Courtesy of the Internet Archive, here's a number of links, taken from Year 2000, that highlight the shifting sands that make our industry so 'interesting':

Apple's home page

AOL's home page

Amazon's home page

Computerworld's top 100 Companies to watch

Here's my favorite

All welcome to add your favorites too.

Just get us behind the wheel

2009-12-02T10:16:00.000-05:00

In an important area, the internet has failed me and it took my son to put it into perspective. After too many years in my vehicle it's now time to pony up and get a new car. Following a time worn path, my son and I trekked to the dealer where our objective was to compare the handling of two interested models. It took us nearly 90 minutes to get into a car. Here's what happened:

1. we were first ignored;
2. then deemed unworthy for taking up the time with a 'Senior Consultant';
3. pawned off to a junior salesperson as the person we were speaking with was expecting an appointment to arrive soon;
4. told that it's too bad we are looking to buy a car this month ("last month we had much better deals")
5. explained that, despite purchasing 2 cars from this dealer, we were not 'loyal' customers because none were now being financed
6. asked to cut short a test drive (5 minutes into it) as the dealer was going to close soon and paperwork had to be done

My son put it best...'dad, these cars are great, if I were a salesperson, I would do everything I could to get someone behind the wheel and let the product sell itself'. Sadly, the salespeople we saw were unnecessary friction in this process.

This brings me to the disappointing internet experience that's exasperated the turkey stuffing left in me. Vowing to 'get respect' I configured a car at the manufacturer site and, using a link, sent the configuration to the closest dealer for a quote. Unfortunately, the dealer was not interested in reciprocating electronically and wants me to visit prior to talking turkey. Grrrrr.

Enter 'the Club'. I am biased; I love shopping at Costco as it's a brand I really trust. Value, quality, discovery, it's all there. But not with cars. I filled out their forms, knowing my shopping was done and now hoping for a clean buying experience. Instead, I am barraged by emails with the subect "Hi, Please contact me' or 'your VIP number is enclosed'.....Grrrrr.

AAA is no better. The no hassle, no negotiation promise, from the dealer AAA directs you to is only for vehicles in stock. You want a configuration they don't have on the lot and the gloves come off.

Perhaps, the Zipcar experience is my salvation. In any event, it's unfortunate that too many organizations let their business processes get in the way of exposing a great product to their perspective customers.

Natural monopolies...not just a game

2009-11-18T18:01:00.000-05:00

Tim O'Reilly had a wonderful post on the alternatives for Internet development from the 'small pieces loosely joined model' to the "One Ring to Rule them All".

Led by Apple and now Google's Android, we may be emerging from the 'One ring to rule them all' model of the PC-centric era. But that does not necessarily mean we stay in an open standard universe. It seems that for generation(s) computing has moved from one natural (or unnatural) monopoly to another. The Social Web may be no different as companies such as Facebook and GOOG can, in many ways, wall-off competition/innovation. This does not mean they will, but the potential is there and, if it produces a better (e.g. safer, more intuitive, more reliable) experience, history shows we will facilitate them doing it by choosing today's experience over tomorrow's potential.

Giving 'them the business'

2009-11-12T13:22:00.000-05:00

Bill Gurley wrote a really insightful post that describes how/why Google is commoditizing the GPS market. It got me thinking about building shareholder value in a sustainable way, in an environment where the cost of obtaining, and servicing an incremental customer is close to zero. In other words, let's recognize that IP based companies value are incredibly vulnerable if the value they create is based on the foundation of licensing that IP, when the pressure to shift to lower, or no cost alternatives, is going up literally by the day.

Google is opening new market opportunities for themselves (and giving great end-user value) by following a consistent strategy of shrinking the gross revenue potential from markets that rely upon licensing of IP. It's really important to reflect that Google gets much more efficient, and valuable, as its network grows. It' value is what they do with the network and is totally divorced from the cost of the IP engine that provisions it. It's this divorce that makes it so hard for IP based competitors, like MSFT, to compete against them. It's like archers, who must husband their arrows, competing against machine gunners...the rules of engagement have changed, no need to conserve ammo as bullets are 'free', so shoot first (and often); take aim later.

To fuel its growth, it's incumbent upon Google to pick off markets populated by companies with suddenly exposed 'monopolies'; vulnerable to the dual shift to 'cloud' delivery and an incremental customer delivery cost that, at best, is nominal. The bigger the market, the higher the vendor margins, the more incentive for Google to commoditize.

We have seen this is play out in consumer facing applications and, in the B2B world, folk such as Salesforce.com, RedHat and MySQL have only scratched the surface for the B2B opportunity.

Traffic Jam

2009-10-22T13:18:00.000-04:00

One of the most profound changes I have seen in the shift from client, or server based software companies, to the web, is the construct of the sales/marketing function. The shift of massive dollars and attention to marketing (GOOG); and away from direct sales and marketing support is astounding. Yet, recent experiences with a few portfolio companies has given me pause to think about where we are, and where's the market heading.

One of the laws of large markets is that, when they hit a critical size, they fragment. This is playing out, in spades, with Search. Not from the perspective of GOOG vs Yahoo vs Bing et al, but from the view of looking at, or for; people, places and things. Now that Facebook and LinkedIn have hit the magical tipping point, GOOG is no longer my 411 for people search. Likewise, the duo of TripAdvisor and Zagat handle my place inquiries with less clicks and more relevance. And for the mother of all categories, 'things', Ebay, Amazon, iTunes, and that great commoditizer, Craigslist, have my dial tone.

MSFL (My Smart Friend Larry) suggested that I run a Compete.com chart comparing traffic for GOOG, Facebook and Amazon. Fascinating to see how FB has passed Amazon, and has GOOG in its sites. Though not on the chart, and amazing for a couple of year old company, Twitter is at a level near 50% of Amazon, and LinkedIn is 50% of Twitter..

Traffic, make that relevant traffic, is the 'coin of the realm' for internet companies. Heretofore, many firms rightfully obsessed with buying (Adwords) or 'stealing' (SEO) traffic from Google. But a couple of factors should shift the status quo. First, the aforementioned tipping point sites, and they're not the only one's, should continue to improve their price/performance faster than GOOG, which seems to be getting less relevant, in absolute terms, due to the 'optimizers' breaking it. At the same time, Adwords is getting so price efficient, where so many well capitalized companies are bidding for keywords, that the toll on the traffic ramp is just getting too steep to build a sustainable, capital efficient, business proposition. It's almost like where we were ten years ago in pre-paying for a sales force and SE's in the Enterprise space.

The good news in all this is the rapid maturation of social media. The potential for companies to offer a thrilling value proposition which their constituents (I am really shy about calling them 'users') enhance their personal value by inviting their friends/co-workers/social supply chain is astounding. When properly executed, the savings in sales/marketing expenses that companies can now devote to their products is tremendously exciting for entrepreneurs and as they say in Wharton, 'juicy' for investors.

The airwaves are full of Tweets, posts, and videos over what this means for the venture, angel and expansion asset classes. I am sure there's room for all, and the relative opportunities will inevitably ebb and flow between them. As they say, stopped clocks are right twice a day. If you choose one area, and stay with it, no doubt that you'll be right...at least once per decade.

How many people does it take?

2009-10-16T17:48:00.000-04:00

There's an industry parable that I often quote:

A VC in training asks "How many people does it take to write great software?"

The sage CEO responds "two, one to write the code, and the other to shoot the programmer when it's done".

I've been actively working with an entrepreneur towards seed funding his new venture. He's been actively speaking with potential employees, business partners, and surveying the target demographic. We get great feedback, and incredible ideas which keeps expanding the product requirement list. And that's the good and bad news. Without his active pruning of the product branches, the Product Requirement Document surely would've collapsed long ago.

This set me to thinking about the product experience we see as consumers, or as professionals. Too often I have been involved with or seen products/sites that are beautiful, yet with so many irrelevant features which burnt precious capital, time, and focus. In many ways and markets, the great progress in LAMP tools and vast open source resources, the art of product management seems to have overtaken the impact of the science of architecture/programming in determining success.

For grounding, I try to hearken back to simple principles such as Google's home page, devoid of everything but its search box. Why? Because the site is all about speed...get the visitor off to their destination ASAP. Management product folk determined that it's to sacrifice near term revenue to optimize the #1 distinguishing site feature, speed. For long, this was a contrarian approach scoffed at my industry sages.

It's not only search. Look at the comparison of three large players in the dating vertical below:

The UI for Plenty of Fish is enough to give any respectable UI designer angina; but it works fabulously well.

How about the mother of simplicity; Craigslist? In many ways, you have to admire a self-professed 'geek' like Craig Newmark, who has consistently rejected 'cool' in favor of effective navigation. Check out the graph comparing traffic on Craigslist, Ebay and Amazon.

The Wii, with it's pedestrian avatars and antiquated graphics slaughtered Sony and MSFT in this generation's console battle. The essence of a site's success may be 'cool', but it's not a prerequisite for success.

You can't judge a book by it's cover.

Aaron Patzer, Mint founder

2009-10-09T08:48:00.000-04:00

Skip the first 1:30 and you'll listen to his unvarnished perspective, in detail, on the phases of starting a web based company. From prototype, to alpha, to beta and launch. The building of a company and the transition of a nerd to CEO.

Interesting points (some tongue in cheek):

* Each engineer is worth $500k and each marketing person subtracts $250k from valuation
* Concentrated on efforts building a great application
* Initial revenue projections are bull; revenue/user (in his case) was more important

Mint CEO Aaron Patzer on Startups from Techcrunch on Vimeo.

Latest fund raising figures for VC firms

2009-10-08T13:23:00.000-04:00

It's no surprise that LP's are still 'stressed' and unwilling/unable to make VC commitments. The malaise is affecting new, and existing funds.

Here's the link

Thoughtful (and negative) Google Wave review

2009-10-08T11:38:00.000-04:00

I think there's a tremendous opportunity around more efficiently bringing real-time attributes to many applications, including multi-media. The silo's of mail, IM, Tweeting, etc are getting too clumsy and unwieldy to manage. That's why I like the appeal of Wave.

Executing on a market opportunity is, of course, a distinct step from seeing it. Here's a well thought first impression of Google Wave written by Orli Yakuel.

This is an early beta and it will be interesting to see how the product evolves. On that topic, and as a stunning contrast, I just downloaded the most recent version of Powerpoint viewer (2007). Imagine freezing a crippled application for 2+ years? MSFT's DNA is totally different from successful web based companies. I suppose if I was charged with protecting a $58b revenue stream and 36% operating margins, it would stifle my innovation too....notwithstanding the MSFT haters, I would love to see the passion return.

Mike Moritz interview

2009-10-06T14:54:00.000-04:00

Guy Kawasaki interviewed Mike Moritz of Sequoia and Paul Graham of YCombinator on the MSFT Campus back in July.

Much of being an entrepreneur is figuring out what to do, when to do it, and getting others to help. If you're interested in a framework it's worth a view...

AAPL Tablet vs Kindle?

2009-10-01T01:22:00.001-04:00

We have 2 Kindle's in our household and have experienced mixed reviews on its utility. On one hand, it is a great device for traveling, on the other, it's just so parochially just a reader (a good one) that, along with the Blackberry, I feel Internet and application disabled when compared next to the iPhone.

Amazon has been testing the Kindle in a few Universities (wonderful idea for backpack laden Middle schoolers too). Unfortunately, the initial review from Princeton is not too compelling. The need is there for a tablet sized real internet device (sorry MSFT, still suffering from buying your Gen 1 OS). Between smart phones, tablets, PC's and the iTouch, there seems to have been enough trial and error to collect solid information for product managers somewhere to hit one out of the ballpark.

Billions of applications downloades; where's the beef?

2009-09-30T05:14:00.000-04:00

Per Apple, as reported in BusinessInsider, more than 2 billion applications have been downloaded onto iPhones. A truly incredible number, and with 85,000 applications in hundreds of niches, represents the democratization (commoditization) of software as I suspect that the vast majority of these downloads were of software that cost less than $2.00/download (with no maintenance charges). More than 10 MILLION applications are downloaded each day! 40 applications per phone....(maybe I should insert disposable before application?).

But (and there always needs to be a but), where are the great new emerging iPhone software companies that are roaring their way to the IPO bank, or into the adoring arms of buyers?

Perhaps, the iPhone really represents a watershed, and terminal, event in the software market. The tipping point of consumer software, where it's now an element of 'Free', a way station towards advertising, subscription, or commerce revenues. No longer a revenue objective in its own right. If so, wherefore art thou future MSFT, EA, Intuit (note the Mint acquisition as highly strategic in a deeply commoditized IP world)? Do your businesses look like Google or Amazon?

Social Media Revolution video

2009-09-24T07:28:00.004-04:00

Erik Qualman runs a bog called Socialnomics and is the author or a similarly titled book that covers the Social Media arena.

Here's a video, chock full of factoids that I found interesting:

Larry Ellison and 'why I acquired Sun'

2009-09-24T00:55:00.000-04:00

Interesting post by Will Price describing Larry Ellison's speech Monday night.

Essentially, he argues that the Enterprise business may now be best served by rejecting the move to a components based horizontal approach, where the customer chooses a multitude of 'best of breed' vendors. Instead, a 'vertical' approach (harken back to dominant IBM) where one vendor supplies, or integrates the total solution is best for the customer.

I suppose he's right in an environment where innovation is stilted, and competition offers many alternatives. Or, you have a culture of intense innovation (Apple). I think you need two of these conditions to be present for his vision to be successful.

Here's a snippet of Mr. Ellison entertaining the crowd on his view of cloud computing

Google Wave

2009-09-23T01:26:00.001-04:00

Google announced their new communications platform, Google Wave will open to the public on Sept 30th. This open sourced platform seems to unite mail and IM in a 'live' application environment that is courting the developer community. If it lives up to its hype this just may spark a creative tidal (er) wave in the communications segment (along with porn, one of the 2 key drivers of the early internet). What could also be really big is that, apparently, Wave does not operate under MSFT's IE 6 browser due to lack of JavaScript and HTML5 support.

Here's a link from Mashable highlighting the top 6 Wave features

Ride 'em Lar

Plans

2009-09-21T11:17:00.004-04:00

A good article in today's WSJ highlights the fallacy of making long (or mid-term) economic forecasts. As we are in the autumn season, where CEO's are preparing budgets and plans for themselves, and investors, I think it's especially relevant.

In the technology space there are so many moving parts, ranging from competitive products, pricing, evolving ecosystems that the general economic environment is often a secondary item to contemplate. One thing I have found is important in the planning process is to empower the CEO with enough flexibility to adjust to the knobs to find the right tune for today's environment.

Judge Rakoff goes the extra mile

2009-09-16T06:11:00.003-04:00

The Wall Street Journal reported yesterday that Judge Rakoff rejected the proposed settlement between the SEC and Bank of America. He was critical of both parties and seems to be injecting a strong dose of common sense by shining a light on who authorized billion dollar bonus payments to employees in a company that was on the verge of collapse, and why this was not disclosed in public filings.

Here's a copy of the Judge's opinion.

Hard boiled eggs

2009-09-15T06:31:00.002-04:00

Now that school is back in session, and lunch making duties beckon, I had to search for the time it takes to make a hard boiled egg. Not as straightforward a task as you would imagine.

Google came back with 'about 473,000 responses' to my inquiry about 'cooking hard boiled eggs'. Recipes detailed piercing the large end with a tack, removing eggs from refrigerator for 30 minutes before boiling, putting eggs in warm water till the water boiled, then removing from heat. And, of course, the fierce 15 vs 17 minute religious battle.

It took more time sifting recipes than boiling the eggs!

If there's so many opinions about making hard boiled eggs, and so many will give results that equally please me, just imagine how many ways there are to build a great company (or not to).

You just got to take your nose out of the book and start boiling the water.

Platform or application?

2009-09-14T06:01:00.007-04:00

Friday, Skype announced that it was discontinuing its Extras program due to 'lack of interest from the developer community'. Announced in late 2006, the program was launched with much initial success, with more than 10mm downloads in the first 4 months and more than 4,000 developers signed to build applications on the platform.

The Extra program always seemed to hold great promise. The ability for young vendors, for a fee based on a % of revenues, to hook into a huge (now nearly 500mm) installed base, seamlessly integrate a payment mechanism, and to ride a new ecosystem around the instant web had great equity building appeal. Of course, there was a huge caveat, Extra sent Skype on the path towards being a platform, where its infrastructure takes a back seat to the application written above it. Product management now had to take into account a new constituency, the developer community, as concerned with API's as consumers were about the next new function. It takes strong and consistent leadership to pull this off well. Not many companies have done so successfully.

Despite initial success, shortly into the platform journey it seemed as if Ebay/Skype was having great trouble straddling the 'coopetition' line that platform players, who also build applications must walk. Certification and promotion seemed arbitrary and statements of direction were murky at best. Developers, investors and consumers were confused. It became just too hard to navigate in a world populated with alternatives, so Extra participants turned their attention elsewhere, or disappeared.

With such great potential to stir up the market, unfortunately, Ebay/Skype performed a hysterectomy on its potential Golden Goose.

$636,687.75

2009-09-01T20:53:00.001-04:00

Thoughtful piece in the Atlantic, written by David Goldhill "How American Health Care Killed My Father"

http://bit.ly/oTtEn

Whatever time it takes

2009-08-31T09:19:00.010-04:00

I was struck by an Op-Ed in the NY Times over the weekend where it was remembered that during a long procedural Senate session, Bobby Kennedy once asked Ted "how long will it take before I become a great Senator"? The response was, 'whatever time it takes'. Sometimes, you just never know enough to give a more succinct answer.

Early stage venture backed companies often don't have the luxury to purse a 'whatever time it takes' strategy. Capital is invested, a site is built and the next step is the launch. The launch event that, pre-Google, was accompanied by shrimp with cocktail sauce, mini hot dogs and much press schmoozing. Post Google (excepting Bing), the standard seems to have gravitated towards a 'softer' launch, SEO tweaking, a beta banner, and a not too subtle buzzzzzz campaign with Facebook and Twitter resources brought to bear.

Though using different tactics, both methods have the same corporate objective; build positive metrics to raise more capital before the current dollars are exhausted. Today, early stage venture backed companies tend to be capitalized for an approximate 18 month run before more capital is required. Whatever time it takes means 12 months of market vindication (assuming a 6 month R&D incubation).

Contrast these ritualistic approaches with Wikipedia, now the 7th most visited site (per Alexa) or SpringSource, recently acquired by VMWare for $362mm. Here's their mission:

'SpringSource forges open source innovations to create lean and powerful technology that people love to use.'

Simple, direct, and all about creating great product that people will use (note that Springsource was venture backed, led by Accel and Benchmark). Numerous examples abound of quite successful sites that took a 'whatever time it takes' approach to building equity value. A couple of years ago, Club Penquin was the rage, today it's Twitter.

Another example of a 'whatever time it takes' success story is The New York Road Runners Foundation. My buddy Jim Milne is a co-founder of this organization that establishes community-based running programs, primarily through schools. Today, with a staff of 30, it serves more than 50,000 kids/week in more than 250 schools and has recently helped establish a program in S. Africa.

Obviously a key to successfully adopting the 'whatever time it takes' strategy is building and launching a site with enough novel utility that its adherents vocally support it via word of mouth, community forums, and product suggestions. Incidentally, all contributors to incredible capital efficiency.

Candidate for man of the year

2009-08-24T15:44:00.003-04:00

Admittedly, similar to my smart friend Larry, I have Libertarian tendencies. Nevertheless, I am quite put-out by the opaque handling of the Merrill bonuses. Billions of dollars of taxpayer went out as bonuses to folk who brought a company to its knees, and its head to the M&A chopping block. The SEC has been notably silent about who knew what and when about all this.

Rather than blindly accepting yet another 'slap on the wrist' settlement, Judge Jed S. Rakoff wants to know more. He's requested, and will publicly release the information that we should know, before deciding to accept, or deny the SEC settlement with Merrill.

Here's the NY Times article describing his perspective. Also, just in, is the B of A response. The SEC will file its response by the end of the day.

ATT and GOOG Voice

2009-08-19T13:37:00.004-04:00

Andy Kessler wrote a nice piece in today's Wall Street Journal, where he opined that ATT/Apple's disincentive to 'open' the airwaves is as much an 'alpha' (company) problem, as it's a 'beta' (industry) issue.

Beginning with the concept that airwaves can be owned by private entities, the government has not only sold, but set a mechanism to maximize the price companies pay for exclusive airwave access. Of course, the derivative of large upfront payments is an expectation of a long and fruitful annuity of high customer payments.

We have a situation here where there is a non-alignment of government objectives (per the President "the US should lead the world in broadband penetration and Internet access.") and its policy of selling access.

Given the airwave ground rules, plus the granting of municipal cable monopolies (more upfront government fees) ATT/Apple, and others, are behaving exactly the way one would expect. Unfortunately, it's not in their long-term interests, nor those of the US, to have regulations that unnaturally create high margins in a world where marginal costs are plummeting and innovators, such as Google, are at the doorstep.

As we have seen, entrepreneurs who are stifled by locked doors, find windows of opportunity.

Legal agreements

2009-08-18T08:24:00.007-04:00

Fred Wilson, Chris Dixon, Brad Feld and others have recently posted about first round funding terms, and helpfully followed with advice and pointers to documents from the law firms Gunderson, Wilson Sonsini and Cooley Godward that will assist entrepreneurs (and VC's) to come to equitable terms.

A site that I have found helpful is Techagreements.com, which hosts a searchable database of a myriad of agreements, by scores of law firms.

In addition, you may want to search Scribd for relevant documents. As an example, here's a search that I conducted on venture financing.

Better transparency in the financing process is good for all.

20 million video views and going strong

2009-08-17T09:39:00.001-04:00

User generated video
Site built by a friend (in the business)
100% viral 'marketing'
Ads by Google on the home site (not sure of the relevance for all, but clearly some return)
Video hosted and stored, for no cost @ Youtube

Those Twin Lakes rock!

And of course, the spoof with 1.4mm views:

Virtually yours

2009-08-17T06:06:00.009-04:00

I have recently been exposed to some happenings (in the estimated $2B revenue) virtual world arena. As in just about any market of this size, it is experiencing fragmentation as the communities become more granular.

Second Life is probably the best known property for folk of my generation. With IBM as a visible member of its community, it's just fine for folk like me to 'research' the site.

Here's an analyst report on the still private company prepared by Global Silicon Valley Partners.

While 'researching' Second Life, a young member of my household commented that it was not as much fun as Stardoll. If you have not yet heard, or played with Stardoll, check out the site comparison below:

Per the site " Stardoll is the largest online community for girls who love fashion, shopping, decorating, creativity, and making new friends from around the world. Members create their own MeDoll avatar, go shopping, dress up, decorate their suite, express themselves creatively and socialize with each other."

Though the site clearly does not have the graphic quality, nor depth of SecondLife, it is good enough to build a rabid following of 7-17 year olds and two years ago attracted a $6mm investment from Index Ventures and Sequoia.

In my household, I have seen a steady progression from Webkinz to Club Penguin, followed by Stardoll, which leads to Miss Bimbo.

A bite out of the Apple?

2009-08-15T14:26:00.004-04:00

One of the attractive, and sticky applications that endears Blackberry owners to their devices is Blackberry Messenger Manager (BBM). It's essentially an instant message application for your smart phone that facilitates texting.

A new version of BBM was just 'leaked' (messenger 5.0) and looks like a significant enhancement. It adds location management to the application, group chat, and facilitates adding new contacts through a neat 'bar code' feature which is integrated with the camera.

To me, the core strength of the BBerry is around its communication (mail and messenger) attributes. This upgrade cements the appeal for current owners, and those interested in having a device maximized for communications. For others, who seek a mobile internet experience, the iPhone just can't be beat.

Here's a nice tutorial on YouTube, posted by Moe Step:

Open Source

2009-08-13T05:26:00.010-04:00

The WSJ published a fine article about the success Peter Fenton of Benchmark (formerly Accel) has had in concentrating on, and exiting, Open Source investments. I am a huge believer that Enterprise prices are on a steady downward pricing curve and that 'best of breed' vendors are suffering from the slings and arrows of open source (maintenance based) pricing, AND pricing bundles from integrated vendors that takes away, or minimizes ASP's for these independent vendors. While terribly painful for these focused vendors (and their investors), it's good for customers.

Here's some of the quotes that I really enjoyed (and agree with):

When praising open-source many venture investors tout the low-cost product development that comes from a project’s community. But for Fenton, that’s overstated - the real advantage he says is the distribution model.

Rather than “expensive sales efforts and negotiations with the upper management to get the most money possible,” the people that will be using the software can easily download and try the product. This helps the best products proliferate and weeds out the underperformers.

Having a well-received product not only results in plenty of downloads, users and developers, it also makes the sales process that much easier. With SpringSource, “anyone the company sold to was already using the product,”

The success of open source, coupled with the aggressive pricing of integrated vendors (CA, Oracle et al) is mostly killing the business model of the best of breed vendors offering limited product suites. Unless these vendors offer real technology innovation, as opposed to products based on business process innovation, it will be quite hard for them to realize returns that will justify the capital investment necessary to build the IP and a direct sales/service organization to support it.

From an investors point of view, the opportunity cost of investing in an Enterprise software company that requires a direct salesforce, a dedicated R&D team, plus a 24/7 support organization pales in comparison to internet enabled alternatives. As my buddy Elad once said "Stay away from businesses that fight technology trends", and embrace the one's that are ahead of the wave.

Stop making sense

2009-08-12T08:38:00.007-04:00

I've been thinking about two high profile, yet unrelated transactions that took place in the past 30 days in the Internet. The Yahoo/MSFT licensing deal and now the Facebook/Friendfeed acquisition. Here's my thoughts:

Yahoo/MSFT

As a Yahoo shareholder I was initially quite disappointed with the terms of the transaction. Like many others, I hoped for much more. However, the reality is that Yahoo search was a depreciating asset. The operation did not have the vision to change the playing field (e.g. Wolfram Alpha), was mired in a distant second market share position, and despite the most public display of being for sale, had no other visible bidders. I believe the management/board team has rightly decided to do a final harvest of the fruits of the 'last war' and clear the decks for the next battle(s). Too bad there was not a 'boat-full of upfront cash, but this outcome is more a reflection of the market value, rather than lack of trying to maximize, or will to do a transaction.

Realistically, the company is way too far behind in the current market 'sweet spot', namely real-time and social. Let alone invisible in exploring, let alone taking early market stakes, in other emerging markets. Hopefully, with the search transaction now behind them and a rebuilt management team at the helm, the team can focus on building going forward value for shareholders by bringing together innovation and its audience reach.

Facebook/Friendfeed

I am a believer that when markets develop, initially best of breed vendors take early leads. Later, firms which combine their initial market share, with a product vision which expands their offerings to serve more needs for their customers, emerge/remain market forces. In the last couple of days, Facebook has aggressively signaled its intent to expand its service through incorporating real-time, adding more user requested social features, and introducing an alpha version of Facebook lite. These are important and timely additions as they simultaneously fend off competition from below (Twitter), and from established vendors who will surely mount spirited counter attacks (Yahoo, MSFT etc).

I suspect the M&A market will shortly heat up for a select few of the innovative social vendors and their shareholders.

Marc Andreessen

2009-08-05T06:27:00.005-04:00

Marc Andreessen (Netscape and Opsware, Ning and Andreessen Horwitz) at his irreverent best:

On newspapers- "stop the presses, how many years of pain do you want to take"
Facebook- 175mm active users, no brand advertising preferring organic growth
iPhone- A central platform for developers to build mobile applications "it was like beamed in from the future"

Qik- He's an investor...any phone with a video camera can stream video live to the web

Venture Capital- We are going to invest in many early stage software companies, with a small amount of initial capital ($200k-$1mm), when successful he'll invest more deeply. Harnessing capital efficiency which the web brings.

Twitter- He bet on the entrepreneur while he was with Odeo, when it was failing, he saw an opportunity that became Twitter. He returned the money raised for Odeo and invited the investors to join him in Twitter.

Kindle- Is representative of the new era of publishing. It's a new form factor 'web pads' that will be a precursor for a generation of similar devices (as a Kindle owner, I agree, and can't wait for a similar sized iPod/iPhone).

ATT is getting 'engaged' on the FCC iPhone matter

2009-08-03T01:00:00.001-04:00

Per Seeking Alpha:

Update: AT&T responded to this post with the following statements:

AT&T does not manage or approve applications for the App Store. We have received the letter and will, of course, respond to it.

Customers can use any compatible GSM phone on our network, not just the ones we’ve approved and sell. And they also can use apps we don’t approve. We don’t approve iPhone applications.

So, it would seem that Apple are the folk that rejected the GOOG Voice application. Though, the company who 'gains' the most by this rejection is ATT (hard to see the upside for Apple, unless the rejection was formally done by Apple, at the behest of ATT). It's great the FCC is getting into this and one or both of these organizations will, hopefully, change their evil ways.

Bottom line is that if you purchase a device (phone, computer, tablet etc), you should be the one who decides what should go on it. Perhaps, ATT/Apple should read the GOOG 'ten things Google has found to be true'.

If pressed for time, 'Don't be evil' should suffice.

Copy of FCC letters...

2009-08-01T07:00:00.001-04:00

Courtesy of Techcrunch

FCC Letter to Apple

July 31, 2009

Catherine A. Novelli, Vice President
Worldwide Government Affairs
Apple Inc.
901 15th Street, NW, Suite 1000
Washington, DC 20005

RE: Google Voice and related iPhone applications

Dear Ms. Novelli:

Recent press reports indicate that Apple has declined to approve the Google Voice application for the iPhone and has removed related (and previously approved) third-party applications from the iPhone App Store. In light of pending FCC proceedings regarding wireless open access (RM-11361) and handset exclusivity (RM-11497), we are interested in a more complete understanding of this situation.

To that end, please provide answers to the following questions by close of business on Friday, August 21, 2009.

1. Why did Apple reject the Google Voice application for iPhone and remove related third-party applications from its App Store? In addition to Google Voice, which related third-party applications were removed or have been rejected? Please provide the specific name of each application and the contact information for the developer.
2. Did Apple act alone, or in consultation with AT&T, in deciding to reject the Google Voice application and related applications? If the latter, please describe the communications between Apple and AT&T in connection with the decision to reject Google Voice. Are there any contractual conditions or non-contractual understandings with AT&T that affected Apple’s decision in this matter?
3. Does AT&T have any role in the approval of iPhone applications generally (or in certain cases)? If so, under what circumstances, and what role does it play? What roles are specified in the contractual provisions between Apple and AT&T (or any non-contractual understandings) regarding the consideration of particular iPhone applications?
4. Please explain any differences between the Google Voice iPhone application and any Voice over Internet Protocol (VoIP) applications that Apple has approved for the iPhone. Are any of the approved VoIP applications allowed to operate on AT&T’s 3G network?
5. What other applications have been rejected for use on the iPhone and for what reasons? Is there a list of prohibited applications or of categories of applications that is provided to potential vendors/developers? If so, is this posted on the iTunes website or otherwise disclosed to consumers?
6. What are the standards for considering and approving iPhone applications? What is the approval process for such applications (timing, reasons for rejection, appeal process, etc.)? What is the percentage of applications that are rejected? What are the major reasons for rejecting an application?

Request for Confidential Treatment. If Apple requests that any information or documents responsive to this letter be treated in a confidential manner, it shall submit, along with all responsive information and documents, a statement in accordance with section 0.459 of the Commission’s rules. 47 C.F.R. § 0.459. Requests for confidential treatment must comply with the requirements of section 0.459, including the standards of specificity mandated by section 0.459(b). Accordingly, “blanket” requests for confidentiality of a large set of documents are unacceptable. Pursuant to section 0.459(c), the Bureau will not consider requests that do not comply with the requirements of section 0.459.

Thank you in advance for your anticipated cooperation.

Sincerely,

James D. Schlichting
Acting Chief
Wireless Telecommunications Bureau
Federal Communications Commission

FCC Letter to Google

July 31, 2009

Richard S. Whitt, Esq.
Washington Telecom and Media Counsel
Google Inc.
1101 New York Avenue, NW, Second Floor
Washington, DC 20005

RE: Apple’s Rejection of the Google Voice for iPhone Application

Dear Mr. Whitt:

Recent press reports indicate that Apple has declined to approve the Google Voice application for the iPhone and has removed related (and previously approved) third-party applications from the iPhone App Store. In light of pending FCC proceedings regarding wireless open access (RM-11361) and handset exclusivity (RM-11497), we are interested in a more complete understanding of this situation.

To that end, please provide answers to the following questions by close of business on Friday, August 21, 2009.

1. Please provide a description of the proposed Google Voice application for iPhone. What are the key features, and how does it operate (over a voice or data network, etc.)?
2. What explanation was given (if any) for Apple’s rejection of the Google Voice application (and for any other Google applications for iPhone that have been rejected, such as Google Latitude)? Please describe any communications between Google and AT&T or Apple on this topic and a summary of any meetings or discussion.
3. Has Apple approved any Google applications for the Apple App Store? If so, what services do they provide, and, in Google’s opinion, are they similar to any Apple/AT&T-provided applications?
4. Does Google have any other proposed applications pending with Apple, and if so, what services do they provide?
5. Are there other mechanisms by which an iPhone user will be able to access either some or all of the features of Google Voice? If so, please explain how and to what extent iPhone users can utilize Google Voice despite the fact that it is not available through Apple’s App Store.
6. Please provide a description of the standards for considering and approving applications with respect to Google’s Android platform. What is the approval process for such applications (timing, reasons for rejection, appeal process, etc.)? What is the percentage of applications that are rejected? What are the major reasons for rejecting an application?

Request for Confidential Treatment. If Google requests that any information or documents responsive to this letter be treated in a confidential manner, it shall submit, along with all responsive information and documents, a statement in accordance with section 0.459 of the Commission’s rules. 47 C.F.R. § 0.459. Requests for confidential treatment must comply with the requirements of section 0.459, including the standards of specificity mandated by section 0.459(b). Accordingly, “blanket” requests for confidentiality of a large set of documents are unacceptable. Pursuant to section 0.459(c), the Bureau will not consider requests that do not comply with the requirements of section 0.459.

Thank you in advance for your anticipated cooperation.

Sincerely,

James D. Schlichting
Acting Chief
Wireless Telecommunications Bureau
Federal Communications Commission

FCC Letter to AT&T

July 31, 2009

James W. Cicconi
Senior Executive Vice President-External and Legislative Affairs
AT&T Services, Inc.
1120 20th Street, NW, Suite 1000
Washington, DC 20036

RE: Apple’s Rejection of the Google Voice for iPhone Application

Dear Mr. Cicconi:

Recent press reports indicate that Apple has declined to approve the Google Voice application for the iPhone and has removed related (and previously approved) third-party applications from the iPhone App Store. In light of pending FCC proceedings regarding wireless open access (RM-11361) and handset exclusivity (RM-11497), we are interested in a more complete understanding of this situation.

To that end, please provide answers to the following questions by close of business on Friday, August 21, 2009.

1. What role, if any, did AT&T play in Apple’s consideration of the Google Voice and related applications? What role, if any, does AT&T play in consideration of iPhone applications generally? What roles are specified in the contractual provisions between Apple and AT&T (or in any non-contractual understanding between the companies) regarding the consideration of particular iPhone applications?
2. Did Apple consult with AT&T in the process of deciding to reject the Google Voice application? If so, please describe any communications between AT&T and Apple or Google on this topic, including the parties involved and a summary of any meetings or discussions.
3. Please explain AT&T’s understanding of any differences between the Google Voice iPhone application and any Voice over Internet Protocol applications that are currently used on the AT&T network, either via the iPhone or via handsets other than the iPhone.
4. To AT&T’s knowledge, what other applications have been rejected for use on the iPhone? Which of these applications were designed to operate on AT&T’s 3G network? What was AT&T’s role in considering whether such applications would be approved or rejected?
5. Please detail any conditions included in AT&T’s agreements or contracts with Apple for the iPhone related to the certification of applications or any particular application’s ability to use AT&T’s 3G network.
6. Are there any terms in AT&T’s customer agreements that limit customer usage of certain third-party applications? If so, please indicate how consumers are informed of such limitations and whether such limitations are posted on the iTunes website as well. In general, what is AT&T’s role in certifying applications on devices that run over AT&T’s 3G network? What, if any, applications require AT&T’s approval to be added to a device? Are there any differences between AT&T’s treatment of the iPhone and other devices used on its 3G network?
7. Please list the services/applications that AT&T provides for the iPhone, and whether there any similar, competing iPhone applications offered by other providers in Apple’s App Store.
8. Do any devices that operate on AT&T’s network allow use of the Google Voice application? Do any devices that operate on AT&T’s network allow use of other applications that have been rejected for the iPhone?
9. Please explain whether, on AT&T’s network, consumers’ access to and usage of Google Voice is disabled on the iPhone but permitted on other handsets, including Research in Motion’s BlackBerry devices.

Request for Confidential Treatment. If AT&T requests that any information or documents responsive to this letter be treated in a confidential manner, it shall submit, along with all responsive information and documents, a statement in accordance with section 0.459 of the Commission’s rules. 47 C.F.R. § 0.459. Requests for confidential treatment must comply with the requirements of section 0.459, including the standards of specificity mandated by section 0.459(b). Accordingly, “blanket” requests for confidentiality of a large set of documents are unacceptable. Pursuant to section 0.459(c), the Bureau will not consider requests that do not comply with the requirements of section 0.459.

Thank you in advance for your anticipated cooperation.

Sincerely,

James D. Schlichting
Acting Chief
Wireless Telecommunications Bureau Federal Communications Commission