Marvell Electronics is promoting an innovative 'permacheap' approach to storing digital content. A "plug computer' that plugs into an electic socket, yet stores and manages all your home media for a cool 50 bucks.
It seems that on an almost daily basis we are seeing fantastic dislocations associated with the digital living room. Product announcements from stalwarts such as Cisco, LG and HP, saber rattling from NBC and CBS, and innovation from Pando Networks, Tversity and many others. Analysts are also in the game arguing about whether intelligent TV's, smart set-top boxes, or media servers will win the home front war.
Back to Marvell. With their new product, folk will be able to access files from anywhere in their house, or over a Internet connection when you're out. It's promised to be ultra small, cheap, and centralizes your media in a format that facilitates discovery and transmission. Don Clark, of the WSJ, wrote about it here.
Hopefully, when the product is introduced, this proud chip company will do so in a consumer friendly way. If so, I have no doubt, we can be together on this one.
Monday, February 23, 2009
Green Bananas
I was reading about the travails over at Move Networks, and the environment management, and their investors are facing. It's troubling, but it seems like our 'new normal'.
The sudden slowing of the economy is now placing many young venture or angel backed companies in an 'awkward' position. Many budgeted to bring their product to market with sufficient leeway to show initial customer traction before completing a funding round that brings them to a stable expansion stage (and, with success, vying for market leadership). Move was incredibly successful in garnering a prestigious stable of financial and strategic investors.
Now, many CEO's are faced with the real prospect of slow market traction, evidenced by meaningful revenue metrics or subscriber hypergrowth. Unfortunately, many can't reduce expenses fast enough, while completing their development, to stave off difficult bridge rounds or worse. Painfully, many of these companies set rational initial objectives (properly approved by their investors), experienced a normalized development expense cycle, but are now facing a suddenly shifted revenue environment.
These companies are like a suddenly hungry person facing the green bananas he harvested too early. He knows they may one day be delicious, bursting with unproven promise, and is trying all the home remedies to accelerate their ripening.
The sudden slowing of the economy is now placing many young venture or angel backed companies in an 'awkward' position. Many budgeted to bring their product to market with sufficient leeway to show initial customer traction before completing a funding round that brings them to a stable expansion stage (and, with success, vying for market leadership). Move was incredibly successful in garnering a prestigious stable of financial and strategic investors.
Now, many CEO's are faced with the real prospect of slow market traction, evidenced by meaningful revenue metrics or subscriber hypergrowth. Unfortunately, many can't reduce expenses fast enough, while completing their development, to stave off difficult bridge rounds or worse. Painfully, many of these companies set rational initial objectives (properly approved by their investors), experienced a normalized development expense cycle, but are now facing a suddenly shifted revenue environment.
These companies are like a suddenly hungry person facing the green bananas he harvested too early. He knows they may one day be delicious, bursting with unproven promise, and is trying all the home remedies to accelerate their ripening.
Friday, February 20, 2009
ComScore's report on the status of US Online Retail
ComScore published yesterday their report, taken from a 2mm person sample, on the state of US Online commerce. Here's my take-away's:
1. 7% 2008 growth to $221B was way below the 17% of '07. Travel, at $84B (and 9% growth) is still the dominant vertical. Since ComScore has been tracking the numbers, it's the first time Online consumer growth has been in single digits.
2. Online coupon sites saw a 40% surge in traffic last year (to 40mm uniques). More sites are using time expiring coupons as a way to drive traffic and commerce.
3. Online commerce has achieved sufficient critical mass that it seems to now closely mirror trends within the general economy.
1. 7% 2008 growth to $221B was way below the 17% of '07. Travel, at $84B (and 9% growth) is still the dominant vertical. Since ComScore has been tracking the numbers, it's the first time Online consumer growth has been in single digits.
2. Online coupon sites saw a 40% surge in traffic last year (to 40mm uniques). More sites are using time expiring coupons as a way to drive traffic and commerce.
3. Online commerce has achieved sufficient critical mass that it seems to now closely mirror trends within the general economy.
Thursday, February 19, 2009
A big chill and gatekeepers
I have been thinking about the Boxee/Hulu imbroglio. While it's unclear what ransom will be extracted from Boxee type companies to gain access to distribute proprietary content, some points are crystal clear:
1. The pace of capital investment towards young companies involved in the 'digital living room' will be vastly diminished.
2. Venture capitalists will be taking turns writing 100x on conference room chalkboards lines of "I will never again invest in industry's controlled by gatekeepers".
3. Hulu's management is in conflict with its parents. On one hand, Hulu has a mandate to build a top destination site, on the other hand, it can't be accomplished by embracing/extending technology to the digital living room; which happens to be an incredibly fast growing market segment.
4. Existing investors in exposed companies have that Free Fallin feeling.
1. The pace of capital investment towards young companies involved in the 'digital living room' will be vastly diminished.
2. Venture capitalists will be taking turns writing 100x on conference room chalkboards lines of "I will never again invest in industry's controlled by gatekeepers".
3. Hulu's management is in conflict with its parents. On one hand, Hulu has a mandate to build a top destination site, on the other hand, it can't be accomplished by embracing/extending technology to the digital living room; which happens to be an incredibly fast growing market segment.
4. Existing investors in exposed companies have that Free Fallin feeling.
Is Boxee Cable's Napster?
Hulu a leading site that streams premium TV content, announced that its content will no longer be available via Boxee (recently funded by Union Square and Spark).
In a short period of time, hundreds of thousands of people have expressed interest in Boxee's solution, that enables you to view movies, TV programs, etc., streamed from your PC and displayed on your HDTV. In a twist that Hollywood writers would deeply appreciate, it seems as if the warm market response became the ironic problem for this company. Similar to the way Napster, Bit torrent, and other pirates siphoned revenues from content providers, it seems as if the battleground is now shifting to Cable/MSO's. Make no mistake, these folk relish a good bloody fight.
The issue is that, with services such as this (and there are many services such as this), users can stream quality content via one cable connection to many TV's. Adios multiple set top boxes (perhaps, hasta la vista one set top box).Therefore, monthly subscriber revenue, which is much more powerful to these folk than advertising revenue, will be under intense pressure. It's similar to the problem newspapers have; no realistic prospect of replacing home subscription revenue with monetized CPM views. It's the ultimate existential threat to the status quo.
Safe to say, round 1 goes to the cable/content providers here. Nevertheless, the software/internet industry is known for being thrown out the door and coming back through the window. The technology barriers to entry for services such as Boxee are not that large. The question is whether this fight, which is really over 'business' model and legal use, will determine if we see a new generation of pirates, or will there be an accommodation that enables a new generation of legal innovators?
In hindsight, unlike YouTube, which experienced incredible hypergrowth, largely through purloined SNL content, Boxee had an early high profile and was rapidly attacked by the content/cable owners (fool me once shame on you, fool me twice...). No doubt this is a battle to see if the Wolf will survive.
In a short period of time, hundreds of thousands of people have expressed interest in Boxee's solution, that enables you to view movies, TV programs, etc., streamed from your PC and displayed on your HDTV. In a twist that Hollywood writers would deeply appreciate, it seems as if the warm market response became the ironic problem for this company. Similar to the way Napster, Bit torrent, and other pirates siphoned revenues from content providers, it seems as if the battleground is now shifting to Cable/MSO's. Make no mistake, these folk relish a good bloody fight.
The issue is that, with services such as this (and there are many services such as this), users can stream quality content via one cable connection to many TV's. Adios multiple set top boxes (perhaps, hasta la vista one set top box).Therefore, monthly subscriber revenue, which is much more powerful to these folk than advertising revenue, will be under intense pressure. It's similar to the problem newspapers have; no realistic prospect of replacing home subscription revenue with monetized CPM views. It's the ultimate existential threat to the status quo.
Safe to say, round 1 goes to the cable/content providers here. Nevertheless, the software/internet industry is known for being thrown out the door and coming back through the window. The technology barriers to entry for services such as Boxee are not that large. The question is whether this fight, which is really over 'business' model and legal use, will determine if we see a new generation of pirates, or will there be an accommodation that enables a new generation of legal innovators?
In hindsight, unlike YouTube, which experienced incredible hypergrowth, largely through purloined SNL content, Boxee had an early high profile and was rapidly attacked by the content/cable owners (fool me once shame on you, fool me twice...). No doubt this is a battle to see if the Wolf will survive.
Wednesday, February 18, 2009
Great site for domestic travelers; or those who want to stay connected with home
Sometimes, simple things add great value. Courtesy of Peta in LA, here's an interactive map from Newseum showing the front pages of local newspapers by city. Just click and read.
Perfect for the Ramblin Man.
Perfect for the Ramblin Man.
Alan Partricof's view of the changing Venture landscape
Alan Patricof began investing in the 1960's, a time of 'little venture' at Patricof & Company. He later rode the 80's wave into 'big investing' when he founded LBO shop APAX, and has now come full circle, back to 'little venture' with Greycroft Partners.
In a recent article in DealBook, he explains the reasons behind his move back to little venture. To summarize, he feels the changed prospects for IPO's is not a temporary phenomenon, due to its semi-permanence, venture firms (and entrepreneurs) ought to shift exit expectations exclusively to M&A. Seeing the bulk of M&A is in the $20-$100mm range, the amount of capital raised ought to be in alignment (far less than today) with the perceived exit.
As expected from Alan, it's a good general industry perspective that highlights dynamics that are changing the venture capital industry. It does, however, beg three open issues for discussion:
1. The number of public software/internet firms has declined over the past five years by nearly one third. The largest decline was in the ‘middle’ market, which is the most likely exit vehicle for venture backed companies seeking valuations in the $20-$100mm range. A growing imbalance is creating a gulf between the supply of sellers and the demand from buyers.
2. Buyers will continue to want to acquire successful firms, not the laggards. Two measures for success have always been market share and growth. Good teams will be able to build respectable companies, in a capital efficient manner, and be satisfied with a more than respectable 5x return. I have no doubt that other teams, experiencing hypergrowth will shoot for bigger wins (e.g. Google, Youtube or perhaps Twitter). Or will dig themselves into a capital starved hole. It's not the bankers that give firms wonderful exits, it's paying customers that build market share leaders. Bankers are facilitators; intermediaries which bring capital to shareholders/companies.
3. Early stage Venture firms tend to embrace a culture of controlled risk. As such, we experience a not insignificant company mortality rate. Such a 'death' rate is then masked by a couple of portfolio 'ten baggers' that provide the bulk of returns for investors. Take away the big hits and the investment culture must change to one closer to the buyout world where no bad investment goes unpunished.
I expect the exit ’stagflation’ to continue only so long as the center weight of innovation is around applications with little innovation at their core, and many competitors at the ready.
In a recent article in DealBook, he explains the reasons behind his move back to little venture. To summarize, he feels the changed prospects for IPO's is not a temporary phenomenon, due to its semi-permanence, venture firms (and entrepreneurs) ought to shift exit expectations exclusively to M&A. Seeing the bulk of M&A is in the $20-$100mm range, the amount of capital raised ought to be in alignment (far less than today) with the perceived exit.
As expected from Alan, it's a good general industry perspective that highlights dynamics that are changing the venture capital industry. It does, however, beg three open issues for discussion:
1. The number of public software/internet firms has declined over the past five years by nearly one third. The largest decline was in the ‘middle’ market, which is the most likely exit vehicle for venture backed companies seeking valuations in the $20-$100mm range. A growing imbalance is creating a gulf between the supply of sellers and the demand from buyers.
2. Buyers will continue to want to acquire successful firms, not the laggards. Two measures for success have always been market share and growth. Good teams will be able to build respectable companies, in a capital efficient manner, and be satisfied with a more than respectable 5x return. I have no doubt that other teams, experiencing hypergrowth will shoot for bigger wins (e.g. Google, Youtube or perhaps Twitter). Or will dig themselves into a capital starved hole. It's not the bankers that give firms wonderful exits, it's paying customers that build market share leaders. Bankers are facilitators; intermediaries which bring capital to shareholders/companies.
3. Early stage Venture firms tend to embrace a culture of controlled risk. As such, we experience a not insignificant company mortality rate. Such a 'death' rate is then masked by a couple of portfolio 'ten baggers' that provide the bulk of returns for investors. Take away the big hits and the investment culture must change to one closer to the buyout world where no bad investment goes unpunished.
I expect the exit ’stagflation’ to continue only so long as the center weight of innovation is around applications with little innovation at their core, and many competitors at the ready.
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