Posts from 2009

I did a "Room For Debate" on the New York Times yesterday with Ken Auletta and John Markoff. Here's the first part and here's the second part. The topic was Google; are they too powerful and if so, what the government should do about it.

I said this about anti-trust efforts in technology:

I am not big fan of governmental intervention in technology markets.
Technology moves very rapidly and one decade’s dominant monopoly is the
next decade’s fading giant.

I would prefer our government focus on creating the right
environment for innovation and new technology development so that the
next Google can come along and change the game again. Things like
immigration reform (the start-up visa movement), patent reform
(elimination of software patents), net neutrality and open spectrum are
all much more important than filing an antitrust case against Google.

No sooner than when I wrote those words I found out about another public policy issue that impacts the technology startup world.

William Carleton pointed out to me yesterday on this blog, in the comments, that Senator Dodd's financial system reform bill contains two provisions that will be very harmful to startups. If passed as currently drafted, the bill calls for:

(1) increasing the threshold for accredited investors

(2) ending the federal preemption of "all accredited" offerings, so
that states would be permitted to regulate such offerings, even if they
meet federal requirements under Rule 506 of Reg D.

I'm not a security lawyer and I hope we get some discussion of these two points from security lawyers in the comments, but both of these seem wrong headed to me.

The angel funding mechanism is potentially the single most important funding mechanism in startup land. Most entrepreneurs get their first real investments from angels, not VCs. If you lower the amount of angel capital in startup land, you'll end up lowering the number of entrepreneurs who can get their projects off the ground.

So now there's one more thing we all have to start calling Washington about. I'm going to call my representatives about this. You might want to do the same. And while you have them on the phone, tell them we also want their support on the startup visa movement, elimination of software patents, net neutrality, and open spectrum. That seems like a lot to ask, but this stuff is important and getting more so.

One of things that always amazes me about investors is the way we move in herds. Developing markets are in, everyone invests in developing markets. Dubai blows up, everyone moves out of developing markets. Real-time is hot. Everyone invests in real-time.

I can understand the hot money game in highly liquid markets if you can get out before the party ends. But in illiquid markets, this kind of momentum investing hardly ever works.

And VC is among the most illiquid markets out there. I don't believe you can deliver top tier returns playing the "hot money" game in the venture business. Moving in a herd will put you in the middle of the pack at best and could put you in the bottom of the pack.

I think there are two approaches that work in the venture business. One is the contrarian approach. When everyone wants to be a consumer web investor, do software as a service/enterprise. Go where the money isn't.

Or you can just be earlier than everyone and anticipate where the herd is going to be next. That is really hard, maybe too hard to do well over a sustained period of time.

But I do believe that both of those approaches will get you top tier returns if you execute them well.

Following the herd, however, is not a recipe for good investment performance. And yet so many do it. That's why they are called herds.

John Heilemann has a cover story in the current issue of NY Magazine titled Obama Lost, Obama Found in which he details the challenges and opportunities facing the President. I took the time to read it last night, on the eve of the President's trip up to my birthplace and childhood home at West Point.

The President is going to irritate most everyone with his Afghanistan policy. The liberals want us out asap and a big troop increase is going be yet another sign that he's not one of their own. The conservatives will hate his emphasis on an exit strategy. And even if they approve of this decision, they'd never support him on anything and never will. 

Heilemann points out that Obama's approval rating is now sub 50 percent and even more worrisome for him and his team is that his "job disapproval" rating is in the mid 40s, higher than any president at this stage other than Bill Clinton.

His support of Bush's economic policies on the meltdown (ie the splurge) were pro-business and placed him as a friend of the banks and wall street and an enemy of the man on the street. His push to get healthcare reform done early in his presidency has also eroded much of his political capital. And now with his decision to re-invest in the war in Afghanistan, he is facing another political hit.

I've got many liberal friends who are at their wits end with Obama and think he's completely blown it, that he is spending too much time negotiating/pandering to the right with nothing to show for it. And I've got plenty of conservative friends who are saying "I told you so". I can't think of too many friends who are happy with the choices Obama has made.

But I'm having a hard time arguing with any of the decisions he's made to date. He is a pragmatist and anti-partisan who seems to me to be doing a pretty good job of playing a pretty bad hand.

His decision to support and expand the splurge are distasteful on many levels, but we have restored the markets confidence and the financial system is functioning. It could have been so much worse.

His decision to focus on getting a healthcare plan passed that covers almost everyone early in his Presidency is borderline political suicide as Clinton showed. But if not now, when? The US is the wealthiest country in the world and it is just not right that we can't find a way to offer basic healthcare to our citizens.

His decision to support and expand the war in Afghanistan is the hardest of his decisions to date for me to support. The US-installed government in Kabul is corrupt and hated by its own citizens. Propping up a government like that has never worked long term and I can't imagine it will work now. But Afghanistan is a strange place where loyalties shift daily and troops fight for the Taliban one day and the Northern Alliance the next. I want to hear the President out on this one before I come to any conclusions. We'll get that chance tonight.

I believe Obama is suffering from governing from the "far center" and pleasing nobody in the process. My favorite quote in the Heilemann piece is from Alex Castellanos, a republican media consultant:

He’s stuck, and it’s kind of ironic. Obama has
tried so hard not to be George Bush and Bill Clinton, and yet he is
becoming exactly that. The guy who ran against ideological division has
brought it back with such a vengeance that he’s lost the middle, but
not sufficiently to make his base happy. He’s got no friends.

David Carr has a good post this morning in the New York Times called The Fall and Rise Of Media.

The post starts out with the old way of the media business. Kids would come to NYC out of school and work in marginal jobs in the hopes of getting a break and joining the "velvet rope" of mainstream media.

And the post ends describing what kids do today:

Somewhere down in the Flatiron, out in Brooklyn, over in Queens or up
in Harlem, cabals of bright young things are watching all the
disruption with more than an academic interest. Their tiny netbooks and
iPhones, which serve as portals to the cloud, contain more
informational firepower than entire newsrooms possessed just two
decades ago. And they are ginning content from their audiences in the
form of social media or finding ways of making ambient information more
useful. They are jaded in the way youth requires, but have the
confidence that is a gift of their age as well.

David has it about right. I've watched this transformation and helped to finance it (and his first job in NYC too at Inside.com but that's a different story). I believe the move from a velvet rope model to a meritocracy is a good thing and that the new media business we are building in the wake of the old one will be a better media business; leaner, faster, and controlled more by users than media moguls.

I realize that the change is gut wrenching and many have lost jobs and careers in the process. I don't celebrate that. In fact, I find it upsetting. But I have also watched many reinvent themselves and come out in a better place too. Change is inevitable and we are better off embracing it than fighting it.

As David says, "It’s a wan reminder that all reigns are temporary". This one will be as well. So let's get on with it.

I just spent four hours going through my inbox and taking it from 500 emails to zero. These were old unanswered emails, not spam (which I delete regularly in the ordinary course of business).

My email routine, now that I am solidly on gmail and loving it, is to quickly check off and delete all spam in my inbox at least once and ideally twice or three times a day.

Then I scan my inbox for emails from my top priorities; wife, family, partners, colleagues, portfolio, etc. I try to get to all of those at least once a day and ideally twice or three times a day. Gmail knows who these people are and I can't for the life of me understand why they don't build a tool to source up all of those emails automatically. Please build that feature google.

I let the rest build up in my inbox and try to get to it on the weekends. That's how I get to 500 unread emails and that's why I spent my sunday mornings in my inbox.

So for those of you who email me from time to time, here are some suggestions:

1) Be patient. I do try to respond to all legitimate non-spam email and do a pretty good job at it.

2) I am not perfect. Sometimes in my haste to delete spam, I delete a few legit emails. If you have not heard back from me in over a week, please resend your email.

3) Short and sweet gets a faster response than long winded.

4) I like to have conversations via email. If you send me an email looking for a meeting, expect a few questions back from me first.

5) Just because my reply is short does not mean I have no interest. It simply means I've got 500 emails to get through.

6) I've largely given up on responding to anything other than urgent emails and disqus comments on my blackberry. I do scan a lot of email on my blackberry.

7) I still would like a send and delete button from gmail. Send and archive is so awesome but I do a lot of send and delete too.

8) Gmail is life changing. Thank you google.

That's it for now.

There's a saying I heard recently from someone in the tech business that goes something like this:

Things take longer in the short run but they happen faster in the long run

I am sure I've bastardized the quote but the point is important. Nothing happens as fast as you'd like but if you have a longer term horizon, it is amazing what you can accomplish.

I was reminded of this today when I saw the news of our portfolio company Indeed's five year anniversary.

Indeed.com launched five years ago. I have no idea how many job searches or visitors it had that day, but I can assure you it wasn't many. Five years later, they are the leader in the jobs industry online. Check out these stats:

•The #1 employment website in the US by job search unique visitors and page views (comScore Media Metrix, Oct 2009).

•Websites in 19 countries and 10 languages.

•24 million unique visitors and one billion job searches per month worldwide.

•The leading pay-for-performance recruitment advertising network.

•The source of thousands of success stories from job seekers andrecruitment advertisers.

•A leading data provider, including Job Analytics, job trends, industry trends, job market competition, and salaries.

Our portfolio company Targetspot is looking for an experienced online direct marketer to "own" and manage their self serve advertising business.

This
is a fun job for the right person because it is an opportunity to run
and grow a small business inside a bigger business. If you are an "entrepreneur" looking for a chance to show what you can do, this job is probably a good fit for you.

Targetspot's self service ad
business is growing nicely and we want to invest and grow it using
classic online direct marketing channels and measurement systems.

The
right candidate will have significant experience in:

• Knowledge of Google
  Analytics and ability to test results on campaign landing
  pages.
• Experience in SEO, SEM or both (either as an affiliate, or as
  part of an e-commerce site).
• Internet media buying.
• Online direct
  marketing.
• Webmaster experience.

The job description is here and if you are interested, please email [email protected] with "Self Service" in the subject.

1) The economic meltdown/panic of 2008 is largely over. The economy is still weak but markets are functioning and buyers are buying and sellers are selling.

2) The FCC has submitted a proposal for rulemaking on net neutrality.

3) Android looks to be a winner and will give the iPhone a much needed competitor to keep Apple honest.

4) Bing is showing some signs of life and may give Google a much needed competitor to keep them honest (this one may be wishful thinking).

5) Venture Capital investing is bouncing back:

6) The NY Metro venture investing market is bouncing back even more sharply:

7) Programs like Y Combinator, Techstars, Seedcamp, etc are expanding all over the country and now the world, turning out newly minted entrepreneurs by the thousands.

8) A secondary market for founder stock, employee stock, and angel and early stage investor’s shares is emerging, offering the possibility of a third way to get liquid on startup investments.

9) The NASDAQ’s Internet Index is up 128% over the past year suggesting that wall street loves the internet sector again. Can a vibrant Internet IPO market be far away?

10) It’s thanksgiving day, a day to forget all of this stuff and spend it cooking, eating, watching football, and hanging with good friends and family. That’s what I plan to do and I hope all of you do too.

Note: The charts on venture investing in this post come from the PWC Money Tree survey for Q3 2009.

We've been doing our Union Square Sessions events for almost as long as our firm has been around. We pick a topic, like Hacking Eduction, that interests us and we invite about forty people to sit around a big open table and talk about the issue for four to five hours. There are no presentations. We have amazing discussions at these events.

A presentation is like a TV show. It's a lean back experience. A discussion is like an online chat room. It is a lean forward experience. They are not the same thing and in many cases they work against each other.

This is particularly instructive when it comes to board meetings as I learned last week. We did our annual Return Path Board annual planning session last week. It is a grueling day. Roughly eight hours of review and planning discussions, both operational and strategic. In prior years, we'd work through a deck of well over 100 slides during the day.

Not last week. As Matt Blumberg, Return Path's CEO, explains in this post, we went without slides for the whole day. The Company did prepare a lengthy package that everyone reviewed prior to the meeting. But once we were in the room, the projector was off and the conversation was on. Matt managed the clock and made sure we got through the agenda. Everything else was impromptu.

It was a huge success as Matt explains:

We thought that the best way to foster two-way dialog in the meeting
was to change the paradigm away from a presentation — the whole
concept of "management presenting to the Board" was what we were trying
to change, not just what was on the wall.  The result was fantastic. 
We had a very long meeting, but one where everyone — management and
Board alike — was highly engaged.  No blackberries or iPhones.  Not
too many yawns or walkabouts.  It was literally the best Board meeting
we've had in almost 10 years of existence, out of probably 75 or 80
total.

"Changing the paradigm away from a presentation" is the point of this post. Presentations are important. I do a lot of them and post all of them on this blog in advance. I am not saying they don't have a role. But if you want to foster real engagement and real discussion, they are not helpful and in fact I think they are hurtful.