Posts from June 2009

Visiting Building 43

A few weeks ago, Scoble was in NYC and we had breakfast at his hotel. After breakfast, he asked me if he could ask me some questions on camera. I said sure and we found a room off of the main lobby and did this interview. I don't think he edited it. And I think it still came out great. It's long (22 mins). I sure wish there was a transcript but I don't think there is one.

UPDATE: PhoneTag has an api and they used it to transcribe this. Wow. This is awesome. Here's the transcript:

Robert: So, who are you?

Fred: I'm Fred Wilson.

Robert: And one thing I've been getting around and talking people about is the 2010 Web which some people call Web 3 but, I think, I just don't like the term.

Fred: Right.

Robert: Web 2.0 or Web 3.0. I think…

Fred: Me neither.

Robert: They explain times in the web, you know, the 1994 Web was about getting a web page. In 2001, it was about adding people and interactivity to those pages. And the 2010 Web is…

Fred: Well, I think, it's real time, for sure. I think it's distributed in the sense that things are going to happen outside of where they start, the whole concept of sort of apps on the iPhone or apps on Facebook or Twitter apps, big part of what's going on now that's going to go mainstream. You know, the way you experience Twitter is through FriendFeed and that's not an entirely obvious thing to most people that, you know, they can use one service through another service and then maybe another service on top of that. And I think that's all part of the 2010 Web. I think games, not so much playing games because we all play games on the Web but, it started to take the notion of what is playing a game and bring it in to more Web services, the notions of virtual currencies and establishing status and just creating game play dynamic inside of services.

Robert: You're talking about Tumblr right?

Fred: Right.

Robert: The Tumblrity…

Fred: Yes, the Tumblrs are this thing called Tumblrity which is recognizing that just the number of followers isn't really what matters inside a social system. It's a combination of how many people following you and how many people really engaged with you and how many people click on a link that you send around or how many people reply or how many people resend stuff. And what Tumblr is going to say, it built an algorithm that sort of captures all that they've established Tumblrity. It's also how often you actually create content in the system. And so people have gone crazy over Tumblrity. Everybody wants to know what their Tumblrity is. They want to make it better, you know. It created some competitive juices and that's essentially a game. It's not to suggest that Tumblr isn't more than a game, it is more than a game but being that it is really, I think, self-reinforcing game play dynamic. So, I think that is a big part of the 2010 Web. And then, also, you know, the ability, virtual currencies, I think. Maybe that's too big of a word, but Facebook's launching a payment system. And you know, I think, a number of people have written that Twitter should have a payment system. I mean, I've often thought like, if I can say The Scobalizer, you know, and send you a message, why can't I say, (P?) Scobalizer $100?

Robert: You can do that anytime you want.

Fred: Anytime, but, you know, so we could maybe, start getting accounts in these social systems that, maybe get some value, accretion from what we do in the system and also allow us to use as accounts to move money around much in the way that people do this already in Second Life and people will start doing it in Facebook. People already do it in Facebook games. So, these are all the kind of things that I think…Mobile is another big part of the 2010 Web. I don't know if this is true, but, I heard that the 40404 shortcode is the most used shortcode in the United States now.

Robert: Yeah, that's Twitter's shortcode, right?

Fred: Yes, Twitter's shortcode. And if that's true, it's a big deal and I think it shows the power of mobile and Web being connected natively. I pull up my phone, I Twit something, you see it on the Web or you see it in front of you which is also on the Web, or you see it in Twit Deck. And that's a very seamless experience between mobile and Web and desktop. And TV obviously should be another piece of that. And so, that's all…

Robert: Now, we just had Adobe and they're showing up the new Flash Player that does 1080p Video.

Fred: Amazing.

Robert: And so, now, you can do a video with a camera like this one and distribute it to iPhones, distribute it to 60-inch TVs and it's (Boxy?) users.

Fred: I'm a huge fan of the TV as… You know, no, the third screen, right. So it's the desktop or Web top, the mobile phone and the TV in the family living room, and we've all known that, but it hasn't really happened. We're still watching more video on our laptops. And we, being geeks, still watch… I'm a geek. Are you a geek?

Robert: Yeah.

Fred: More video on our laptops than we do on our TVs and that I think is going to change. But, the thing I really want is… you know, how there's a Delicious Firefox plugin, so whenever you see a Web page, you can just hit your Delicious plugin and it just go… that your (apps?) gets posted on a map into Delicious. What I want is a video plugin, right, where I have a little thing on my browser, anytime you e-mail me a link and I see it in Gmail or you pass a link to me in Friend Feed or Twitter, or I see a link in Facebook, or I come across a video, I just want to bookmark it. But what… I really want to bookmark it. I want to queue it. And then, after I get home at night, after the kids, dinner with the kids and homework, that hour-long time that I have where I sort of lean back, linear video, I just want to go to my queue which I've built up over the past day or two and just boom, sit back and watch linear video, watch this video, and then the next thing is some funny clip somebody saw me and then go watch Charlie Rose and, you know…

Robert: It seems, yeah, I was driving and I just picked up my son… Marian was driving actually one day on a Sunday and it was during one of the golf tournaments. And Twitter was going nuts about Tiger Woods, right. Tiger just made the most amazing shot we've ever seen.

Fred: Right.

Robert: I was just…hundreds of them, right, you know. And so, that told me that there was something really interesting on TV but I couldn't watch TV right then. I wanted to click a button and save…

Fred: Save that for me.

Robert: And save that for me and bind that moment because I don't want to watch the whole two-hour tournament.

Fred: Exactly.

Robert: I just wanted to see that shot, you know. It's sort of like the nightly news, you know. And it's really hard to do that, driving and so…

Fred: And I think when we do that, when we create services like that with Microchunk Video that allow us to essentially queue up that video. I mean, you know, we've seen a little bit with TiVo remote, right. Like you can hear about something and through TiVo you can somehow log on to the Web and tell your TiVo to record it but that's way, way too hard, right. You know, we need to be as simple as your seeing Tiger Woods hit an amazing shot in your Twitter feed and you need to be able to do something right then and there. Maybe through a Twitter and that goes and grabs that thing and puts it into some queue that later on at night, you can sit back and there it's going to be for you. When that happens, I think, video on the Web is going to take off big time.

Robert: So, you've been investing in all sorts of interesting stuff at Twitter and, right? And the…

Fred: I'm not an investor in but I'm a big of the guys who did That was John Borthwick and Andy Weissman of Betaworks.

Robert: How did you get involved with Twitter?

Fred: I was using it and…

Robert: You chased them. I saw you on the blog.

Fred: Yeah, yeah. What happened was, I was using it and Ev wrote a post on his blog, this is why you got to read blogs. Ev wrote a post on his blog that said, we are going to spin Twitter out of Obvious Corporation. Obvious was the successor to Odeo and I happened to be in San Francisco. I called Ev, he said, yeah, you know, I was coming to talk about it. It turned out I couldn't come in that day. Our schedules didn't work. I flew back to New York. I sat down with my partner, I said, you know, we should make this investment. So, at that time, it was just the two of us. We now have a third partner, Albert, but at that time, it was just Brad and myself. The next week we flew out there. We had a two-hour meeting with Jack and Ev. We basically convinced them that we were good guys. We came back, I called Ev. I said, what do you think? He said, we liked you. I said, can I send you a term sheet? He said, yes. I sent him a term sheet. He called me back the next day. He said, I think we can do this. We did the deal.

Robert: Where do you think, I could spend a whole lot in two hours just typing on my Twitter. For regular businesses on the street, you know, a restaurant, a bike shop or a small manufacturing company. How do you think they're going to use the real time, the Twitter, the Friend Feed, the Facebook from the future?

Fred: Well, I think that we need a lot more stuff built on top of these services. I see Facebook and Twitter and Friend Feed emerging as public channels. I call them public because it's a way for people to communicate with each other publicly. And the problem with those channels is they're really noisy. And I think we need services built on top of them. I think Facebook and Friend Feed and Twitter are building a lot of those services into their services. But I think way more people are building services on top of them. And I think they're going to be people who built services for the small guy, the local merchant, to be able to do what they need to do. There's a company called CoTweet that's here in New York that's building an application for businesses to engage on Twitter. A good example of that is that we have a company called Clickable which is built to service on top of the Adwords API. So, for small businesses who want to buy and sell, who want to buy Adwords, Clickable is a better interface for them. And there's going to be somebody who builds a great interface for the small business on there for Twitter. It could be Clickable. Actually, it's a smart thing for them to do. But, it will probably be somebody else just because they've got a lot of do already. And that's the great thing about these open APIs which is another big part of the 2010 Web, is that services are going to be built on top of services are going to be built on top of services. And you know, how we always have these layers, these stacks and then the next layer comes, the next layer comes. That's happening faster and faster and faster just like pop, pop, pop, pop, pop, pop. And developers are just building amazing stuff. I'm going to a meet up tonight in Brooklyn. Three of our portfolio companies, all my blogging tools and they're having a blogging API meet up so to discuss outside in and (Samantha?) all have really cool blogging tools, all of which have APIs. And they're doing a presentation to developers who want to built blogging tools on their APIs and other APIs. And that's, there's just going to be more and more of that.

Robert: Yeah, it's pretty crazy how the blog is changing. What I'm doing now is doing cut and paste programming, you know, cut and paste programming.

Fred: Exactly.

Robert: And so, on my blog, I have a whole bunch of widgets on the side, one of which is Friend Feed, one is a Google Latitude thing, one is a Facebook Connect thing, and those were just copied and pasted…

Fred: Right.

Robert: (Without a script?). If you're a more adept programmer, then you can actually play with the APIs to build even something cooler, right?

Fred: Right. Yeah, and what people do is they post it for themselves.

Robert: Yeah.

Fred: And they put it out there and other people like it too. Etsy has an API and…

Robert: Etsy is a really cool service for people who want to sell handmade goods, right?

Fred: Yeah. It's an arts and crafts marketplace on the Web. It's really the best way to think about it, and many of the sellers are women, and there is a small but meaningful subset of Etsy sellers who are married to geeks, and so, a lot of them have, you know, said to their husbands or boyfriends, "Hey, can you build me something on top of the Etsy API?" And so we see a lot of activity where, you know, sellers want some widget that they can put on their blog or on Facebook and, you know, Etsy doesn't really have that for them, so they get their significant other to build it on top of the Etsy API. And then, once it's out there, other sellers see it and say, "I want that, too" and starts to propagate. I mean, I have this single blog roller on my blog. I just wrote on my blog, like, I don't want to do a blog (roll?) because the blogs are being changed and the idea of constantly managing a blog (roll?) is too hard for me. What I really want is just a Firefox plugin that watches what I read and decides what the most important blogs are to me, and over time, it will evolve and change. Some guy built it. It's called BlogRollr and it's just a widget to put on your blog, you download a Firefox plugin, it basically looks for pages with RSS feeds on them, counts them up, and then the one that you visit the most is first on your BlogRollr, and you can have a…

Robert: That's awesome.

Fred: Isn't it cool?

Robert: That's awesome.

Fred: I just wrote about it. Someone built it. You know, that's the amazing thing is that with all the tools out there, it's not that hard to build stuff. It's about building stuff that people care about.

Robert: Yeah.

Fred: So, this is sort of a five-year trend, not a one-year trend. But what we see, these engineers are even more important than ever. Most of our companies, at least half the headcount is in engineering, and I don't see that doing anything but continuing to go up. The other area that we're seeing a lot of headcount in is what I call environmental remediations, sort of trying to deal with all the bad stuff that happens in these systems, spam, hacking, fishing, abusive behavior, you know, squatting, like one of the issues Twitter has to deal with is people squatting on people's brands.

Robert: Yeah.

Fred: Someone had Scobalizer, you know, that wouldn't be right, you know, so they have got to deal with that. And so, that's basically large customer support infrastructure and engineering that's dedicated, so, you know, you can't scale… those kinds of problems you can't scale with just adding more humans, so you just have to start building detection systems and moderation systems. And so that whole area is just a huge call center for anybody that's involved in social media, and most of our companies are involved in social media. Discuss, for example, has been building their own comment spam system. They're using all the existing systems that are out there.

Robert: Yeah.

Fred: And now, you know, they sort of mash them all together, and now, they're building their own proprietary algorithms that use a lot of the data that they've got inside their system. You just got to do that.

Robert: Yeah. Are you saying that physical infrastructure is changing? You know, 10 years ago, people have to buy their own servers or use…

Fred: Oh, we see most people building on a Cloud, you know, the small startups building on a Cloud. Some people, as they…

Robert: Completely on the Cloud or a hybrid (frame?)…

Fred: Hybrid mostly. Some people pure Cloud. We are seeing some companies as they scale go to a collocation, you know. You know, I think servers the size of Facebook or Twitter, you know, it's unlikely that they could run that entirely on the Cloud and they don't. But it's amazing how many services do still run on the Cloud.

Robert: Yeah.

Fred: And I think we'll see more and more of that.

Robert: Yeah. Anything else that you're seeing? It's 2009, we're in the middle of a recession, depression, whatever you really want to call it…

Fred: The only thing that I would say is we would talk a lot about sort of horizontal, you know, innovation, what's… you know, what's happening kind of across all sectors. We're very interested in, you know, a lot of what the internet has changed, disrupted or whatever you want to call it over the past 15 years has been the media business.

Robert: Yeah.

Fred: And we think that education, finance, energy, government, health care, those are all sectors that we should look for really disruptive internet services to evolve either into or build up inside of… we're particularly excited about education and energy and finance. Little less excited about government and health care, but we're looking to cross all these sectors and there's lot… lots of interesting innovation going on.

Robert: Sometime in the next 10 years, there's going to be a revolution in education due to the cell phone.

Fred: Yeah, not just the cell phone but you know, this whole home schooling, un-schooling movement, you know, which I thought was sort of like the lunatic Fringe but it's starting to become more mainstream and I think entrepreneurs are starting to build services for that movement. And that movement's just really hungry for any kind of service they could leverage and I think there will be businesses that will ultimately disrupt the entire education system that will start in the home schooling and un-schooling movements because that's the place that they can get going first.

Robert: Yeah. Tell me about the tools that you're using. Yeah.

Fred: What do I use?

Robert: Yeah. I see you on Twitter all the time.

Fred: Well, I'm pretty old school. I… I'm the anti-school…

Robert: I love your blog by the way. It's one of the few that I read everyday and I'm sending…

Fred: Thank you.

Robert: Pretty crazy.

Fred: I'm very old school. I mean, I'm embarrassed to say that I use the Twitter Web app and SMS as the two ways I interact with Twitter which is pretty, pretty (log-eye?) when compared to what's our there.

Robert: I turned off SMS three years ago. So…

Fred: And…

Robert: But that's because I, I just couldn't deal with it… with having to manage, you know, that many users. So…

Fred: I still visit Techmeme everyday and try to keep track of what's going on out there. I, I use Gmail just actually switched pretty much from Outlook to Gmail. It took me a while, I kind of force myself to do it. I'm loving it now. What else? I don't use Instant Messaging very much because I'm away from my desk. I spend most of my day in meetings or like out on the road, meeting people like you…

Robert: That's why Twitter works so well. It's like you can do it while in between things…

Fred: Right.

Robert: You know.

Fred: Exactly.

Robert: I (never?) said to the congressmen that I talked with who are on Twitter loved it because they could do it in more other way – going from session to session or…

Fred: Exactly.

Robert: From the meeting to…

Fred: I snack on Twitter.

Robert: Yeah.

Fred: You know, it's like, I wrote a twit over the weekend. My son and I were waiting in line at the shopping market and we both pulled out our phones and I went to Twitter and started, you know, catching up on Twitter. It was, we knew we were going to be in line for like two or three minutes. So I'm catching up on Twitter and he goes in, he plays his game of Mafia Wars on his iPhone and he goes in and plays two or three hands of Mafia Wars and we both snacked on our particular mobile app and then, you know, it's our turn to pay and we left.

Robert: Yeah. The (road?) really site that because I have a 19-month old son and he already knows how to turn on an iPhone and find his game, so he knows how to page through the apps.

Fred: What's his game?

Robert: Well, Monkey Ball. Yeah, it's Monkey Ball, I think. It's the one that he likes or SmackTalk, he loves that. It's little animals that you talk to the iPhone and it talks back to you with a monkey, with a funny voice. But he knows how to pick out his app and start it up and how, you know…

Fred: It's amazing!

#VC & Technology

A Lesson From Morty

In the comments to "Term Sheet Manners" we got to talking about Morty, a lawyer who taught me some seminal lessons in deal negotiation almost 20 years ago now. I was going to write a post about Morty but then realized I had done exactly that a few years ago. So I doing something I've never done before. I am reblogging a previous post because it's such a good one and because I learned a lot from Morty and you can too.

I woke up thinking about Morty this
morning. I haven't seen or heard from him in over ten years. But Morty
taught me one of the most important lessons about negotiating that I've
ever learned.

Morty was Isaak's partner in Multex early on. They put up the
initial money to get it started. Morty wasn't a venture guy. He was a
real estate lawyer and sometime real estate investor. He was as
conservative as you can get and never liked the startup/venture
business. But he was Isaak's partner. And Isaak asked Morty to
negotiate the term sheet for the seed round with me.

This was late 1992 and I'd been in the venture business for five
years and was on my second or third deal on my own. I'd negotiated a
bunch of term sheets by that point, but I'd never had a negotiation
like the one I was in for with Morty. Actually I don't think I've ever
had one as rough as that since.

Morty wasn't familiar with venture terms. They didn't make sense to
him. So standing in an airport pay phone (before cell phones) I went
line by line, term by term with Morty.

We got to redemption and he started in. "Why do you need this provision Fred?". I was getting tired of his non stop push back and blurted out "Because it's standard. We always get this provision. Always have, and always will".

That got Morty pissed. He shouted over the phone:

don't give a f>>>k that you always get this provision. Doesn't
mean shit to me. This deal will be the first time you don't get it if
you don't explain why you need it.

That set me
back on my heels and I weakly explained that if the deal goes sideways
for years, we need some way to get out of the deal and redemption
provides that path. I don't even remember if he bought that argument.
But I do know that we had redemption in the Series A at Multex and
pretty much every deal I've ever done.

But the point Morty made rang true to me and I've lived by his rule
ever since. I never ever say that a specific provision is "standard".
Nothing is standard. You either need it or you don't. Explain why you
need it and most of the time you'll get it or something like it as long
as both sides really want to make a deal.

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#VC & Technology

What Drives Consumer Adoption Of New Technologies?

I'm participating in a panel discussion this morning during the offsite of a major media company. They sent me a list of questions in preparation of the event. One of the questions was the title of this post; "What drives consumer adoption of new technologies?".

It's an interesting question and one I've never tried to answer directly in writing. But it's also a question we attempt to answer every day in our firm as we evaluate thousands of new startups every year.

Let's take ten of the most popular new consumer technology products in recent years (with a couple of our portfolio companies in the mix): iPhone, Facebook, Wii, Hulu, FlipCam, Rock Band, Mafia Wars, Blogger, Pandora, and Twitter and let's try to describe in one sentence or less why they broke out (feel free to debate the reasons they broke out in the comments):

iPhone – mobile browser with a killer touch screen interface
Facebook – a social net with real utility
Wii – gesture based user interface for gaming
Hulu – your favorite TV shows in a fantastic web UI
FlipCam – a video cam that fits in your pocket comfortably
Rock Band – everyone can be a rock star for a few minutes
Mafia Wars – a natively social game built for social nets
Blogger – a printing press for everyone
Pandora – drop dead simple personalized radio
Twitter – blogging everyone can do in less than a minute

In most of these cases, the breakthrough product or service delivered a new experience to consumers that they had never had before. Sure there were social nets before Facebook, but none allowed you to run your life the way Facebook does for my kids. Sure there were browsers on phones before the iPhone, but there hadn't been one that you could actually use like you use a browser on a computer. Sure there had been personalized internet radio services before Pandora but not one that was drop dead simple and delivered a great experience.

So it seems to me that consumers are driven to new experiences that are simple and useful and/or entertaining. It is not enough to be the first to market with a new technology. You have to be the first to market with a version of the technology that is simple and easy to use.

I'm curious to hear everyone else's thoughts on this. The sooner the better since the panel starts at 10am today.

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#VC & Technology

You Won't See The Palm Pre On Me

I was emailing with Ken Berger over the weekend. He went to the Palm Pre launch event on Friday (here's Ken's take on the phone) and was wondering why I had not mentioned it yet on this blog.

I am quite excited by the Palm Pre. It's a touch screen phone with a keyboard. It shows what the user experience might be if there were a keyboard version of the iPhone. It's got a brand new mobile web operating system that is supposed to be very solid. It is worthy competition for RIM and Apple and should drive those two smartphone leaders to deliver even better phones.

So I asked Ken if I could get an unlocked Pre to run on T-Mobile. He responded:

joking, right?
It's a CDMA phone only– no GSM radio at all.
Besides that, Sprint and Verizon phones have no SIM to swap out.

I responded:

i had no idea

i've never used a palm phone and i've never been on sprint

i think i am just going to ignore this phone for now

it's useless to me

I'm not going to used a closed device like that, no matter how good the device and OS is. You won't be seeing a Palm Pre on me.
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Kickstarting a 7"

I was meeting with the team at one of our portfolio companies last week and we got to talking about music. I was asked if I ever "broke a band" on this blog. I said, "I don't think so." Then someone suggested that I had in fact "broken" the Rural Alberta Advantage with this post earlier this year. I am not sure that post "broke" the band, but it did get a lot of people to come out and see the band play their first US show at Piano's in late January.

Since then, the RAA have taken off, signed a label deal, and are touring around the US and Canada this summer. I am so glad to see it. They write great songs and deserve this success.

As part of the re-release of their record Hometowns on Saddle Creek (their new label), the band also wants to make a vinyl 7" re-recording of two of their songs; Frank AB and Deadroads.

Frank, AB

The Deadroads

So they turned to a cool new website called Kickstarter, where anyone can go and request help funding a project they are passionate about. Kind of like Donors Choose for everything.

The RAA is raising $5,000 to fund the production of the 7". Here's the Kickstarter widget explaining why they want to do this and soliciting your contribution to help them make it a reality. I've given $50 and hope all you RAA fans out there join me in making this happen for them and for us.


Yahoo! Media Player
Engineers Design Product
Mike Davis Lino Wiehen Lucas Gonze
William Khoe Douglas Kim Dave Warmerdam
Amit Behere Suman Nichani

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#My Music

Term Sheet Manners

Although the title of this post is "Term Sheet Manners", what I am going to write about can be applied to all legal documents, not just term sheets.

The past couple days, I've been going back and forth with one of our lawyers on a deal we are working on. We've decided to suggest some changes to the deal and the lawyers are marking up the documents to show the changes.

We could simply send the marked up document back and say "these are the changes we are looking for". I've taken that approach in the past and it's not ideal. Usually, the recipient gets ticked off and you end up spending a lot of time and energy getting things back on track.

The better approach is to compile a list of the big changes you are looking for and call the recipient and walk them through the things you need changed. It's even better if you can do that face to face, although I wouldn't suggest getting on a plane to do this unless the deal is super important and very material to your company.

There are three primary reasons I've learned (the hard way) that a live discussion is the best way to suggest changes to a deal:

1) It shows respect for the other side. Instructing a lawyer to mark up a document and send it back is a slap in the face and most people get very upset by it if the changes are material.

2) Discussing deal terms principal to principal is so much easier than working through lawyers. I've gotten way more done this way.

3) Many times, there is a misunderstanding of the deal terms being discussed that documents and lawyers can't break through. A conversation can usually resolve these kinds of misunderstandings quickly.

So I suggest that we should all resist the temptation to convey material changes via the exchange of markups. At best, it saves you a twenty minute conversation, at worst it can easily cost you a deal.

#VC & Technology

Open Platforms and Innovation

6a00d8345166f269e201157 I love Steven Johnson's cover story in this week's Time Magazine. I told that to the Gotham Gal last night and she said "yeah you tweeted that not once, but three times yesterday."

You'd expect a cover story about one of our portfolio companies (Twitter) which mentions our Hacking Education event would excite me. But honestly, that's not why the piece is still rumbling around my brain this morning.

It's the finish of Steven's piece where he talks about "end user innovation" that is so brilliant. He makes this "larger point about modern innovation":

When we talk about innovation and global competitiveness, we tend to
fall back on the easy metric of patents and Ph.D.s. It turns out the
U.S. share of both has been in steady decline since peaking in the
early '70s. (In 1970, more than 50% of the world's graduate degrees in
science and engineering were issued by U.S. universities.) Since the
mid-'80s, a long progression of doomsayers have warned that our
declining market share in the patents-and-Ph.D.s business augurs dark
times for American innovation. The specific threats have changed. It
was the Japanese who would destroy us in the '80s; now it's China and

But what actually happened to American innovation during that
period? We came up with America Online, Netscape, Amazon, Google,
Blogger, Wikipedia, Craigslist, TiVo, Netflix, eBay, the iPod and
iPhone, Xbox, Facebook and Twitter itself. Sure, we didn't build the
Prius or the Wii, but if you measure global innovation in terms of
actual lifestyle-changing hit products and not just grad students, the
U.S. has been lapping the field for the past 20 years.

That's the thing that gets me so excited to get up and get going every day. Technology has reached a point where anyone can get involved with innovation. Patents and degrees matter a lot less. Imagining something and then coding it up is what its all about these days.

We are engaged in what Eric von Hippel calls "end user innovation" and it is a fundamental shift in the way society innovates. The Twitter founders are a perfect example. They built a simple tool to share short messages and it has become something entirely different. As Steven says:

It's like inventing a toaster oven and then looking around a year later
and seeing that your customers have of their own accord figured out a
way to turn it into a microwave.

I'd like to do exactly that to my toaster. Since every time I write about something I want, one of you builds it, I'm expecting my microtoaster to show up sometime soon.

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#VC & Technology

The Leap Of Faith

Our family belongs to a jewish community in lower manhattan called The New Shul. Last night we celebrated our 10th anniversary and the co-founder, Holly Gewandter, gave a great talk about taking Leaps of Faith. The whole history of the community is one big leap of faith. They had no clue how to start a shul. Everything they did was counter to established norms. And yet, ten years later there's this large and growing community that is great to be part of.

Of course, as Holly was talking, I was thinking of different leaps of faith. I'm not much for religion to be honest. It's something I partipate in but not something I believe in.

But I very much believe in leaps of faith. Every investment we make, every person we back, every strategy we concoct in partnership with the entrepreneurs we back is a leap of faith. Wikipedia says that a leap of faith is:

the act of believing in something without, or in spite of, available empircal evidence

I was on a call yesterday with another VC who asked me why we made our investment in Zemanta last summer. There's a blog post I wrote up that explains our thinking at the time, but I did not point him to it. I explained that we had a gut instinct about the technology, market, and team that made us think there was a substantial opportunity in allowing people to "write smarter."

There is no market for tools, beyond spell checkers and grammar checkers, to allow people to write smarter. There's no business model for a tool like Zemanta. There's no established track record of successful internet companies in Slovenia. In short, there was little to no empirical evidence to go on when we made our investment in Zemanta. And nine months later, there still isn't.

So I told the VC I was on the call with that if he was going to invest in Zemanta, it would have to be a leap of faith. Maybe he'll make it and maybe he won't. I still have faith in Zemanta and I still have faith in all of our portfolio companies.

You need a lot of things to be a successful venture capital investor. You need to understand the market you invest in. You need great networking skills. You need to be able to add value to your investments. You need an understanding of financial markets and how companies are valued. Those skills are neccessary but not sufficient. Because most of all you need to be able to make leaps of faith. And the right ones, of course.

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Is Twitter A Substitute For Set Top Box Data?

For the past decade, the cable and television industry has been working to use set top box data in the way that click stream data is currently used on the web. To some, it is seen as the holy grail and/or the savior of the television business. The thinking is that if TV viewers can be understood, segmented, and targeted in the way that Internet users are, the TV experience and the TV advertising business can be transformed in ways that are beneficial to everyone.

The problem with set top box data is that it is controlled by the cable companies and they have not been particularly open with it. There are a few companies that have access to it, but suffice it to say that building a business based on getting access to set top data is not for the faint of heart.

So I was quite interested when I came across this post from one of our portfolio companies, Simulmedia, which is working in this TV targeting space. Simulmedia was founded by Dave Morgan, founder of Real Media and TACODA and a veteran of the online ad targeting business, to deliver similar products and services to the TV market. So he knows a bit about all of this stuff.

The post describes a little experiment Simulmedia did to analyze TV channel surfers using only Twitter posts as their data source. Simulmedia explains why they turned to Twitter data for this work:

To investigate surfing behavior further we tapped into data from Twitter,
where dozens of people announce to the world that they are channel
surfing every day.  Unlike traditional ratings or second-by-second
set-top-box information, Twitter has rich qualitative information that
reveals motivations behind viewers’ surfing.

Here's the results of their study:

While the data in and of itself is interesting, I am more intrigued by the idea that Twitter can be used as a panel that once it is large enough (and maybe it is already) that can produce much of the same data that is currently locked in set top boxes and controlled by the cable companies.

The Internet is disruptive and reminds me of that fact every day.

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