Posts from October 2009

My partner Albert said this a week or two ago on his blog:

When people ask me whether investing in web services is a long-term opportunity, I often say that “we ain’t seen nothing yet.”

I was reminded of that when I went to the web to find a hotel to stay in Miami when I am down there for Future Of Web Apps in February.

In the past, I'd have tried TripAdvisor or maybe even Google. But just in the past few months, there are two really great new ways to do this.

The first is Oyster, a web service dedicated to honest and excellent hotel reviews. They literally send out a person to stay in the hotel for a few days, take their own undoctored photos, and present in a clear and concise format. Here's their page on Miami hotels, and here's a page on Tides in South Beach, which they say has awesome rooms.

Oyster's strength, personally crafted reviews, is also its weakness because they only have reviews right now for certain destinations. I suspect it will take them a few years to be totally comprehensive. However, because so much hotel seeking traffic comes from Google, they can be a great service for people who start their hotel searches at Google. If you see an Oyster result in Google, you should absolutely click on it.

The other way to do it is Hunch. Instead of hiring "experts" to go out and review the hotels, Hunch takes an approach that is more like wikipedia. They crowdsource questions and answers from thousands of "contributors" and then package them up in easy question and answer sessions that lead you to the "right answer".

Try this hotels in miami page and see how it works. You'll notice that Hunch doesn't give you just one answer. It gives you a "best" answer and three other suggestions. I've found that not only do I get good advice from Hunch, it also helps me quickly understand the tradeoffs I am making in hotel decisions.

Of course, there's a natural partnership between Hunch and Oyster around hotels. Hunch is good at framing the decision and giving you a short list to consider. Oyster is great for digging into the specifics of the hotel to get to the final choice.

Since both companies are in NYC and are part of the great startup culture we've got going here, I bet that's not too hard to make happen.

Last friday my partner Brad attended a company offsite for our portfolio company Meetup.com. On monday of this week during our regular weekly meeting, he gave our firm (all five of us) a report on the day which he said was excellent. One thing that stuck in my mind all week was his description of the lunch talk by one of the leaders of the "slow movement" (whose name escapes me now).

I'm familiar with the slow food movement and I would say that our family, led by the Gotham Gal, are active participants in it. I'm less familiar with the broader slow movement. This quote from Guttorm Fløistad via Wikipedia explains:

The only thing for certain is that everything changes. The rate of
change increases. If you want to hang on you better speed up. That is
the message of today. It could however be useful to remind everyone
that our basic needs never change. The need to be seen and appreciated!
It is the need to belong. The need for nearness and care, and for a
little love! This is given only through slowness in human relations. In
order to master changes, we have to recover slowness, reflection and
togetherness. There we will find real renewal.

There are now sub-movements like slow travel, slow parenting, slow art, slow sex, etc. All of them promote the idea that we should slow down, relax, and take our time at things instead of "getting it done and moving on".

I'm not much for any orthodoxy but I do appreciate the sentiment behind the slow movement and I've been thinking all week about what "slow capital" would be. And of course, I believe that Union Square Ventures practices slow capital. Here are some basic tenets of slow capital:

1) doesn't rush to conclusions and doesn't expect entrepreneurs to do so either

2) flows capital into a company based on the company's needs, not the investor's needs

3) starts small and grows with the company as it grows

4) has no set timetable for getting liquid: slow capital is patient capital

5) takes the time to understand the company and the people who make it up

I've spent almost twenty five years in the capital markets watching investors behave. Way too often it is a "wham bam" experience and then off to the next deal. Things like exploding offers, "fly by" board members, and shotgun marriages are so common that you sometimes wonder how anyone makes any money.

There's a reason why Warren Buffet is the best investor of his generation. He practices slow capital and I am proud to say that our firm does as well.

I read the Google blog post announcing their enhancements to music searches this morning. I think it's terrific that Google has made these enhancements but there's one thing I don't like.

Google says:

Now, when you enter a music-related query — like the name of a song,
artist or album — your search results will include links to an audio
preview of those songs provided by our music search partners MySpace (which just acquired iLike) or Lala.
When you click the result you'll be able to listen to an audio preview
of the song directly from one of those partners. For example, if I
search for [21st century breakdown], the first results provide links to
songs from Green Day's new album. MySpace and Lala also provide links
to purchase the full song.

I really dislike the "audio preview" experience. It's been available for years in the iTunes store and I never use it. A 30 second sample of a song is an awful experience in my opinion.

When I want to search for music, I'll do an mp3 search on the Internet or go to the hype machine and do the search there. I almost always get the result I want with one of those two approaches and I can listen to the entire song.

Of course, it is not Google's fault that they are being limited to an "audio preview", it is the fault of the rights holders who won't let Google offer a full song sample. But as we've seen again and again, this only drives users to the "gray market" where they can get a full song sample which is often just a right click away from an illegal download.

A smarter approach would be to allow Google to offer a full song sample (one play per person based on cookies or some other approach) and then a link to purchase. That would allow Google and the music rights holders to take share back from mp3 search engines and encourage music purchases instead of illegal music downloads.

There has been a lot of talk about young entrepreneurs creating all the great companies; Gates, Jobs, Yang/Filo, Bezos, Dell, Brin/Page, Zuckerberg, etc, etc.

I agree that visionary young people are worth backing and we do a lot of that at Union Square Ventures.

But there is another kind of entrepreneur I love backing even more. It's the serial entrepreneur who has had a number of successes under their belt and now wants to swing for the fences. We have a bunch of them in our portfolio and there is nothing more fun than watching someone who has a ton of experience get behind the wheel and really step on the gas.

When someone has two or three startups under their belt, they understand a bunch of things that a first time entrepreneur doesn't. They understand the value of setting a very clear vision and getting everyone on that page. They understand that they need to hire the very best people. They understand how to raise capital and pick their investors carefully. They understand how to make quick decisions and not let issues fester. They have a rolodex of talented people and potential business partners they can get on the phone or email quickly when they need them. Most of all, they ooze confidence and make everyone better around them.

These entrepreneurs usually have enough money in the bank that they are not looking for a payday. They don't build their companies to flip. They build their companies to go all the way. They are doing it for money, but they are also doing it for the thrill of the game, for ego, and to build a legacy. Those are very powerful motivators, much more powerful than money if you ask me.

If you look at our portfolio, you'll see quite a few startups created by young visionaries and quite a few startups created by serial entrepreneurs who are swinging for the fences. There isn't much else to be honest.

We are open to all kinds of entrepreneurs and we don't screen for age or track record. If you have built a web service that fits into our investment thesis, you'll get a hearing at our firm regardless of who you are and what you have done. But it is also true that we tend to back young visionary founders and successful serial entrepreneurs most of the time. That's because we've made a lot of money doing those two things and not so much doing anything else.

I was having breakfast at Pastis with a friend today. The "mayor" of that restaurant, Mark Ghuneim, walks in and goes to the bar to order his morning coffee to go. I said to my friend, "watch this, he's going to pull out his phone and then look up and and try to locate me in this restaurant". My friend, who is not on foursquare, says to me "how do you know?" I said "trust me". Sure enough, Mark starts looking around the restaurant and spots us and comes over and has a ten minute conversation about web music stuff (and foursquare).

When I checked in this morning at Pastis, I added a shout that said "getting a demo of a hot new web music service". The CEO of Targetspot, Eyal Goldwerger, saw that on his phone and jumped in a subway to come down and see the demo too. Sadly, we had left by the time he got there.

But both anecdotes are examples of why foursquare has such potential. It seems like such a simple and whimsical service. You just checkin to places via your phone. But the data that it creates and the way it is published out to your social graph is powerful. I expect we'll see a lot more of this sort of thing as the user base on foursquare hits six figures and hopefully seven figures in the coming months.

Disclosure: Foursquare is a Union Square Ventures portfolio company.

I've thought a lot about whether you can build a business via a browser plugin. I wrote a post a while back on that exact topic. I have seen web services successfully use browser plugins to increase the engagement with users. Delicious did this very successfully. The combo of a web service and a browser plugin is better than just a web service and is vastly superior to trying to do it all via a plugin approach.

And so I am very pleased to see that our portfolio company Adaptive Blue has announced the introduction of a very useful web service to supplement it's Glue plugin. The Glue plugin recognizes all sorts of web sites and catalogs the users visits to them.

I've been using the Glue plugin for several years. Glue automatically recognizes books, movies, music, artists, stars, stocks, restaurants and wine on hundreds of popular sites around the web. Glue works on Amazon, Netflix, Last.fm, Rhapsody, IMDB, Citysearch, Wine.com just to name a few. Here is a full list of Glue supported sites.

Now all of that activity is captured for each user and displayed via a public profile. Here is mine.

Each Glue user has a profile in the web service. Each item (book, movie, music, etc) has a page in the Glue service. So Glue is building a social network of people and items and showing connections between them.

And it is making connections and recommendations between items and people based on all of the data it has collected over the past couple years (and will continue to collect).

Here's an example. There's a BBQ restaurant near our office in NYC called Hill Country. Here is the Hill Country page on Glue. On that page, you can see the Glue users who like Hill Country, you can see what they say about it, and you can see similar barbeque joints, including my favorite in NYC, Fette Sau, in Williamsburg, Brooklyn.

There are a few other additions that I think are noteworthy. Glue now has a "game like" element in which you can collect stickers and become the Guru of a particular item in the service. As we've seen with foursquare, such gamelike features can really enhance the engagement levels of a web service.

The recommendations are delivered via a stream so they are "light and easy" to consume. The Glue service uses streams throughout to give the application a "live" feel. Here is the live feed of all user interactions.

Glue is about using the power of implicit behavior (web surfing) combined with occasional explicit behavior (likes and short comments about the items) and semantic analysis to develop a rich data set to power recommendations across many web services.

Give it a try and let me know what you think. You can download the extension here to get started.

I was reading Technorati's State Of The Blogosphere report yesterday. It has a lot of data on bloggers but not so much on readers. And I'm more curious about readers than bloggers.

I believe that blog reading has gone completely mainstream based largely on discussions I've had with friends who are not in the tech business (one advantage of living and working in NYC) and based on talking to my kids and their friends. I really don't know anyone who doesn't read blogs these days.

Here is some interesting data to think about:

Comscore says a Blogger powered blog is viewed by almost 300mm unique visitors worldwide every month.

 
Tumblr had 50mm visitors in July.

Quantcast says Disqus powered blog comment systems reached 60mm people worldwide in the last month.

These are big numbers. Blogs are being read by hundreds of millions of people worldwide every month and the growth numbers for companies like Tumblr and Disqus (both of which are Union Square Ventures portfolio companies) are very encouraging.

I think it is clear from a quick review of these numbers that blog reading is a mainstream and a mass medium. And the companies that serve this market, both bloggers and blog readers, are in a very interesting position.

We started investing in blog related businesses early in the development of our first fund and have now invested in delicious, feedburner, adaptive blue, outside.in, disqus, tumblr, and zemanta. We also invested in twitter because we thought it was a quicker and faster form of blogging.

The thesis that blogs were a new form of publishing and self expression is playing out nicely and we are pleased with the progress of our companies and the market as a whole. And I think we are not anywhere near the end game.

David Gillespie sent me a note today about this presentation he posted about a week ago. It’s really great and I think everyone should take ten minutes out of their day and spin through it.

Technorati released its annual State Of The Blogosphere report this past week. In it was a short interview they did with me about VCs and entrepreneurs who blog.

I like the way it came out so I figured I'd reblog it here.

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Fred Wilson, managing partner of two venture capital firms and well known "VC blogger" at AVC.com, discusses the relationship between entrepreneurship and blogging, and what's next for blog-based businesses and the web. 

You’re one of the best know “VC bloggers.” What originally motivated you to get involved in blogging, and how has it influenced your life and career?

I got into blogging because it was a new internet technology back in the early part of this decade and I wanted to understand it better. As I got into it, I realized it could help our business a lot by building a direct channel to entrepreneurs. It has allowed us to build a reputation as one of the best web-focused early stage venture firms.

What’s your take on and advice to VC-backed entrepreneurs who publish blogs?

It's not easy for an entrepreneur to find the time to blog. But for those who do it, it is a great tool to communicate with the various stakeholders in their business and build a reputation for thought leadership.

Blog-based businesses and blog networks have seen a lot of activity over the last few years in terms of investment and acquisitions. Given the economic downturn, what does the future look like for blogs-as-businesses?

I think it’s better than ever. Blog-based businesses have lower cost structures and are more "authentic" and as a result are drawing larger shares of ad budgets.

You’re a passionate early adopter and experimenter with web applications in general and widgets on your blog in particular. What’s turning you on these days?

Mobile apps and new commerce models. 

What’s your advice for aspiring professional bloggers?

Show up every day with something interesting to say and don't be afraid to speak your mind.