Posts from April 2005

Yes, there are assholes in this world. 

One of them posted this comment on my blog this morning.

Knock Knock – Who’s There?

Oh, it’s just an extremely LUCKY cocky VC.  You think you’re such hot sht – but guess what?  You’re not.  That punk kid of yours looks….well, whatever.  Just keep kicking back with your arms around your head.  Yeah, that’s it.  A little farther…good.

Gotham girl, my ass.

I am not going to delete this comment.  I am going to post it so more people can see what an asshole you are.

If you don’t like me or my blog, don’t read it.  But ragging on me, my wife, and my son isn’t cool.

I love The Flaming Lips.

Like many of the best things in life, they are an acquired taste.  Many people can’t get into lead singer Wayne Coyne’s voice. Other’s find the music too spacy or the lyrics too trite.

None of that matters to me.  I can listen to the Lips anytime, day or night.  They are the closest thing our generation has to Pink Floyd.

The Flaming Lips make majestic, beautiful, mind blowing music.  My only issue is that I want more of it and they’ve been very silent lately.

Anyway, on to the record.  There are a bunch to choose from including the awesome Yoshimi which may also make it into the top 50.

But one of the genuine masterpieces of rock music is The Soft Bulletin.

This record came out in 1999 but the music is timeless.

Waiting For Superman alone makes this record a must listen.  I don’t know if there is a heavier song ever written:

Tell Everyone Waiting For Superman
That They Should Hold On As Best They Can
He Hasn’t Dropped Them, Forgot Them, Or Anything
It’s Just Too Heavy For Superman To Lift

But the rest of the songs are just as good.  Race for The Prize, A Spoonful Weighs A Ton, Buggin’, and Suddenly Everything Has Changed are particular favorites of mine.

If you haven’t heard the Lips, you should give them a try.  This record is the one to start with.

I didn’t plan on posting anything about Union Square Ventures‘ most recent investment, del.icio.us.

The founder, Joshua Schachter, posted twice to his list about the investment and I figure that is pretty much the whole story. If you want the details on the investment, that’s about all there is to tell.

But I’ve gotten a number of comments on this blog and elsewhere suggesting that there are people who’d like to hear my side of the story.

So, I’ll try to give you that.

del.icio.us is a really interesting web service that lets anyone who uses it "tag the internet".

Most people, me included, go there for the first time, look at del.icio.us, and then shake their heads and say "I don’t get it".

But for those who come back and actually use it, the experience is very different.

del.icio.us becomes a critical tool for them to manage their web experiences.

That’s what happened to me.  That’s what happened to Brad.  That’s what happened to Charlie.

So we figured we ought to pay some attention to del.icio.us.

What we learned when we dug into it is that "tagging" is a relatively new, but increasingly important, phenomenon on the web.

Simply put, tagging is the exercise of associating words, any words you want to use, with URLs.  That’s all it is – a series of words and URLs. The words are the tags.  But when lots of people start tagging with a similar tool and similar words, and the tags are shared, some very interesting things result.

I like to send people to the del.icio.us tag page to see what that result is.

del.icio.us made tagging popular, but others have used it with incredible results.  The most obvious example is Flickr. I believe that tags and RSS feeds of the tags has made Flickr vastly superior to other photo sharing sites. 

RSS feeds make tagging even more powerful.  Because everyone’s tag can be an RSS feed, tagging becomes extremely viral and portable.

Jeff Jarvis was the first person that pointed the power of this out to me.  I asked him about del.icio.us and he said that he didn’t tag, but he pointed me to this tag that he subscribed to as an RSS feed.  It was like looking at someone’s personal daily bookmarks.  That was the aha moment for me.

I would encourage anyone who is curious about tagging to go to del.icio.us, register to create an account, and start tagging. 

The most difficult part is getting the posting window into an easy place to use.  I highly recommend the experimental bookmarklet.  If you haven’t done something like this before, it will not be clear what you need to do. In Internet Explorer, you need to select one of the posting windows from the links on the about page and add them to you "link" bookmarks.  It’s much simpler if you use Firefox.  In that case, you simply drag the link for the bookmarklet to the place on your browser underneath the field that displays the URL.  That will create a little icon that says "post" on your browser toolbar.  Anyime you are on a page you want to tag, you click on that icon, and tag away.

That is all there is to del.icio.us really.  It’s hard to get going, but once you do, you will be surprised by the results, particularly if you share the tags with others.

If you want a simpler way to understand the power of tagging, I suggest John Udell’s screencast.  It’s a really good description of how this stuff works.

I am going to try sharing my tags with everyone who reads my blog.  The post underneath this one is an automatic daily post to my blog of everything I’ve tagged the day before and the tags I used.  I hope you will all find that useful.

Many people ask why Joshua took an investment.  He built del.icio.us almost two years ago and its been up on the Internet for almost a year and a half.  It has a huge number of users and is growing very quickly. 

But del.icio.us needed some things that Joshua could no longer provide in his spare time (nights and weekends).

Seth Goldstein thought Joshua could use some capital and introduced us to him.

Joshua needed capital for the two major priorities.

The first is scale.  The service is taking off and it needs to be configured like the popular web service that it has become.  That means boxes, bandwidth, redundancy, etc.  That costs money.

The second is ease of use.  That means tweaks to the user interface that make the service easier to use for non-techies.  That means new features that users have been asking for.  That means spending time writing code, testing it, making the service work better for its users.

Joshua’s hope is that by dedicating himself full time to the service it will become better for its faithful users and better for new users.  That feeds right back into the community because more tags means more shared information which is what this is all about.

The question everyone asks is "what is the business model".  To be completely and totally honest, we don’t yet know.  This was a seed investment and none of the investors put up very much capital.  Joshua retained complete control of the service and is going to focus on making it better.  That is all anyone wants to see happen right now.  In time it will become clear what the business model should be.  And there are a number of them to choose from for sure.

In summary, we believe tagging is important, its here to stay, del.icio.us is a very important participant in the tagging phenomenon, and we are really excited to be part of its development.

• LA vs NYC Sushi – The Gordon Gould Weblog – gould.weblogsinc.com _
  (tags: sushi NYC LA)
• fahrvergnügen » Information Assets Redux
  (tags: startups web20)
• Software Only: Del.icio.us closes a round of financing, led by Fred Wilson
  (tags: delicious keep)
• Tagging Sites to get Spammed, Hard | Threadwatch.org
  (tags: delicious keep)

The Gotham Gal took Josh out for a date last night and he met some new friends.

She has all the details on her blog.

Brad Feld has a great counter post to my VC Cliche of the week where he takes on two more overused VC jargon words, space and thrilled.

I don’t know about thrilled.  I kind of like that word.

But space is more overused than traction and I agree that it must go from our vernacular. And the sooner the better. 

I have been working hard for the past year to eliminate space from my vocabularly.

I am thrilled to say that I will match Brad on his promise never to use it again.

The VC Cliche of this week is Traction.

Inspiration for this week’s cliche comes from Jarrett Collins of NeoCarta Ventures who posted the following comment on my blog post about scale yesterday.

Can someone please tell me what traction is? If I hear one more
presentation in which an entrepreneur tells me about all the traction
his company has, I may attempt to jump out one of our office’s
non-opening windows.

Traction is certainly one of the most overused phrases in the venture capital and startup business.  But entrepreneurs aren’t the only ones who are guilty of overusing it.

I remember back in the Flatiron days when we’d have our monday meetings, literally every person around the table would utter the word traction when it came time for them to pitch their favorite deal to the rest of the team.  If you didn’t say traction at least a couple times, there was no chance the deal would get the green light.

But as Jarrett asks, what is traction?

Is traction revenues?  Not always.

Is traction customers?  Not always.

Is traction lots of press mentions?  Usually.

Is traction required to attract a venture investment?  Almost always.

I believe that traction means that a company is making clear and recognized progress toward whatever business milestones it has outlined for itself.  If these milestones are appropriate for the development of a successful and profitable business, then traction in meeting them is a good proxy for success.

True early stage investing requires different metrics than later stage investing or public market investing.  Revenues, customers, and cash flow aren’t normally in the picture when an early stage VC makes an investment decision.  So finding the appropriate milestones and determining whether the company is making progress toward achieving them is the best you can often do.  If that’s called traction, so be it.

But I’d still like to hear the word traction used less in our business.

The Picture:  This is a picture of a traction engine that I found using Google image search and comes from Tony’s Lanz Bulldog Pictures Page.  That’s a cool looking  tractor and I bet you get some serious traction with it.

Yesterday was a big day at Fenway Park.

The Red Sox got their World Series rings and then went out and trounced the hated Yankees 8 to 1.

I am not a Red Sox fan nor am I a Yankees fan.  But I am a fan of sports, rivalries, drama, and fandom.

And for all of that, there is nothing better than Yankees vs. Red Sox.

I am also a fan of Boston.  I spent four years there in college and lived in Kenmore Square in the shadow of Fenway Park.

There is another Fenway Park in Boston, called The Fenway [click on this link – it’s a cool satellite image of The Fenway and Fenway Park].  It’s a grand urban park in the vein of Prospect Park or Central Park, but its fallen on somewhat hard times.  It’s not what it once was.

But I loved to wander around The Fenway when I was in college.  It has this magical feel to it.

Jonathan Richman also loves The Fenway.  His Rockin and Romance album is out of print, but I got my $15 copy of the digital master from TwinTone yesterday.  I listened to it last night.

My favorite song on the record is The Fenway.  Jonathan captures the magic of the place so well.  Give it a listen in tribute to Boston, Fenway Park, the Red Sox, and The Fenway.

I should save this for my cliche of the week, but its Tuesday and I can’t wait to blog this until tomorrow.

One of the most overused cliches in the venture business is the word scale.

"It doesn’t scale"

"They’ve reached scale"

"We are having scaling problems"

"There are economies of scale"

Etc, etc.  You get the point.

We all look for scale because scale is what generates returns.

In the old world anyway.

As Jeff Jarvis points out in a great post, scale doesn’t mean what it used to anymore.

You cannot collect all the pieces of a marketplace in a centralized way and control all of it.  The technology won’t allow that to happen.  You can’t "get to scale" that way.

You must be open to others owning pieces of the equation.  You must let the users get the value of scale however the choose to create that scale.  You must facilitate the creation of virtual scale.

We had two conversations in the office yesterday that are good examples of this.

First, we were discussing the online news business with a newspaper executive.  He mentioned the the AP is considering pulling out of Google news if Google doesn’t pay for AP’s content.  After getting off of that call, we all agreed that the Google news reader won’t suffer too much if AP’s stories aren’t part of Google news.  There are so many sources of news these days that Google news will still be a viable service with our without AP.  AP’s scale is the wrong kind of scale.  Google’s is the right kind.

Second, we were talking about financial markets.  For as long as there have been markets, there have been centers where all the participants need to get together and trade.  Call them exchanges, hubs, or trading pits.  It doesn’t matter really what they are called.  They’ve been a critical piece of every market that has existed.  Soon that won’t be the case.  Plenty of trades get done one to one these days because technology makes that happen.  There is still a need for some kind of centralized clearinghouse that provides price discovery and liquidity.  But technology will provide that to the market participants and everyone will be trading one to one with tools that create a "virtual marketplace".  The kind of scale that exchanges provide is the wrong kind of scale.  Bloomberg’s is the right kind.  And even Bloomberg faces the possibility that its kind of scale will be the wrong kind soon as new technologies emerge to replace it.

So think carefully about the word scale when you use it next time.  Is it the right kind of scale you want to create?  If you go about creating the old kind of scale, you’ll spend a lot of money and end up with some really bad economics.  Just watch what is going to happen to the AP.