Posts from April 2008

  Keith and Buddy KM•079.jpg   Kevin Mazur / Paramount Classics 
  Originally uploaded by Doctor Noe.

The Gotham Gal and I went to see Shine A Light last night. I’ve been wanting to see this Scorsese concert film of the Rolling Stones’ Beacon Theater show from the last tour since I first heard about it.

The Stones are my all time favorite rock band but they’ve been a shadow of their former selves since the  mid 80s. So I wasn’t sure what to expect.

I am not sure if it’s Scorsese, the Beacon, playing in front of the former President of the United States, or just their incredible showmanship, but they pulled this one off. It’ not The Last Waltz, but it’s certainly one of the best concert films I’ve seen.

Like the Last Waltz, the best parts are when the Stones are joined by others. It happens three times in the film, Buddy Guy joins them for the Muddy Watters classic Champagne and Reefer, Jack White joins them for the Exile stomp Loving Cup, and Christina Aquilera joins Mick for a duet on the always fun Live With Me. I also loved Keith’s rendition of You Got The Silver, and the killer version they did of Imagination. The whole set list is on the film’s wikipedia page.

I really dug the Champagne and Reefer part (pictured above). There is something really satisfying about watching Jagger and Buddy Guy delivering this line to the former President of the United States:

Well you know there should be no law on people that want to smoke a little dope.

But the Jack White/Jagger duet on Loving Cup is probably the highlight of the film for me. It was a passing the torch moment in some ways and they all played their roles perfectly.

So here’s my bottom line, every Stones fan should see this film. And if you like concert films, get this one for your DVD or bittorrent collection.

My partner Brad has a fun post on the Union Square Ventures weblog talking about the $600mm failure of the Census Bureau’s effort to build a handheld census collection device. He suggests that they should think about leveraging the open source hardware and software movement the next time they think about something like this.

Brad says:

This is more than a technology problem. It’s a colossal screw up. But there is an underlying technology problem. There is no easy way to create a purpose built device and integrate it into a new or existing process

That’s what we are hoping to change with our investment in Bug Labs. The consumer electronics business works at scale for things like phones, music players, etc, but not very well for niche applications. We think the open source movement can help solve that problem.

I included this chart in my post yesterday.

I selected it because it made the point I wanted to make (that delicious was languishing under Yahoo!’s ownership). I did check the chart against several other tracking services and was confident it was correct. And it is, sort of.

I got the following email from Joshua yesterday afternoon:

We continue to grow normally.

Unique users is not a good measure of our growth, though.

Much of our traffic is through the firefox and other browser extensions, which is not measured by these systems.

Additionally, we cut off search indexing several months ago, which also hurts the UU numbers.

So I got it wrong, at least partially. And I want to correct the record.

Delicious continues to grow under Yahoo!’s ownership.

I find Joshua’s first point particularly interesting. Much of delicious’ traffic is through firefox and other browser extensions. That rings true to me because it’s how I use the service.

I wonder how many other web apps are accessed via third party services (twitter’s traffic is largely through its api)?

And if that’s a growing trend, then what does that mean for our ability to measure audiences, traffic, and growth from a distance?

Everyone probably remembers the Donor’s Choose bloggers challenge that I won (sort of) last year. Well Donor’s Choose has moved on from tech bloggers to political comedy and I am so pleased to see this. Enjoy.

Please go vote for your candidate of choice and help some public school kids in Philadelphia while you are at it. I just finished off the funding of new classroom speakers for a music classroom. I love Donors Choose.

Watching all these machinations between Microsoft, Yahoo!, Google, AOL, News Corp/MySpace, and their ilk makes me sick. They are playing around with Internet assets like they are toys. And meanwhile the services we have come to rely on like Flickr, AIM, Delicious, Yahoo Groups, FeedBurner, etc are an afterthought.

The Internet is decomposing into a vast array of micro-services that we, the end user, stitches together to make our own unique web experience. It is the de-portalization of the Internet and it is very real. And yet, these large behemoths are trying to do their normal consolidation play on the Internet. First of all, it’s not going to work. They are destroying value with all of their M&A efforts and the bigger they get, the more value they will destroy, for them and their shareholders.

But honestly I could care less about them. The only company on the list at the top of this post that I am a shareholder of is Google and I don’t see them bidding for assets, just sitting on the sideline trying to figure out how to extract some value out of this game of musical chairs that their competitors are playing. But even Google is not without fault. It has bought a number of assets over the years and several of them have languished. I see them making some decisions about how to consolidate these web services inside of Google and I scratch my head. And that’s Google, the best Internet company in the world.

Here’s the problem. The company/web service creation process needs some kind of end game. The entrepreneurs who spend years and risking a ton need a way to get paid for that effort. And those of us who finance their efforts need to get some return on our investment. We can argue about the magnitude of the return we need and a host of other things, but the fact remains that without a path to liquidity, all the innovation that is being created by the entrepreneur/VC equation will stop happening.

The IPO market is closed and frankly hasn’t really been that robust (at least for technology/web offerings) since the crash in 2000. And even when it’s open, it’s nuts to take any company public that cannot deliver consistent and predictable growth and earnings quarter over quarter for years. That’s what the public market investors demand and they should demand that as they have no control over the companies they invest in. The public markets should be for the best companies. Apple, Google, Amazon, eBay – those are good public companies. Skype, YouTube, and the current Facebook are not.

So if you can’t take a company public, how do you get out? M&A has been the primary answer in the web/tech sector for the past eight years. And it’s been a great period to sell companies. We’ve sold three in the past couple years out of our Union Square Ventures portfolio, delicious, FeedBurner, and TACODA, to Yahoo!, Google, and AOL, respectively. Were we happy to take their money? Yes. Were we happy with the outcome? Yes. Were they good buys for their new owners? On the face of it, yes.

But if you look deeper, I wonder. Delicious grew nicely for a while under Yahoo!’s ownership but recently the user base has fallen off pretty dramatically. I double checked this chart in compete and alexa and they all show the dropoff.

Well, what about FeedBurner? Clearly Google has done a good job with that acquisition. Well I am not sure. I don’t see any integration between Adwords and FeedBurner yet. I can’t buy FeedBurner inventory through Google’s text ad interface. I honestly don’t see any additional money flowing to me, the publisher of the feed, since the Google acquisition. There’s no way to know what the rate of signup by publishers has been since the acquisition, but I wonder if it’s increased much.

And TACODA? I know that TACODA had an incredible fourth quarter post the acquisition by AOL, blowing way past the numbers we were projecting in our annual budget. But in the first quarter, AOL fired Curt Viebranz, TACODA’s CEO, and many of the top members of the TACODA team are now gone from AOL. Another acquisition messed up.

But who am I to complain? We got paid right? So sit down and shut up.

Except I am also a user of these services. I see what happens when a company gets purchased. The service languishes. The team leaves. It stops getting better. And often gets worse. And so even though I am happy to take the money, I am left wondering, frankly wishing, if there is a better way.

This topic came up in the comments to my Decline of the Firm post and one thing that was mentioned is Goldman Sachs’s GS True market. As my friend Roger Ehrenberg (author of the awesome Information Arbitrage blog) explains on Seeking Alpha:

But now there is a new game in town, and it relates to IPOs: Goldman Sachs’ (GS) GSTrUE ("GS Tradable Unregistered Equity OTC Market") program.

It turns out that there is another private liquidity market under development called Opus-5.

The idea behind both of these new emerging (and currently illiquid) markets is to provide a place for private equity investors to trade securities with each other. The companies remain private, do not have to file with the SEC, and do not trade daily like public stocks do. When an entrepreneur or investor wants liquidity on a position they own, they come to these private markets, offer their position or part of their position for sale, and a trade is made.

We don’t even need liquid markets to develop to allow this to happen. We already have entrepreneurs selling pieces of their ownership in the later private rounds to VCs. And when we we decided to sell the Flatiron portfolio company Bigfoot Interactive three or four years ago, three of the top five bidders were private equity firms who wanted to buy out the VCs. We could have easily gotten as good of a return on our investment in that company by selling it to a new set of financial owners instead of a strategic buyer.

This post has already gotten too long. It’s looking more like a pmarca post than an AVC post, so I will stop here and let the discussion start. And I am sure it will be a good one. Because the comments are always better than the post here at AVC.

  – Python + Django hacker
  – Experience with PostgreSQL
  – Very comfortable with JavaScript
  – Scaling a distributed web application
  – Uncovering relevance from large data sets
  – Play a significant role in product and market direction
  – Love blogs and online communities

If it does and if you live in the bay area or want to relocate there, then please consider being "employee #1" at Disqus, one of our portfolio companies.

Here’s the job description, posted appropriately at Hacker News.

My friend Tom Evslin did an unscientific poll of three VCs (including me) and concludes that:

PowerPoint presentations won’t get you
into the meeting room of most venture capitalists even though you may
need a presentation once you get there. Working software that they can
look at before they look at you, on the other hand, seems a great way
to start.

and

That’s actually great news for us nerds. Wouldn’t you rather code up some cool AJAX and php than make a PowerPoint presentation?

Think about it from an investor’s perspective. If you are getting dozens of new opportunities a day, it’s just more efficient to be able to play with something quickly on the web to understand what the entrepreneur is up to.

Last September, my partner Albert wrote a post on the USV blog called I Want A New Platform. Albert’s a VC but he also builds web apps on the side, most recently dailylit.com. It was the process of building daily lit that inspired that post.

Today, he wrote a brief update to that post and concludes that Google may have just answered his call. Here are his thoughts.

Most readers of this blog know what Y Combinator is. Hell, last month two of the top five referrers were affiliated with Y Combinator. But for those who don’t know, Y Combinator was started by Paul Graham and now runs two programs a year in which about twenty teams (each program) are funded with enough money to pay for food and rent for roughly three months while they build and launch a web application.

With the announcement last night of Google App Engine, it’s literally possible to build your entire web app on top of Google’s vaunted infrastructure. It’s already been possible to do that on top of Amazon’s for some time now.

So it’s not surprising to me that the Y Combinator model is being adopted and adapted by others. Last summer my friend Brad Feld helped sponsor TechStars in Boulder Colorado and a number of interesting startups have come out of that program.

I was at a meeting recently where a University was considering starting a venture fund to back companies coming out of their school. I encouraged them to look at the Y Combinator model for inspiration and suggested that they back 10 teams at $25k each instead of one team at $250k. Two reasons. First it’s hard to know who will get it right, by backing 10 opportunities instead of one, you vastly increase your chances of success. And second, you can get a lot done on $25k now, particularly if you back young software engineers right out of school (or even in school) who can live for at least six months on $25k.

This stuff is transformative. I’ll leave you with a part of a comment from phbradley in response to my recent post on the decline of the firm.

bioanalogy – (if) firms are breaking up into smaller, agile units, the
economy will resemble the human brain – dense, dispersed clusters of
small inter-related units (neurons!) forming transient, agile patterns,
constantly being remodelled.

There are 4 components to the
system you could copy: 1) be a neuron – basically small firms,
startups, road warrior consultants and creatives; 2) be a synapse
between neurons: the service that lets neurons talk to one another,
form temporary networks and memories; 3) be the extracellular matrix –
half incubator, half director, it’s the YCombinator of the brain on
which every neuron finds its position and develops under its occasional
signals. 4) be the blood supply – the main supply of resources
(multimillion VC?), but *not* directly involved with neurons. Often
aligned with the neurons via the extracellular matrix. 5) be the skull
(i think government’s already got that one figured out pretty good)