Posts from VC & Technology

Bug Labs (a Union Square Ventures portfolio company) launched its new website this week and the details of the hardware and software are now out in the open.

Engadget has the details if you want a quick summary.

Or go visit the product page at Bug Labs to get the full scoop.

You have to hand it to the people over at Facebook. They pay attention to what’s going on in their community and when something is out of hand, they fix it.

Everyone knows that the race to get the most installs had some bad effects. It led to application spamming, cost per install advertising, and the net result was lots of installs and little use.

So Facebook made some changes recently to the way they rank applications when you browse the service for new ones. Installs no longer matter. Usage, real usage, matters. Here’s the default tab when you start browsing for apps (the best real estate you can get).

Top Friends is still on top, but their 13mm installs don’t matter anymore, its just the 2.7mm people that actually used the Top Friends app recently that counts. As it should be.

Back in early July, I wrote a post comparing Facebook stats to FeedBurner stats. In that post, I said:

But Appsaholic needs more data to be truly useful. Like FeedBurner
did, Appsaholic needs to get beyond the "subscriber/user" number and
get into what is actually getting used.

In more good news, Appsaholic has adopted the new methodology too. So focusing on installs is over. The game is now daily usage. And that’s exactly what every really cares about at the end of the day.

I gotta hand it to Facebook. It seems that they are doing most things right these days, but most importantly, when they see something is wrong, they fix it. And that’s how you build a great company.

I put my photos online at Flickr and occasionally directly on this blog. My girls put their photos at Facebook. My niece puts hers on Facebook too. The Gotham Gal occasionally puts photos up at Flickr and on her blog.

My parents are visiting and my dad asked if there was a way we could create a shared space on the web where our family could aggregate all of these photos that are being posted in various places and we could comment on them privately.

He’d also like to upload his photos to that place since he and my mom don’t upload photos to the web, they just email them around.

So, the requirements are as follows:

1 – standard photo sharing, uploading, commenting like flickr
2 – ability to create a private space, ideally it would be a blog with photos in reverse chronological order, with comments, and an RSS feed to take the photos out (a private RSS feed? not sure about that one)
3 – ability to feed certain taggged photos in from Flickr, blog posts, and Facebook, and other places that support RSS photo feeds

I think that’s it. Does such a service exist?

Sometimes you write a post asking for something and then months later you find someone has actually built it. That happened with my desire for a Flickr/Twitter integration that I posted about in June. By early August Dave Winer had built it.

Also in June (I guess I wanted a lot that month), I posted about the need for tools to engage with advertisments  like the way we engage with social media. I called the post "Favoriting Ads". It was a fairly popular post, it got 20 comments, and 7 links. A decent amount of "social media engagement".

So I was excited when I saw the idea implemented in the form of a company at Y Combinator’s demo day in early August. The company is called Adpinion and they have built a simple way to vote on ads. You will see one of their ads on this blog, right below the Federated Media banner ad on the right sidebar. Play with it, vote on some ads, save your profile, and let me know what you think.

It’s very early days for something like this. For this approach to work, they need a ton of ads. And they basically have none right now. It looks like they are just pulling items from Amazon and turning them into ads you can vote up or down on. But what we all really want is to be able to vote up or down on the Mastercard advertisement or the Financial Times ad, both of which have been in heavy rotation on this blog in recent days.

So I am not sure whether Adpinion should try to build an ad network of their own or if they should work with existing ad networks to add value to their inventory and help them target ads. Maybe what Adpinion has done is easy enough for existing ad networks to replicate and that’s what will happen.

But regardless of how this all plays out, I am thrilled to see banner ads with up/down buttons on them. It would be a wonderful thing if all banner ads on the Internet had them.

The answer to that questions is of course you can. I still love Howard using that question to announce the sale of Wallstrip. And that also points out that blogging pays its dividends a bit less directly than straight publishing. Sure you can run ads on a blog, as I do, but if you want to make big money, you have to use your blog to do something else.

First and foremost you need to build an audience, build trust with them, deliver on a regular basis for them. There’s no way people are going to come back again and again if your blog doesn’t enlighten, entertain, and inform.

Jason Calacanis has expertly used his blog to launch two businesses to date, Weblogs and Mahalo. If you click on over to Jason’s blog, you’ll see a picture of our friend Jeff Jarvis, who used his blog to build a very profitable "guru" business. Jeff is also launching several new ventures and I hope and expect he’ll use his blog to help launch them.

Which naturally leads me to the venture capital business. I stumbled into blogging as a tool to help me, my partners, and our portfolio companies make money. The model works great. There are a bunch of venture capital blogs out there these days and many are great reads. Everyone knows of my fondness for Brad Feld’s blog. But you might not know that I read Susan Wu and David Beisel regularly. Susan and David are two super sharp up and comers in the VC business whose opinions I have come to respect by reading their blogs.

Which leads me to this post by Donna Bogatin taking a shot my occasional shilling for my portfolio companies. I don’t think Donna likes Twitter based on my read of her posts on the subject. That’s not surprising. There are certainly plenty of people who have a strong dislike for Twitter. I take comfort in that in a contrarian sort of way.

Shilling for portfolio companies is one of the things I do on this blog. My readers know that. We try to avoid that on the USV blog. We reserve that for think pieces, announcements about new investments, liquidity transactions, and an occasional bit of important news about one of our companies.

But I don’t just shill for our portfolio companies. I’ve shilled for YouTube, Flickr, and recently new companies like disqus and search crystal. If I like it, I’ll talk about it. It shouldn’t surprise you  that I like the companies we invest in a lot and I’ll talk about them a lot.

It’s also true that you have to balance that kind of post with other posts. If it’s something you do occasionally, it’s not a bad thing. If you do it too much, you’ll hear about it from your readers and/or they’ll simply leave. I am sure that many readers have left this blog over the years because they were tired of hearing about delicious or TACODA. That’s the risk of shilling for your portfolio company.

But if you have a well read blog, you’ve got an advantage, just like Jason’s, in launching and building a company. My post on Twitter’s new features led to posts at TechCrunch and Donna’s blog among others. We see a lot of entrepreneurs who want to tap into that. It’s a competitive advantage. It’s not going to win us a deal over any other firm all by itself. We have to do a lot of things right to win a deal, including prove to be compatible with the founder and team, pay the right price, and do our homework on the company well. At the margin, the exposure this blog can give a startup company helps quite a bit. And once the investment is won, it continues to help.

So in the venture business blogging helps. Sometimes it helps a lot. It did with delicious and I expect it will as well with Twitter.

And back to Twitter. I don’t know Donna. But if she was in East Hampton last night, and if she used Twitter, we might have been able to meet after the movie. That would have been neat. She’s got a great blog.

In addition to hosting the first board meeting since we invested, Twitter did two really big things this past week that I think are going to make the service a lot more useful to me (and hopefully you).

They are both in the area of finding other people you know on Twitter. To date, Twitter has made it nearly impossible to find friends on Twitter. That’s a very big shortcoming of an inherently social service. It sort of makes me wonder how Twitter got any users at all.

Here’s the new "find and invite" tab in Twitter.

The first new service they launched last week was people search. You can now type a name, last or first or both, a location, a URL, pretty much anything someone would put in a twitter profile, in search of people you want to follow. I’ve added about 15-20 people this way in the past couple of days.

The second service was launched quietly on friday, so quietly that they don’t even have a post about it on the Twitter blog. It’s the gmail address book integration. Here’s what that looks like.

I just tried it out and it worked great for me. I don’t really use gmail, but from time to time I’ll forward my mail to gmail and use it as a backup. So I have a small address book, certainly less than 500 names in it. Even so, I found three people in Twitter that I had no idea were users and I am now following them.

Twitter gets better and better as you follow more people. And now that the default is following on the web and not SMS, the signal to noise issues that plagued the service in the early days are much less.

If you tried Twitter early on and found it useless, I suggest you give it a second try. Upload your gmail address book (don’t worry you won’t spam your whole book), and search for a few friends. Get a following list of at least 20-30 people. Then get a desktop client like twitterific or a firefox plug in like twitbin.

My bet (literally) is that you’ll find following your friends on twitter to be habit forming. I certainly have. I know that Bijan just went for an exhausting run and Scotty is going out with friends in Vienna. And those are things I like to know.

I have friends who loved music in high school and college, would spend hours going through the bins at the record store, and would hang out all night playing music and talking about music. And some of these friends barely listen to music anymore. They think rock music is "dead and boring". They are right. To them it is.

But not to me. I read music blogs, hang out at the hypemachine and last.fm, write about new music, and go see live music as much as I can. Music is as interesting to me now as it ever has been, maybe more exciting now that is so ubiquitous.

That’s the first thing that came to mind when I read Mark Cuban’s assertion that the Internet Is Dead and Boring. It is to him. He doesn’t care about the Internet anymore. That’s fine. He’s moved on to other things that are alive and exciting to him like professional sports, HD video, etc.

The main thing I take objection to in his post is the use of second and third person. Take this paragraph:

Some of you may not want to admit it, but that’s exactly what the net
has become. A utility. It has stopped evolving. Your Internet
experience today is not much different than it was 5 years ago.

If it ended with "my Internet experience today is not much different than it was 5 years ago", I’d be nodding my head in agreement. Clearly Mark’s not using the Internet the way I am.

My delicious toolbar records my most visited web services. Typepad, Google Finance, Techmeme, Delicious, Flickr, Facebook, Twitter, last.fm, hypemachine, yottamusic. I did not use one of those services 5 years ago. Not one of them!

The other thing that I think Mark is wrong about is his focus on bandwidth as the essential element for innovation. He says:

The days of the Internet creating explosively exciting ideas are dead.
They are dead until bandwidth throughput to the home reaches far higher
numbers than the vast majority of broadband users get today.

I’ll be the first one to agree that here in the US we are way behind the rest of the world in broadband to the home and our telecom infrastructure policy would be laughable if it wasn’t so critical. But I don’t think innovation on the Internet is driven so much by bandwidth.

Moore’s law continues to work it’s magic and we can do more with less bandwidth than ever before. And software developers continue to build new technologies that deliver better experiences. Look at Adobe’s new "moviestar" version of Flash for an example of what can be done with today’s internet infrastructure.

But even more importantly, the web is primarily a communications platform, not a broadcasting or publishing platform, those are secondary uses. We don’t need vast amounts of bandwidth to communicate. We seem to be doing just fine with new communication services like voip, blogging, social networking, etc. The key to these innovations is not more bandwidth, its thinking about what the internet/web makes possible that is not possible in the offline world.

And the second wave of internet creativity, dubbed web 2.0, is doing just that. And it has made my experience vastly different than it was 5 years ago, 1 year ago, even 6 months ago. Hopefully if you read this blog, you get to share in all of these exciting new developments and aren’t bored either.

Keith Benjamin, who was a wall street analyst when I first met him almost 10 years ago, has posted twice in the past week and a half about the impact the "credit crunch" could have on tech IPOs and venture returns. The first post is on Keith’s blog and the second is on Venture Beat.

As an aside, I don’t know why both posts aren’t on both blogs. Content should be everywhere you might want to read it.

Keith argues that public investors are going to move away from sectors that are affected by the tightening of credit we are now seeing in response to the mortgage lending mess. And he points to VMware as the kind of seminal IPO success story that will lead to more (remember how Netscape kicked off the web IPO boom in the late 90s?).

VMware is indeed a fantastic success story. Virtualization of servers (and desktops) is a big deal. It allows the IT organizations to buy whatever hardware they want and to run whatever software they want on it. VMware is trading at a $27bn valuation. And a huge multiple of the next 12 month’s expected earnings (almost 100x). But it’s a big time growth story with significant revenues and earnings. Maybe it can hold this valuation. Maybe it can keep going up. I honestly don’t know enough to predict what’s going to happen with VMware.

But I do know a bit about the IPO market’s desire to buy tech companies. Our Flatiron portfolio had two IPOs this summer, comScore (SCOR), and Mercado Libre (MELI). Both have peformed very well for investors who bought into the offerings. comScore is up 35% from its offering price and Mercado Libre is up 67%.

I don’t know what the average tech IPO is up this year, but I suspect it’s a good number. And given the amount of money sloshing around in hedge funds seeking returns, there may be a growing appetite for more deals like VMware, comScore, and Mercado Libre.

If so, that is indeed good news for VCs. But maybe we can learn from these three offerings and our past mistakes too. VMware was started in 1998, comScore and Mercado Libre were started in 1999. They’ve all had nearly a decade to become seasoned well run companies. All are profitable and have been profitable for a while. All are leaders in their sector. All have bright prospects of being solid public companies.

So if we are, in fact, witnessing a return to a favorable climate for tech IPOs, the best way to keep it going is by being very selective about the companies we take public. I think the bankers, the public market investors, and the VCs are certainly going to try to do that, but at some point greed will get in the way and we’ll screw it up. We always do.

My original post on this topic, which is still on the front page of google when you search for unlocked iphone, suggested we’d have an unlocked iPhone by July 5th.

It took a month and a half longer, but we are there now. It’s funny that there are a flurry of unlocked stories all happening today. Must be something about two months worth of work.

Anyway, congratulations to everyone who hacked the iPhone. Awesome job.

Next question is who should I send my brand new "still in the box" iPhone to in order to get it to run on T-Mobile? And how much will I have to pay them?