Posts from Technology

Fun Friday: little Bits

I came home on thursday evening to find some leave behinds from a board meeting the Gotham Gal had been at earlier that day. She's an angel investor in little Bits. I ripped the box open, sat down at the dining room table, and started having fun building simple electronic circuits. The Gotham Gal grabbed my android and filmed it.

If you want to get one of these little Bits sets, you can find out how to do that here.

#Random Posts

Bridge Technologies

When the tech landscape changes; from web browsers to mobile browswers, from flash to HTML5, from laptops to tablets, from typing on keyboards to typing on screens, from local storage to cloud storage, there are always companies that are started to solve the pain points that crop up from that technology change.

I call these "bridge technologies" because they bridge from one technology to another. I don't like to invest in companies built upon these bridge technologies. Most of the time they do really well while the transition pain is high but once most individuals and enterprises have made the change, their business slowly disappears.

There is a chance that they can use that brief period of time to pivot into something with a lasting differentiation and value prop, or that they can build a large enough user base and figure out how to provide additional value to that user base before the initial bridge technology loses its luster.

But from my experience very few bridge technology compaies successfully make those kinds of moves that lead to lasting sustainable value. More often than not, these bridge businesses are not successful investments and very seldom are they the top performing investments in a venture fund.

Bridges are rarely good things in the venture business.

#VC & Technology

Skip The Water

I told this story to an entrepreneur last weekend and she loved it. So I figured I should tell it to everyone here at AVC.

I was a mechanical engineering major (course 2) at MIT. One of the best classes in the mechanical engineering curriculum at MIT is 2.70, Introduction To Design. And the highlight of 2.70 is the contest in which everyone is given a bag of stuff from which they need to design and build a product that will compete in a contest.

My year, the contest went like this. There was a huge water tank with diving boards on both ends and a rope swing in the middle. Two contestants would put their designed product on each diving board, jump into the water, and start moving toward the rope swing. The one whose product got to the rope swing first would move on.

The "bag of stuff" was a brown paper shopping bag with an empty large soda bottle, the spring mechanism for a music box, a bunch of rubber bands, and so on and so forth.

I did what you might imagine, with the help of my friend Jim. We cut the soda bottle in half to create a boat, used the spring mechanism to power a paddle boat style propulsion system, and used the rubber bands to launch the boat from the diving board. It worked and I made it past the first race.

In the second race, I came up against a student who had a different idea. His product simply launched, like a rocket, from the diving board, flew through the air, and grabbed the rope swing in about a nanosecond. He destroyed me and everyone else and won the contest.

The lesson is, of course, is to skip the water.

#VC & Technology

Talent and Bandwidth

When people ask me what the city and state government can do to help the technology driven startup community in NYC, I tell them two things.

First, there is not one tech ecosystem. There is the software, internet, digital media sector which is thriving and on a tremendous growth spurt. And then there are the biotech, bioengineering, materials science, and energy sectors. These sectors are languishing in NYC with very little commercial activity given how much research and science goes on in the city.

I don't work every day in the latter category and I don't have much advice for how to stimulate these sectors commercially, but I do know that much must be done.

I do work every day in the former category and I have some advice for how to continue to stimulate the sectors that are working. I would focus on two areas; talent and bandwidth.

NYC has a tremendous workforce advantage over most any other city in the world. With one exception. There is a dearth of well educated engineers coming into the workforce every year in NYC. We have a large exisiting workforce of engineers, but they are in high demand and there are scarcities in NYC like those that exist in the bay area. Talented engineers are expensive and are always being recruited away from companies.

So the obvious answer is to develop ways to bring engineers right out of school into the local workforce. One way to do that is to develop strong engineering programs here in the city. The Bloomberg administration has announced an initiative to do that. I am very supportive of that effort. But that will not be enough. We also need to support our existing educational institutions, like NYU, Columbia, Fordham, CUNY, etc, etc.

And we need to start recruiting newly minted engineering grads to come to NYC to start their career. If you are a 22 year old man or woman just starting out in life, would you rather live in suburbia and work on a campus or would you rather live in Williamsburg and work in Flatiron? I think the answer to that is obvious. We just aren't making that case to the best and brightest engineering grads. There are emerging programs, like HackNY, that need our support, both financial and emotional, to do this work. It is critical. Charlie O'Donnell has put forth a challenge to bring 250 new software developers this year to NYC. I think that's a good start but I'd like to see a bolder number, like 1000 a year, or even more.

The other area is bandwidth. I mean data bandwidth. I mean fiber to every school, institution, business and home in the five boroughs. Other localities have built community owned fiber networks. A good example is Lafayette Louisiana. NYC needs to do this and it needs to do this now. The fiber plant should be owned by us, the citizens of NYC, not some company that will charge us a fortune for using the network and potentially restrict what we can do on the network.

There is a company I know of that is one of the most exciting new startups in NYC. They are locating their new office in the emerging area in Brooklyn between DUMBO, Fort Greene, and the Brooklyn Navy Yard. This is a cool new neighborhood that could be home to a lot of startups looking for great workspaces at low rents. But there is no commercial grade Internet service in this neighborhood. TIme Warner Cable wants this young startup to guarantee them $80,000 in revenues so they can afford to dig up the street and lay the cables.

That is nuts. We need to wire up this city from Staten Island to the Bronx, from Harlem to Rockaway Beach. And we need to own this fiber plant and we need it to be the best in the world.

These two moves will do it. We have everything else we need. We have the capital to fund startups. We have the real estate to house them. We have the legal, accounting, marketing, and other service providers. We've got it all. We just need talent and bandwidth to keep it going. Bring it on.

#NYC#VC & Technology#Web/Tech

Retooling Stale Businesses

There was a great conversion in the comments to yesterday's post that I'd like to highlight. It was about retooling stale businesses and it was initiated by comment blogger JLM. A "comment blogger" is a person who leaves comments that can (and should be) entire blog posts, but they leave them on other people's blogs. We've got a bunch of comment bloggers here at AVC and JLM is certainly one of the very best. Here's what he had to say on the topic of retooling stale businesses:

There is a huge opportunity in America today to acquire "old school", low tech businesses and retool them with modern management, modern marketing including social media, a well crafted financial structure and a dab of leadership to make an otherwise boring business into a highly scalable and expanding enterprise in which the growing size provides an enormous financial operating leverage.

In effect, this approach takes the cutting edge of the evolving technology (including the basic impatient thinking and genius of the entrepreneurs in that space) and cycles it backwards to apply it to other opportunities.

If you click on this link you'll find the start of the discussion and you can follow it down the thread.

When my partner Brad and I were starting Union Square Ventures in 2003, we both read Carlotta Perez' book called Technological Revolutions and Financial Capital. We were inspired by her description of the "second phase" of technological revolutions where the revolution is applied to the broad based business sector and society itself. An example from her book is the way the auto revolution allowed for fast food and malls to develop as big industries. They auto revolution reshaped the food and retail industries along with most other industries.

So when we wrote the business plan for Union Square Ventures, we consciously decided to focus on the "applications layer" (ie web services and now mobile web services) and not on the infrastructure layer which we saw as the largely played out "first phase" of the Internet technological revolution.

But as JLM so rightly points out, there is a much broader opportunity than the one Union Square Ventures is focused on. You can invest in existing but stale businesses and apply the lessons and benefits of the Internet technological revolution to them. But not only that, you can apply good old fashioned leadership to these businesses. This is not a new idea and I know of a bunch of entrepreneurs who have been doing this for a while now. But there is enormous opportunity here and I think we need to see even more of this kind of investment of time and money going forward.


Why We Need An Independent Invention Defense

My partner Brad wrote an impassioned plea for an "Independent Invention Defense" for patent infringement claims. He starts his post with this observation.

Almost a third of our portfolio is under attack by patent trolls. Is it possible that one third of the engineering teams in our portfolio unethically misappropriated technology from someone else and then made that the basis of their web services? No! That's not what is happening. Our companies are driven by imaginative and innovative engineering teams that are focused on creating social value by bringing innovative new services to market. Our portfolio companies are being attacked by companies that were not even in the same market, very often by companies they did not even know existed.

We can argue about software patents or patents in general. I'm not a fan. I don't think they encourage innovation in many sectors, maybe most sectors. But I recognize that they play a role in protecting inventors from others blatantly stealing their innovations.

But anyone who has spent a significant time in technology based businesses will understand that two groups working completely independently from each other will often solve a problem similarly. One group is not copying or ripping off the other group. They are simply coming to similar conclusions about how to get something done.

In these cases, it makes no sense to protect one group from the other. Nobody has taken anyone's "intellectual property." Both groups should own their inventions outright without having to license technology from the other.

That's not how it works today and as a result, our portfolio companies and entrepreneurs and startups all over this country are paying a very high tax on innovation. Read Brad's post for more details on the costs of bad patent policy and what we should do about it.

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#VC & Technology