Wednesday, June 9, 2010

And the winner

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.


Friday, June 4, 2010

3rd and 1

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.