Posts from September 2010

I’m doing an interview today with Sarah Lacy of TechCrunch. It is the first episode of a new show on TechcrunchTV called Ask A VC. Sarah blogged about it early this week.

The interview is taking place at 2pm eastern today. I don’t know if it will be broadcast live or delayed. But it will appear on TechcrunchTV sometime today. Once it airs, I will embed it here in this post.

If you have questions you want Sarah to ask me, you can email them to her at askavc(at)techcrunch(dot)com.

Here is the interview:

My partner Albert is a hacker. We didn’t invest very much in development platforms before Albert joined us (Twitter being somewhat of an exception) because we couldn’t eat our own dogfood. Albert changed all of that for us. He can not only evaluate development platforms but he can use them and provide feedback to the team.

Over labor day weekend, Albert hacked together a web app he calls Preditter. As he explains in this blog post, he built Preditter on top of three of our portfolio company platforms, Twitter, MongoDB, and Twilio.

If you want to make a prediction about a football game this weekend, just tweet the prediction to your followers and add @preditter to the end of the tweet. I just did that. Here is the tweet:

Let’s do Albert a favor and test Preditter out. And let us know what you think.

I saw this film last night. It made me angry and upset. Go see it. It will be in the theaters on Sept 24th.

And if you have the time after watching that trailer, please read my friend John Heilemann's longer piece on the film in this week's NY Magazine.

My favorite investor is the contrarian. I know a lot of momentum investors that do well and I respect their approach to investing. But it is not an approach I can wrap my head around.

My favorite quote on contrarian investing is from Baron Rothschild who supposedly said:

the time to buy is when there is blood in the streets, even if the blood is your own

That is the kind of thinking that drove me to put a bunch of money into the market directly buying stocks in the fall of 2008, which I blogged about frequently here.

It was very hard to raise a venture fund focused entirely on early stage web investments in 2003 and 2004. Nobody thought that was a good idea. And that fund we raised will be the best venture fund I've ever been involved in. So I've had enough experience personally with contrarian thinking and excellent investments to know that it makes sense, at least to me.

I've been thinking a lot about what a contrarian would do in web investing right now. The easy answer is sit on the sidelines. But we are not paid to sit on the sidelines. We are expected to invest capital. In addition, I feel strongly about not trying to time markets. We like to put about the same amount of capital out year after year without too much variation.

We will only invest in things we know well so that takes non-web sectors off the table. Add to that our particular investment thesis around investing in large networks of engaged users and avoiding gatekeepers and you have a quandry.

I'm thinking a lot about this question these days so I thought I'd put it out there and see what you all think. Opinions of all sorts are welcome here, including the occasional kookery.

Last week's MBA Mondays post on What A CEO Does was a huge hit. Matt Blumberg, who is one of the finest CEOs I've had the pleasure of working with, wrote a follow-up post on the topic for his blog. I asked him if I could run it as a guest post here on MBA Mondays and he agreed.

So, here's a bit more on What A CEO Does:

—-

What Does a CEO Do, Anyway?

Fred has a great post up last week in his MBA Mondays series caled “What a CEO Does.“  His three things are set vision/strategy and communicate broadly, recruit/hire/retain top talent, and make sure there’s enough cash in the bank.

It’s great advice.  These three are core job responsibilities of any CEO, probably of any company, any size.  I’d like to build on that premise by adding two other dimensions to the list.

First, three corollaries – one for each of the three responsibilities Fred outlines.

    •    Setting vision and strategy are key…but in order to do that, the CEO must remember the principle of NIHITO (Nothing Interesting Happens in the Office) and must spend time in-market.  Get to know competitors well.  Spend time with customers and channel partners.  Actively work industry associations.  Walk the floor at conferences.  Understand what the substitute products are (not just direct competition).

    •    Recruiting and retaining top talent are pay-to-play…but you have to go well beyond the standards and basics here.  You have to be personally involved in as much of the process as you can – it’s not about delegating it to HR.  I find that fostering all-hands engagement is a CEO-led initiative.  Regularly conduct random roundtables of 6-10 employees.  Send your Board reports to ALL (redact what you must) and make your all-hands meetings Q&A instead of status updates.  Hold a CEO Council every time you have a tough decision to make and want a cross-section of opinions.

    •    Making sure there’s enough cash in the bank keeps the lights on…but managing a handful of financial metrics in concert with each other is what really makes the engine hum.  A lot of cash with a lot of debt is a poor position to be in.  Looking at recognized revenue when you really need to focus on bookings is shortsighted.  Managing operating losses as your burn/runway proxy when you have huge looming CapEx needs is a problem.

Second, three behaviors a CEO has to embody in order to be successful – this goes beyond the job description into key competencies.

    •    Don’t be a bottleneck.  You don’t have to be an Inbox-Zero nut, but you do need to make sure you don’t have people in the company chronically waiting on you before they can take their next actions on projects.  Otherwise, you lose all the leverage you have in hiring a team.

    •    Run great meetings.  Meetings are a company’s most expensive endeavors.  10 people around a table for an hour is a lot of salary expense!  Make sure your meetings are as short as possible, as actionable as possible, and as interesting as possible.  Don’t hold a meeting when an email or 5-minute recorded message will suffice.  Don’t hold a weekly standing meeting when it can be biweekly.  Vary the tempo of your meetings to match their purpose – the same staff group can have a weekly with one agenda, a monthly with a different agenda, and a quarterly with a different agenda.

    •    Keep yourself fresh…Join a CEO peer group.  Work with an executive coach.  Read business literature (blogs, books, magazines) like mad and apply your learnings.  Exercise regularly.  Don’t neglect your family or your hobbies.  Keep the bulk of your weekends, and at least one two-week vacation each year, sacrosanct and unplugged.

There are a million other things to do, or that you need to do well…but this is a good starting point for success.

Peter Thiel, entrepreneur, VC, angel, Facebook board member, and hedge fund manager, penned a long and thoughtful piece about the possibility of an impending apocalypse and how that might lead to financial bubbles. It was written in 2008 but I only came across it yesterday (on Hacker News). He calls it The Optimistic Thought Experiment. I you are an investor and haven't seen it before, I suggest you go read it in its entirety.

For those who would rather have the cliff notes, Peter's argument goes like this (Peter's words are in italics, mine are not):

1) if the truth were to be told, our slumber is not as peaceful as it once was. Beginning with the Great War in 1914, and accelerating after 1945, there has re-emerged an apocalyptic dimension to the modern world. In a strange way, however, this apocalyptic dimension has arisen from the very place that was meant to liberate us from antediluvian fears. 

Peter argues that science in all of its form (nuclear weapons, biological catastrophes, etc) has vastly increased the probability of some form of apocalypse.

2) A mutual fund manager might not benefit from reflecting about the danger of thermonuclear war, since in that future world there would be no mutual funds and no mutual fund managers left. Because it is not profitable to think about one ’s death, it is more useful to act as though one will live forever.

Peter argues that betting on the apocalypse makes no sense so rational investors don't do it.

3) Globalization may end by accident or by terrible miscalculation: It may end by world war.  Because there would be no winners in a new world war, every path away from globalization will end in catastrophe. Thus, in spite of the many uncertainties surrounding the costs and benefits of a more globally integrated world, investors have no choice but to bet on globalization. There are no good investments in a twenty-first century where globalization fails.

Peter argues that globalization is the anti-apocalypse bet.

4) Even the most preposterous bubbles of recent decades — Japan in the late 1980s and high-end real estate today — would have been far more restrained, had they not been stoked much further by the narrative of globalization.

He goes on to connect financial bubbles with bets on globalization. This is the most fascinating part of the essay to me. I've gone back and read it a few times now.

5) the pace and amplitude of these booms has accelerated tremendously, in complete contradiction to the widespread notion that markets are becoming more smooth and efficient over time. During the last quarter century, the world has seen more asset booms or bubbles than in all previous times put together: Japan; Asia (ex-Japan and ex-China) pre- 1997; the internet; real estate; China since 1997; Web 2.0; emerging markets more generally; private equity; and hedge funds, to name a few.

And then Peter explains that the recent slate of financial bubbles, which he calls unprecedented in history, are related to the growing sense of impending doom.

And here is the money quote:

But because we do not know how our story of globalization will end, we do not yet know which it is. Let us return to our thought experiment. Let us assume that, in the event of successful globalization, a given business would be worth $ 100/share, but that there is only an intermediate chance (say 1:10) of successful globalization. The other case is too terrible to consider. Theoretically, the share should be worth $ 10, but in every world where investors survive, it will be worth $100. Would it make sense to pay more than $10, and indeed any price up to $100? Whether in hope or desperation, the perceived lack of alternatives may push valuations to much greater extremes than in nonapocalyptic times.

It's a fascinating argument. I can't say whether I buy it or not. But it's in my head now and as a result it will be part of the way I look at the world, investing, and valuations. How much it will be a part of that remains to be seen.

At the end of the essay, Peter talks about China, Web 2.0, and hedge funds in the context of this "optimistic thought experiment". I've been thinking a lot about all three having most of my eggs in the middle basket and having taken a lot of eggs out of the latter basket and thinking about putting some eggs in the first basket. It was a good time for me to come across this essay.

So I finally got around to downloading iTunes 10 and playing around with Ping.

I agree with Swizec who makes all the points I would make in much more colorful language.

In summary, Ping is not very social and it is not really about music. It is about music purchases and celebrities.

If you want to see a social network about music, check out last.fm. It knows what I am listening to right now no matter where I am listening (not in iTunes hopefully). It knows what music I like and it doesn't ask me to tell them what that is. It knows who likes the same kind of music I do.

Ping shows what a command and control culture thinks a social network is. I am sure millions of people will use Ping. And I am equally sure that it will not advance the state of the music business one bit.

I read Om Malik's early take on Ping. I was shocked that I would have to download software to create a social network and said so in the comments. Of course that is what Apple would do in its iTunes centric view of the world. But tying Ping to iTunes is wrong. And tying Ping to music purchases is wrong. And tying Ping to top artists is wrong.

I didn't find any of my music friends on Ping. Just a bunch of tech pundits and VCs who had to check this thing out. So I'm headed back to the places I hang out with my music friends online; Tumblr, last.fm, hype machine, Soundcloud, extension.fm, etc.

I hope you'll join me. And while I am on the subject of music, you might enjoy listening to my internet radio channel this weekend. It is called fredwilson.fm and it was built on tumblr, streampad, and soundcloud. Not one bit of Apple technology in it.

Related articles by Zemanta

• Apple's Ping is a social disaster (en.onsoftware.com)
• Apple's Ping is a big pile of steaming dung (swizec.com)
• iTunes Ping: The Missing Thing (mashable.com)

Paramendra wrote a post last night that got me thinking about a class of apps that I'll call "mobile first web second". He mentions Twitter and Foursquare and I would agree that both of them are mobile first web second.

Back in the early days of Twitter, I sent and read most of my tweets via SMS. I signed up a lot of users by telling them to text "follow fredwilson" to 40404.  Evan Williams said in a blog post yesterday, "46 percent of active users make mobile a regular part of their Twitter experience." I am surprised it is not higher. I use Twitter on the web and mobile every day, but I use it a lot more on mobile.

Foursquare's web app is not particularly useful, at least not yet. Most of the value from Foursquare is delivered in their mobile apps. I've used the Android and Blackberry apps. And my kids use the iPhone app. All three of these apps are high quality mobile experiences. Foursquare is most definitely a "mobile first web second" experience.

The thing I like about these kinds of apps is they are with you all the time and can be used in moments of downtime. As such they lead to higher levels of engagement. But because they are also web apps and connected to a web scale network, they can offer a lot of value that mobile only apps cannot.

I think we'll see a lot more of these kinds of apps going forward. I'm curious what other "mobile first web second" apps you all use.

 

I've never been much of a fan of incubators. Some have made the model work. My favorite of the bunch is Betaworks, based here in NYC. Betaworks is more than an incubator, but they have shown that they can make the incubation model work with projects like bit.ly and chartbeat.

But one aspect of incubation that I like very much is the idea that multiple projects are sharing the same workspace. The term for this kind of work setup is coworking. There are various approaches to coworking.

There is the shared space model. Foursquare, Curbed, and Hard Candy Shell have shared a single office for the past year and a half and they get a lot of benefits from working together even though they are three companies all working on very different things. Our portfolio company Outside.in has employees from our portfolio companies Disqus and Zemanta working out of their office. We see that kind of setup all over the startup world. I encourage all of our young companies to think about that kind of setup.

The main benefits of this kind of setup are comraderie (small startups can be lonely), knowledge sharing, high energy, culture, and cost sharing. I have heard so many stories of software developers walking to the other side of the office to talk to software developers working for another company to talk about a thorny tech issue. That same thing can happen in finance, legal, bus dev, marketing, product management, really all parts of the business. You can get some of the benefits of scale without being at scale.

I have been contacted by a large number of people working in city, state, and federal government recently asking me how they can help small tech companies. They often ask about real estate. I tell them that small office spaces are plentiful and not terribly expensive, but that what we need more of is coworking spaces. And we have been getting them at a nice clip here in NYC.

The "grandaddy" of NYC coworking spaces is New Work City. They just raised almost $20k on Kickstarter to open "the awseomest coworking space NYC has ever seen."

A few weeks ago I was down at the NYU Poly coworking space on Varick St right near the Holland Tunnel. They have about thirty companies in one large open floor in a very nice buiding owned by Trinity Church. NYC Seed keeps their manhattan office there as well.

Dogpatch Labs has coworking spaces in SF, Boston, and NYC. The NYC Dogpatch is on 12th between University and Broadway. There are a lot of great companies going into and coming out of Dogpatch these days.

A new coworking space has opened in Williamsburg recently called The Brooklyn Makery.  The image at the top of this post is of their space. I am really excited about this project and a few of us from our office are going out there in a few weeks to visit all the teams.

There is an all woman entrepreneur coworking space on 23rd St between Fifth and Sixth called InGoodCompany. There is an all green/environmental startup coworking space on lower broadway called Green Spaces.

I could go on and on, but I'll just link to this wiki of coworking spaces in NYC. If yours is not on there, please add it.

If you are launching a startup or have one that is just one or two people, you should really try to get into a coworking space. It can be more cost effective, but that is not the best reason to do it. You'll get knowledge sharing, energy, and a lof of camraderie. And you can't put a price on those things when you are doing a startup.