Posts from July 2008

Corporate Venture Capital

The news this morning is that Google is seriously considering entering the venture capital business. They bring a lot to the table for sure.

But as Jessica Vascellaro points out in here WSJ piece (which is what I linked to):

Their [corporations who invest directly in venture deals] track records have been mixed. Corporate
venture-capital arms have been hampered by challenges that traditional
venture-capital businesses don’t face. Venture capitalists invest in
private start-ups at an early stage, usually in hopes of a big payout
if the company is sold or if its stock goes public.

Many start-ups fear that taking corporate money limits
their options and comes with strings that could turn away other
potential investors — such as a right to buy the company at a later
date. Some funds with less competitive compensation have struggled to
retain managers, and corporate venture funds often don’t allow senior
employees to invest personal money in their funds, while other venture
funds typically do.

Corporate venture capitalists’ share of overall
venture-capital dollars invested in U.S. companies fell to 7% in the
first half of 2008 from 8.4% in 2007, according to
PricewaterhouseCoopers and the National Venture Capital Association.
Corporate venture capitalists were involved in roughly 20% of the
venture-capital deals signed during the first half of 2008, compared
with 21% in 2007.

All businesses are about talent and the best talent in the venture industry doesn’t work in large companies and won’t work in large companies. So corporate venture investors start with a big talent handicap and eventually face employee churn in their venture groups.

And to make matters worse, corporate investors don’t really share the profit motive with the entrepreneurs. Let’s say Google (or any other corporate VC) invests in a startup and buys 20% of it for $3mm. Let’s say that startup is a huge success, sells for $1bn and Google (or any corporate VC) makes $200mm on the deal. None of the employees who made that investment get rich. The founders of Google and the CEO of Google don’t get rich (they are already but that’s not my point). The company "gets rich". But Google makes $1.5bn of pre-tax profits every quarter. So this big win generates another 12-13% to the bottom line, but just once. It’s not a recurring gain.

And that’s the big problem with corporate structures for venture investing. One time gains in corporations don’t make anyone rich. Wall Street ignores the gain. The company can’t put the gain into the pocket of its management. So it just doesn’t matter very much.

Corporations have other motives for doing venture capital. But those motives aren’t particularly well aligned with the founders, managers, and financial investors. So there’s always tension in a corporate venture investment and it’s not always healthy.

Please don’t get me wrong. There are corporate investors in many of our portfolio companies. Six of our eighteen active and announced portfolio investments have corporate investors in their capital structures. That’s one in three, well above the 20% number cited in the quote from Jessica’s WSJ piece above. We like working with corporate investors in the right situations and we’d certainly love to work with Google considering all that they bring to the table.

But I do think that venture investing is not the best use of a corporation’s capital and that it is inevitable that it will produce sub-par returns at best and significant losses at worst. And as a Google shareholder, I’d prefer to see them do something else with all that money they are making.

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#VC & Technology

Smart Move

My friend Eric is in town and we are going to see some live music tonight. After spending some time on Hype Machine this morning, I decided we’d go see Tilly and the Wall at Bowery Ballroom.

When I went to Ticketmaster to purchase tickets, I got two free downloads on iTunes. Combine that with the free downloads I got earlier this week from purchasing Ben Kweller tickets (yes, Ben is coming to town on Oct 16th!!), and I have 8 free downloads.

So I went to iTunes and bought the eight most popular Tilly and the Wall tracks on iTunes and will listen all day on my iPhone. When you go to a show, it’s helpful to know the music. Ticketmaster and iTunes are doing their part to make that happen and it’s a very smart move.

#My Music#VC & Technology

Peer Producing A Web 2.0 Keynote

Hudson from Midtown Manhattan with Javits Conv...

Image via Wikipedia

The Web 2.0 conference juggernaut is coming to NYC this
fall. On September 16-19 there will be a Web 2.0 Expo at the Javits Center.

The conference organizers have asked me to give a keynote at
3pm on Wednesday, September 17th
. And they’d like me to talk about
the evolution of the web industry in NYC over the past fifteen years.

Last week I picked a title for my talk. It will be:

York’s Web Industry
From 1995 to 2008: From Nascent to Ascendent

I am very fortunate to have been hanging around the web
business in NYC since the start and I’ve witnessed some amazing things. I only
have 25 minutes to tell a story that really deserves a much longer treatment.
But that’s the time I’ve been allotted.

I am planning a highly visual presentation that will tell
the story in words, pictures, audio and video clips. I’ll provide the color

Here’s where you all come in. I’d like to peer produce this
speech. We’ve created a wiki page where we’d like people to contribute anything
that they think is worthy of being in the keynote speech. We are specifically
looking for links, quotes, audio, and video, but if you’ve got something
important to contribute that’s in another form, please send it our way.

We’ve also set up a delicious tag if that’s easier for you.
It’s nywebhistory.

I’d also like to ask for suggestions for books I should read
in preparation for the talk. It’s only a month and a half away so I have to get
busy. Please leave any book  suggestions
in the comments please.

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#NYC#VC & Technology

New Park Space Opens Up

It happens so rarely in NYC that when it does, I always get excited.

A whole swath of new park space opened up this past week on the Hudson River Park between Laight Street and Houston Street, just south of Pier 40. Here’s a link to Google Maps which shows the location.

There’s a terrific running/walking section right along the river (just like all the other sections of the Hudson River Park) and there are three tennis courts and a full court basketball court.

But the best part of this section is the greenery between the running path and the west side highway. They did a great job with this section.


I posted some additional photos I took today on Flickr.

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The Death Trap

Jason Calacanis may have quit blogging, but he hasn’t quit writing valuable and provocative thoughts. His email yesterday on Google is worth reading. I think someone reblogged it but I am writing this from my blackberry on an early morning train so I can’t be sure

This post is not about Google getting into the content business. Its about another of Jason’s observations in his email

Jason wrote the following:

Why all the focus on death? ——————————

The life of a startup CEO dealing with the rabid but sometime naive blogosphere is one of extremes. You’re killing or you’re killed, you’re the shinny new object or yesterday’s news. You can couple the link-bait based blogosphere with main-stream media journalists who, instead of acting like the voice of reason and "sticking to what got them there," have taken the link-baiting bait. The MSM has had to incorporate the flame warring, rumor mongering and link-baiting ethos in order to keep up in the page-view cold war.

This is either the shot in the arm MSM needs to compete, or they’re chasing the blogosphere Thelma and Louise-style off a cliff. Time will tell I suppose.

Anyway, Facebook has had crushing success while MySpace continues to grow. Apple is hitting the ball out of the park while Microsoft continues to set sales records while fumbling into various markets. If Microsoft and Apple, MySpace and Facebook, and a Coke and Pepsi can’t kill each other why is everyone obsessed with death?

Well, because Microsoft did kill Lotus, Netscape and thousands of other software companies when they decided that the operating system just wasn’t enough.

We as a industry are obsessed with death. And its a trap that clouds your thinking. Facebook did not kill MySpace, YouTube did not kill Hulu, Google did not kill eBay, Pownce did not kill Twitter, and I could go on and on and on.

Web services are like cars or soft drinks. There’s room for many of them to coexist peacefully. You might like to drive a Honda, drink Coke, and use AIM to talk to your friends. I might like to drive a Chevy, drink Pepsi, and use Twitter to talk to my friends.

Yes, like cars and soft drinks, web services compete with each other for customers/users. But there are almost a billion internet users globally these days. And you can build a very nice business serving millions or ideally tens of millions of users.

So I’d like to suggest that we stop focusing on who is going to kill whom and instead think about market share, business model, sustainability, and profitability which are the measures that people in most businesses tend to focus on.

#VC & Technology

When Will A Comment Be Treated Like A Post On Techmeme?

I’ve asked this question before and I am still hoping we’ll see someone answer it soon.

The best comments are often way better than the posts that generated them. I’ve reblogged comments on to the front page of this blog and I am hoping we’ll get new features from disqus and others soon that make that drop dead simple.

But when Scoble’s misinformed rant on David Hornik and VCs gets front page treatment and David’s reply does not, it’s not a balanced system. We need to fix that.

Scoble said today that we have a well functioning blog editing system in action. Well sort of. But the fact remains tens of thousands read Scoble’s broadside on Hornik and VCs and a small fraction of them read David’s reply, even though Scoble did link to it today. Let’s fix that.

If Techmeme is a conversation, and I think it is, then it needs to be open to great writing and ideas from people who don’t have top 500 tech blogs. It needs to be open to great writing and ideas from people who don’t even have blogs.

#VC & Technology

Honesty Is The Best Policy

This quote from Joe Nocera’s piece on Steve Job’s health in today’s NYT shocked me:

This is Steve Jobs,” he began. “You think I’m an arrogant [expletive]
who thinks he’s above the law, and I think you’re a slime bucket who
gets most of his facts wrong

I’m personally with Joe on this one. Steve Jobs is an arrogant fuck who thinks he’s above the law. He’s also the most amazing technology CEO/entrepreneur working right now. He’s way better than Bill Gates (who isn’t working anymore) and the Google duo in my book.

Apple and Steve are at the top of their game, pushing the envelope in so many ways. But Steve is wrong to try to hide his personal health from the media, the market, his customers, and his employees.

Steve’s health is not a private matter as much as he’d like it to be. Apple’s stock is off between 15-20% in the  past 45 days in the midst of one of the most powerful product cycles (iPhone) we’ve witnessed in the tech business. You can blame it on the fact that they are going to take macbook prices below $1000 shortly and take share in the laptop market, but the stock market will love that because it can do the DCFs and value that move. The stock is weak because the market thinks Steve is sick.

The technology revolution that Steve has had so much to do with has changed a lot of things and one of them is transparency. You can’t hide stuff anymore. So honesty is the best policy. And calling influential reporters "slime buckets" should be avoided as well.

Disclosure: I am long APPL.

#VC & Technology

Are Ad Spend And Commerce Spend Correlated?

I wrote a post with some numbers on global internet use earlier this week and followed up with a second post the next day. Both posts generated excellent comments and also some good links with additional numbers.

I particularly like this post from the InPage Advertising blog which has some good IAB numbers on Europe. This chart from that post caught my eye.


So the online ad spend in Norway is 130 euros per monthly unique Internet user in Norway. And that number in Italy is 37 euros.

So that go me thinking. Is the online commerce market (on a per user basis) four times larger in Norway than it is in Italy? Is the online commerce market per user in the UK three times larger than France?

I don’t think so, but I don’t have the data to back that up.

If all internet advertising was direct response/CPC/CPA advertising, then I think the correlation would be pretty high between ad spend and commerce spend. But it seems that brand oriented campaigns are more prevalent in some countries like UK and the some of the nordics and less prevalent in markets like France, Austria, and Italy.

I’m not sure why that is. It could be that branding dollars have just not moved online as quickly in some markets as others. This chart from the same post bears that theory out.


But I still wonder if online ad spend will ultimately be correlated with online commerce spend. There are many markets around the world where online commerce is starting to take off but online advertising has not. Are those developing markets big opportunities for online media?

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Real Time Blogging

I was thinking that I’d write a post summarizing our month in Europe on the plane back today. But then I realized that I’ve said it all already on this blog. Sure there is value to summarizing and wrapping it up, but I’m not big on the rehash to be honest.

I like to blog in real time. If it happens, I like to talk about it at that moment in time. It’s fresh in my mind and it just comes right out. It takes a lot less work to get it right.

The Gotham Gal used to travel without a laptop. She’d go on these trips, take a ton of photos and a ton of notes. Then she’d spent the first couple of days back home blogging about the trip.

That changed a year or so ago. Now she takes her macbook with her and blogs the trips in real time. Well, maybe not real time, but at the end of the day or start of the next one. It’s made a huge difference. She posted maybe thirty posts during the month we were in Europe. And anyone who wants to travel to London or Paris would be well served to read them. And our family and friends back home were able to follow what we are doing on her blog. One of our daughter’s friends texted her about something we’d done last week. Our daughter asked how he’d heard about it. He said “I read the Gotham Gal.” That gave us all a chuckle.

With my mobile phone, flickr, twitter, tumblr, twitpic, and a host of other services, I sometimes take it a step further and actually blog in real time. I wrote at least five and possibly as many as ten blog posts on my blackberry on the metro or the tube or waiting in line somewhere on the Europe trip. It’s simple. You send TypePad an email and it gets posted. There’s a new super simple blogging service called Posterous that does everything via email. We’ll see more things like this.

If you do all of your blogging on tumblr, then you can actually create a pretty amazing real time blog with almost no work. I like to mix it up, posting some stuff to tumblr, some stuff to twitter, some stuff to this blog via typepad, and some stuff to a few other places. It’s a bit harder to keep everything straight that way and I really think that real time blogging a trip on Tumblr is the way to go. I’d like to try that sometime.

One of the great things about real time blogging is it flows into the real world pretty quickly. The other day the Gotham Gal blogged about a store she liked in London. A person who is involved with the store commented on her blog about the store and made some other suggestions. Which impacted her next day. That wouldn’t work so well if you waited until you got home to blog the trip.

And of course, twitter is huge when you are on the road. I got advice on coffee in Paddington Station, where to get a UK blackberry charger, and a host of suggestions on life in Paris via friends and followers on twitter on this trip. People say that only people with a lot of followers on twitter can use it that way and currently that is mostly true. But with the acquisition and integration of summize, I hope and expect that people will start following locations and keywords in the same way they follow people. Then a person with no folllowers on Twitter can ask where to get a good cup of coffee in Paddington Station and my friend @wilstephens who commutes in and out of Paddington every day and should be following that keyword for a bunch of reasons, can do the same thing for the person with no followers that he did for me.

Blogging has a reputation as an ego centric activity for people who want to be heard. And that is certainly true and a big motivation for many people who do it. But blogging can be valuable in many other ways. Our blogs helped our friends and families keep track of us while we were in Europe. They will be a valuable source of information to travelers in the future (thanks to google and our collective google juice). And they were a valuable way to get information and connect with people in europe while we were there. And blogging in real time makes all of that work a lot better.

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#Blogging On The Road#VC & Technology

You Can't Regulate Just One Industry And Leave The Other Alone

The big news here in the UK this morning (lead story in the FT and I just saw the minister of culture on the BBC) is the deal between the broadband ISPs in the UK and the music and film companies on downloading.

The ISPs have agreed to send warning letters to thousands of their customers who are the most active downloaders of music and films. The UK government will do their part by discussing legislating regulations on the ISPs if the warning letters don’t work.

The most commonly discussed legislation would be a "download fee" applied to every ISP bill which would be paid to the music and film companies.

All of that is well and good, but I read nothing in the FT piece and heard nothing in the BBC interview about regulating the music and film industries to force them to make their content easily and readily available over the Internet.

Of course there are people who don’t want to pay for their music and films, but I believe that vast majority of downloaders are people like me who would gladly pay if the content was available to purchase when I wanted it in the format I want it.

Let’s take The Dark Night. Let’s say that I’d really rather watch it at home on my big screen. I know I can get it on bit torrent so I do that. If it was available to be purchased the same day it went live in the theaters, I’d be happy to pay $20 for the right to watch it at home. But the film companies want to maintain their release windows so it’s not available. So its to bit torrent that I and thousands of others go.

Last month I wanted to purchase a new music album from a band I like. I went to emusic and amazon mp3. It wasn’t available. It was available exclusively on iTunes in DRM format. Screw that. I can’t play DRM’d music on my Sonos or Request systems. It’s of little to no use to me in DRM format. So I bought the CD on Amazon but also downloaded it on limewire so I could listen while I waited for the CD to show up.

The solution to the downloading promblem is not simply to plug the hole at the ISP level. First, its not fair to impose a fee on every ISP customer when not everyone downloads. It would be fair to impose a downloading fee for those who want to download, and maybe it will come to that. But we all know that it will be very easy to hack around that technology.

The real solution is to give the customers what they want which is simple, easy, affordable, instant access to the content they want at a reasonable price. When and if the content owners do that, they will be on their way to solving the download problem. If they don’t do it themselves, we should regulate them and force them to do it.

#My Music#VC & Technology