Posts from VC & Technology

I've made this point in several talks I've given recently so for those of you who attended or watched the talks on video aren't new to this meme. But I thought I'd share it with the AVC community.

As software has moved from running on local machines to running in the browser a number of important things have happened. One of the most important changes is software has become media.

Here's a definition of media I pulled from TechTerms

"media" refers to various means of communication. For example,
television, radio, and the newspaper are different types of media. The
term can also be used as a collective noun for the press or news
reporting agencies.

Media are the tools that are used to communicate. And software that runs on the web is part of the media landscape. That has certainly been true for things like online publications and online video and they are accepted as part of the media landscape. But I think all software should be characterized and thought of as media.

Like other forms of media, software produces an emotional reaction when we use it. Software needs to have a "voice." It needs to be more than a simple utility. We need to feel something when we use software. The best software does this incredibly well.

Like media, the interfaces that present software to us need to be stylized, designed, and elegant. Software can be beautiful and the best software is beautiful.

And like media, the most important measurement for software today is the number of engaged users. The more engaged users a piece of software has, the more impactful it can be.

Many will read this and say "well that might be true for consumer software but not for enterprise software." I don't think so. This week we started using a web-based applicant tracking system for our hiring process. We have close to 400 applicants for the two jobs we posted and we need something to track all the applicants and help us run the process. We looked at a number of options and selected one of them. This is enterprise software, but I want the same experience with this software that I want with the best consumer software I use. I want it to be attractive, elegant, I want it to have a voice, I want it to be more than a simple utility.

Once we've begun to treat some of the software in our lives as media, we are going to treat all the software in our lives as media. And the software that is ugly, void of emotion and voice will not work as well for us. So I believe all software is media and will be seen as such by its users.

I saw this chart in Morgan Stanley's latest Internet trends report.

 

Even though I've been saying for years that social networking will one day usurp email, it's a bit shocking to see that it has. 

There are some caveats. My kids use Facebook as their primary inbox (they also use gmail). So some of what they do on Facebook is actually email.

But even so, it looks like email's reign as the king of communication is ending and social networking is now supreme.

When we landed back in the states recently after a long flight and got in a car to drive into the city, The Gotham Gal looked at me and said "why are you checking twitter and not email?" (as she was doing). I told her that email required a reply and twitter did not. And that I preferred twitter to email and always checked it first.

Whether it's Twitter, Facebook, or some other social networking service, I believe the lighter weight communication paradigm (say less, reach more) is superior to email for many things and I'm certainly moving more of my communications away from email.

Ideally, that would leave the more important heavier weight communications in email. If it were only so. Email's biggest problem is the inability to control other's power to email you. That is also its greatest strength.

If email can solve the inbound overload problem, it can become a sustainable compliment to social networking and remain a powerful mode of communication for a long time to come. It's a truly private channel and is more suitable for long-form serious private conversations.

And email's usage is still growing (125bn minutes per month in the chart above). So don't take this post as anti-email. We've got one email related investment that is doing great, Return Path, and we are certainly open to doing more there.

But social networking is the king of communications now. Long live the king.

We've got a post up on the Union Square Ventures blog explaining our hiring plans. We are looking for two people who want to spend the next two years at our firm. One will be an analyst position and requires no previous work experience but very strong quantitative skills. The other will be the General Manager of the Union Square Ventures Network. This requires a person with strong interpersonal and operating skills and some work experience where they have been demonstrated.

If you are interested in either position, please go read the blog post and follow the instructions at the end.

Like the Paul Simon song, there are probably at least fifty ways to be your own boss, but I only have twenty minutes this coming thursday at the 99% Conference and so I am going to talk about ten of them.

The super high growth startup that lands a ton of venture capital and heads for a big exit is the iconic entrepreneurial success story but it represents a tiny fraction of all entrepreneurial endeavors and I think it gets in the way of more people starting their own businesses. They think "well I can't do that" so they don't do anything. And that's wrong. 

So I am going to talk about ten ways you can be your own boss and hope to deliver the message that there is a way that most everyone can do it. 

Here are my visuals in draft form. As always, comments and suggestions are very welcome.

Ten Ways To Be Your Own Boss

View more presentations from fredwilson.

I'd like to acknowledge flickr member .eti whose most excellent photo graces the front of this presentation.

Rhode Island Senator Jack Reed was quoted in the WSJ yesterday saying that VC firms managing $30mm of capital or more need to report to the SEC because "the government needs the reporting requirement so it can assess whether
these private pools pose a systemic risk to the financial system."

The only systemic risk the VC business is creating for the financial system is attempting to put the current one out of business by financing entrepreneurs with new ideas for banking, brokerage, insurance, and other financial services. I'm not joking about this. I believe entrepreneurs will use technology to reinvent the way financial services are provided to consumers this decade.

But to suggest that small venture funds of $30mm could possibly be creating systemic risk to the global financial system is ludicrous. I can't even imagine a huge $1bn venture fund could create systemic risk, but I can understand how a regulator might want to keep track of something like that. But a $30mm fund???? I'm speechless.

I've never liked the term net neutrality to be honest. And in the wake of the FCC's legal loss to Comcast over bit torrent throttling, the net neutrality camp (which I am very much in) is on its heels. This post is not about that decision or its ramifications, which I think are significant. It's about the need to frame the issue in a different way.

My partner Albert got me thinking about Internet Freedom with his post the other morning. Internet Freedom is about sustaining the era of permissionless innovation that has characterized the first fifteen years of the commercial Internet in this country and brought us thousands of new big profitable companies, millions of jobs, and a vast array of new services and devices that have changed our lives and made them better.

Our firm, Union Square Ventures, focuses most of our time on finding companies, investing in them, and working with the entrepreneurs to build them. But a few years ago, we made the decision to invest a small amount of our time on public policy issues, like net neutrality, patent reform, spectrum reform, immigration reform, and a handful of other ones. All of this and more is about Internet Freedom. Our business requires it. If we lose Internet Freedom, we won't have any companies we would want to invest in and we'll close up shop and move on with our lives. That would be our loss.

The bigger loss would be to our society which has benefitted mightily from Internet Freedom and will continue to benefit as long as we don't lock everything down and close everything up. So as Albert says, "the price of Internet freedom too is eternal vigilance." 

We'll be stepping up our efforts inside our firm and outside our firm in this area. It's so very important.

Related articles by Zemanta

• Court Tells FCC It Has No Mandate To Enforce Net Neutrality (And That's A Good Thing) (techdirt.com)
• What Happens Now with Net Neutrality (dailykos.com)

I was emailing with a friend of mine yesterday who is a 30 year veteran of silicon valley. He'd written a post that was quite positive about the iPad. I sent him my post which wasn't so positive. We had a good discussion. Which ended with my friend making this point:

iPad’s
fate depends on entrepreneurs inventing new kinds of killer apps. (remember how
desktop publishing saved Mac?)

I got out of college in the early 80s when the desktop revolution was upon us. A bunch of my friends from MIT were piling into startups in Cambridge building products on top of this new desktop computing platform. One of them was a company called General Computer that made external hard drives for the original Macintosh, which you might recall came with only a floppy drive. General Computer did fantastic for a while but its business eventually faded away as Apple filled in the holes in the Macintosh product.

Contrast that with Lotus, another Cambridge company that built something entirely new on top of the desktop platform. Or Aldus, who started the desktop publishing business that "saved Mac" as my friend points out.

Which brings me to the title of this post. I've been thinking a lot about the Twitter Platform and Ecosystem recently. I think it is at an inflection point, much like the desktop software and hardware business was in the mid 80s as the desktop platform started to mature.

Much of the early work on the Twitter Platform has been filling holes in the Twitter product. It is the kind of work General Computer was doing in Cambridge in the early 80s. Some of the most popular third party services on Twitter are like that. Mobile clients come to mind. Photo sharing services come to mind. URL shorteners come to mind. Search comes to mind. Twitter really should have had all of that when it launched or it should have built those services right into the Twitter experience.

When you talk to a new user, they want to know how to post a photo to Twitter, they want to know "what is this bit.ly thing?", they want to know how to get Twitter on their iPhone. Names like Summize, Twitpic, Tweetie make no sense to them. Of course, without Summize, Twitpic, and Tweetie we would not have the Twitter we have today. They and many other third party products and services filled out the holes in the Twitter product and made it work better.

But those services don't feel like Lotus or Aldus to me. What are the products and services that create something entirely new on top of Twitter? I'll come back to that question, but one more history lesson, this one recent history.

When Facebook platform launched, we saw a massive number of new products and services launched on The Facebook. But many were slight variations on existing Facebook features (like Superwall) or holes in the Facebook service. As Facebook closed up those holes and enhanced their own feature set, those apps fell to the wayside. But there was one entirely new business that got created on top of the Facebook platform and that is social gaming, which industry analysts project will be a $1.6bn market this year and I think that number is low.

Facebook (and Twitter) have also spawned the social media agency business, helping businesses and brands market themselves in social nets, which may be even bigger than social gaming when you add up all the companies in it. That business opportunity is directly analogous to the search agency business that got built on the back of Google as it scaled into the business it is today.

So it is clear that you can build large businesses on top of a social platform like Facebook and Twitter. And because Twitter is so open and so lightweight, I am surprised that there aren't more "new kinds of killer apps" to quote my friend who I started this post with.

Here's are some places where I think we might see these killer apps emerge:

* Social Gaming – There have been a number of attempts to build social game experiences on Twitter. But I'm not aware of any successes of scale like we've had on the Facebook platform. I think we will see it emerge soon.

* Verticals – We have some successes to point to here like Stocktwits for finance and Flixup for movies but this is a wide open opportunity in most verticals and we haven't seen as much effort here as I'd have expected.

* Enterprise – CoTweet comes to mind as well as the efforts that Salesforce has made to integrate Twitter. This is a huge opportunity.

* Discovery – This is one area where there is a significant amount of effort. Hunch, Listorious, TweetMeme, Cadmus, WeFollow, and MrTweet all come to mind.

* Analytics – While Twitter will obviously be delivering better analytics to its users, particularly its marketing and business users, I believe that there is always a market for third party analytics. Google Analytics is available for free and yet none of the large analytics providers have seen their businesses suffer. There is simply a voracious appetite for information on the Internet. So companies like bit.ly, Radian6, HubSpot, Scout Labs, and others have a bright future.

But these are the obvious places to look for killer apps on Twitter Platform. If I can see them, so can many others. I think there are a number of non-obvious places, like desktop publishing was on the Mac, where something entirely new will be built on top of Twitter. And that's what I'd like to challenge entrepreneurs and developers out there to focus on. I think the time for filling the holes in the Twitter service has come and gone. It was a great period for Twitter and its third party developers.

I believe we are entering a new phase now. Twitter is a global platform, the 33rd largest in the world according to Comscore, with almost 70mm uvs worldwide in February. It is a large company now with the resources to service the ecosystem in ways it never could before. It's hosting its first developers conference, Chirp, in San Francisco next week. And so it's time for Twitter and its developer ecosystem to work together to create entirely new things that will shape the Internet in the coming years. I'm excited to see it happen.

Last month congress passed and the President signed an $18bn jobs bill "providing tax breaks for businesses that hire previously unemployed
workers and extending funding for infrastructure and transportation
projects."

While I can't argue too much with the idea of using tax breaks to spur hiring and investing in infrastructure, I think smart immigration reform might be a better way to create jobs in this country. Tom Friedman agrees and in today's NY Times, he writes:

“Between 1980 and 2005, virtually all net new jobs created in the U.S.
were created by firms that were 5 years old or less,” said Litan. “That
is about 40 million jobs. That means the established firms created no
new net jobs during that period.”

and

“Roughly 25 percent of successful high-tech start-ups over the last
decade were founded or co-founded by immigrants,” said Litan. Think
Sergey Brin, the Russian-born co-founder of Google, or Vinod Khosla,
the India-born co-founder of Sun Microsystems.

It is not surprising that new companies are creating the jobs in this country. Most businesses don't last forever, they start, grow, hire, eventually get fat and happy, stagnate, and then fail or are sold off. Add to that assertion that technology is changing things and that companies based on older technologies are likely to suffer and decline, and you come to the obvious conclusion that new company formation is the key to job growth.

That second quote from Friedman's piece is about tech jobs, but I would bet that immigrant led business creation is not limited to tech companies. The "fat and happy" thing is unfortunately true about many US citizens. But immigrants are rarely "fat and happy" so they work hard, start businesses, hire employees, and build companies. That's the american way. To quote again from Friedman's piece:

What made America this incredible engine of prosperity? It was
immigration, plus free markets. Because we were so open to immigration
— and immigrants are by definition high-aspiring risk-takers, ready to
leave their native lands in search of greater opportunities — “we as a
country accumulated a disproportionate share of the world’s high-I.Q.
risk-takers.”

We need smart immigration reform in this country. We are not inviting many of the world's "high-IQ risk takers" to come to America any more. And worse, we are asking many of them to leave. That must change.

Regular readers of this blog know that I'm a big fan of the startup visa idea and have been working to get it made into law. That is a small, but important, part of the bigger challenge. We need comprehensive immigration reform in this country. We have always been open to immigration in this country. It is fundmental to what this country is. We cannot change our approach and expect to continue to have a prosperous country.

Three years ago most western european countries had a local social network that was the most popular social net in the country. Today Facebook is dominant in most of western europe and those local social nets have largely been bypassed.

It would seem that Facebook leveraged the size of its network (approaching 500mm people worldwide) to beat its competition in social networking. But what's interesting to me about that is that it also means that it leveraged a network that was larger out of country to beat an incumbent who initially was larger in country.

For the sake of this argument, I am assuming network size and network effects was the cause of Facebook's success internationally against local competitors. It could be that it was not network, but instead features that won the market for Facebook. Certainly it was some of both.

I come to this "argument" with a deep respect for the power of networks, particularly online, and so I believe that in fact Facebook was able to leverage the size of its out of market network to compete in market against a local incumbent who had a stronger in market network.

And why exactly would that work? Well first of all, many people have social networks that span geographies. And those people tend to be influencers who are important in the value of an overall social graph. I think it is also true that in many parts of the world, big american brands are powerful in local markets. And so its probably also true that there is an allure of being part of a big american social network. I've been told that there are only four countries that are mostly impenetrable for a US internet company; russia, china, japan, and korea. We will see if that is true in Facebook's case.

I was thinking about this yesterday as I was making my way around Paris, checking in on Foursquare. In every place I went to in Paris, there was an existing mayor and plenty of tips. But it was rare to check into a place and find someone else checked in as well. By contrast in NYC, I rarely check in these days without finding at least one other person checked in.

In talking to some local parisian web entrepreneurs, I heard about a local Parisian company called Tellmewhere that has 500,000 users, mostly french. Read Write Web has a good post up about Tellmewhere right now. So maybe the reason I found the usage of Foursquare in Paris to be light compared to NYC is the presence of a strong local competitor.

And thus my question that started this post. Do network effects span geographies? Does the fact that Foursquare is approaching 1mm users worldwide make a difference in Paris or will Tellmewhere, with 500k users who are mostly here, continue to dominate locally?

If we can use Facebook as a guide, it seems eventually the largest network wins. But can we use Facebook as a guide and is that universally true on the web? Let the discussion begin.