Last night I attended the Churchill Club’s “Venture Capital: What’s Hot? What’s Not?” On the panel were Jim Breyer of Accel Partners, Bill Gurley of Benchmark Capital,
Joe Lacob of Kleiner Perkins Caufield & Byers and moderating the panel was yet another venture capitalist, Geoffrey Yang of Redpoint Ventures.
After a superb comedic introduction by Yang, the panel settled into mostly violent agreement on the topics.
Hot – Digital Home, particularly component plays. Software with Open Source components or delivered as a managed service. Later stage deals in China.
Not – Packaged Enterprise Software. Storage. Semiconductors. Nanotech (for decade).
Breyer restated his belief in “content deals” and peer-to-peer networks as he said at last year’s event. Oddly he suggested that distribution through retailers and PC OEMs was promising – it’s 1994 all over.
Gurley pushed his belief in the future of multiplayer gaming, mobile devices and security.
Lacob was the most candid. On too much money in the venture business, “the venture capital business has ups and downs but over the long term venture capital averages 30% returns and that is a very sustainable business.” On the flow of good ideas, “good ideas are always out there, but the venture business tends to follow trends not lead them so our attitude is not always receptive.” On outsourcing, “we had a company with 800 people in Pakistan and after 9/11 we had to move that operation to Costa Rica.”
Yang closed with a few thoughts. We are entering a bubble in internet media companies that have “search” or “local” in their business plans. We are entering a bubble in investing in China. Finally, the recent run up in stock prices will create a “carbonated environment for startups,” and valuations will go up – I’m always happy to spread this type of news.
Last night I attended the VLAB presentation, “Bringing Great Open Source Ideas to Market.” The format was a presentation by Marc Fleury, founder and CEO of JBoss, followed by a panel discussion moderated by an industry analyst with Fleury, three other open source advocates and Sequoia Partner Doug Leone, appropriately dressed in black.
Fleury’s presentation extolled the virtues of his “third generation” model, “professional open source.” Basically they hire the developers so they can tightly control the code base. This allows better support as they can put fixes into the project (vs. “second generation” companies like Red Hat who have to lobby to get fixes into the next distribution). He tirelessly pitched other attractive attributes of open source businesses that have “critical mass,” such as the predictability of maintenance revenue and the ease of customer acquisition with a large user base.
As the presentation turned to business models, Fleury noted that there are perhaps six (out of 94,000!) open source projects that have the critical mass to support a business. How do you get critical mass? Fleury says “get lucky” – an answer that comes off as modest and dodges the question. Later in the discussion, panelists cited solving a real problem, having a strong leader and getting community involvement.
The moderator asked each panelist if Open Source is good for the software industry. Not surprisingly, they all said it is good. Leone, in carefully chosen words, said “What is good for customers is ultimately good for the industry.” Later he noted that “Open Source is of interest at the lower levels of the IT organization. The closer you get to someone with a budget, the more they care about solving their problem, and the less they care about the source code.”
When the moderator asked about the role of patents in open source, the temperature of the room dropped 10 degrees. All panelists agreed – software patents are bad. IBM’s recent contribution is nothing more than a ploy to slow down Microsoft’s forthcoming litigation. Leone quipped that the way to make money off open source is to sue open source companies. (Note to event organizers, you can never go wrong having a Sequoia Partner on the panel.) Fleury, who is surely the world’s most charismatic French software developer, quoted a line he attributed to Scott McNeally on open source and patents, “Open Source is like using a dirty needle – you never know what you might inject.”
As the event turned to audience questions, another VC in the audience asked (1) whether customers wanted integrated LAMP stacks and thus (2) whether the value-add of open source would move away from code and towards assembly, certification etc. – basically the SourceLabs/Spikesource business plan. Fleury answered “Yes and No.” The rest of the panel remained oddly silent.
As the evening wore on, a fatigued and hungry Leone grew tired of being agreeable and could no longer forebear. Paraphrasing he said that open source will become pervasive over the next several years, but open source companies will be small and marginal businesses that will ultimately consolidate.
Next month the topic is “The Future of MicroContent and Mobile Device Applications.” The topic will include RSS, and yes, PodCasting.
While I try to keep this a non-commercial commentary blog, it’s been a big week for us. After over a year of work, we launched our company, SimpleFeed. While bloggers have taken notice of our technology, today we got our first big article. It is by Rafe Needleman writing on Esther Dyson’s Release 1.0 site.
My favorite sentence in the article:
“Naturally, my BS detector rang loud when Carlson told me this, but …
But … you will have to read the rest on the Edventure web site.
Many thanks to all who have helped get this company off the ground. Please check us out at SimpleFeed.com.
The momentum of RSS is unstoppable. Yesterday, IDG announced the first conference devoted to RSS. I’m helping put together the speaker list. If you know someone good please contact me at indexedforever at gmail dot com. See you in NYC.
John Udell’s InfoWorld column this week (The Network is the Blog) discusses blogging in the context of the blog network. He argues that the blog network filters and retransmits knowledge is a way that approximates a human nervous system or insects acting as a cooperative group. As a proof point he notes that he subscribers to more people than publications, knowing that people will alert him if a publication contain important information. Thus, a subconscious facility of the blog network is that it can help filter the crush of information.
I’ll take it further, I believe the blog network is mimicking human conscious thought. Let’s take an example.
I blog about the Churchill Club Top 10 Tech Trends. I report on Roger McNamee’s belief that it is a tough time for software vendors because we are a Do It Yourself period for IT. I disagree citing my market experience, particularly the excitement we are seeing around RSS. This generates many comments and links all from people I have never met. Notably Doc Searls comments via his blog. Doc agrees on RSS and feels that we are not in a DIY period, but rather the IT industry is on an irreversible march towards DIY. This generates more comments, notably Roger Lee, commenting on Doc’s blog asserts that everything in life is on a DIY trajectory, and brings it back to RSS as an enabler. Doc comments further – well, you get the point.
Ideas ping around the blog network like firing neurons. One node takes an input, gets excited, processes the idea in the context of its experiences and comes to a conclusion. Other nodes do the same. And ideas are discussed and developed like a conscious thought.
So can the blog network help process your ideas?
Over at Mike Rowehl’s blog, he is trying to put his finger on what is really different about blogging as a collaboration technology, noting that Blogs are just HTML on a web site, only worse looking.
Mike should read Gladwell not McLuhan – small changes to contagious ideas yield disproportionate effects. And personal publishing is a contagious idea. You publish. Others comment on your ideas on their blog. Still others comment on those comments on their blogs. Very quickly there are hundreds of comments and even more readers. Then you realize you are spending too much time on your blog and reluctantly go back to your day job.
So what are these small changes that have had a disproportionate effect?
Blogs are much easier to use than home page builders, so people write.
The writing is in one place, so readers get context.
It is easier to link, so readers can find you.
It is easier to get linked to, which confers legitimacy and trust.
Via RSS, it is easier to maintain a persistent link with you readers so they pay attention.
Gutenberg did not raise money from the Medici, go public and buy a huge mansion on the Rhone. He is remembered because the printing press allowed information dissemination that facilitated the rise of democracy. More interestingly it happened outside of his homeland. And so I think it will go with blogging.
Are you kidding me?! That was pretty much the reaction of the BBC reporter when he dropped that number in an interview.
Let’s put that in context. In the San Francisco Bay Area, the fourth largest media market in the US, the leading radio station, KCBS 740AM, has approximately 650,000 listeners. And a listener is someone who tunes in for “at least five minutes, once a week.” To build that audience takes radio personalities, reporters, meteorologists, helicopters, producers, studios, transmitters and so forth.
And to PodCast? A thousand dollars worth of equipment, access to a broadband line and a bunch of bandwidth. Who has even heard of PodCasting? It has been around for three months.
It will not take much sponsorship to turn this into a profitable business. And think of the upside – your reach is not limited by your FCC license. In one of his hard edged businessman moments, he drops a few other data points – 592 PodCasters in his directory, 6 million iPods sold, and soon 600 million MP3 capable mobile phones all looking for content. Then he moved on to the tap-dancing PodCaster news.
So consider that before you get caught up in the latest speculative radio frenzy.
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Over the holiday I read the first half of The New Normal by Roger McNamee. Interesting book – I will write a little more when I finish it. One of his points is that church, employer and government has fallen short of expectations, and as a result, family is much more important than it was a few decades ago. By family he means community – friends, neighbors etc. He encourages robust use of technology to mitigate the greatest challenge to family – the lack of time spent together.
I was reminded of this point this morning when I got an e-mail from a friend discussing the weekly results in our Fantasy Football league. Included with the e-mail was this picture taken out the window of his hotel room, in Istanbul.
Yes, his hotel in Istanbul has WiFi. Quoting from his e-mail where he quotes the natives “ees magic, yes?
Not magic, just Byzantine technology.
On last night’s Apprentice, the contestants were tasked with creating an in-store catalog for Levis. As usual, my mind was cranking through how I would solve this business problem. What does Levis mean to me? What emotionally attractive image would I create to sell more jeans? How would I present this to customers in a catalog?
I was watching the show off my ReplayTV, skipping the commercials. But midway through I realize, this is an hour long commercial for Levis. And I like it.
Now my mind shifts from the narrative, to the real story – this is a moment of business genius. How often can a marketer engage even a single customer so deeply?
So how does he do it? By presenting a problem that’s fun to try and solve. If that is too challenging, you can just evaluate the merits of the two team’s solutions. Either way you consider how you feel about the problem and its potential solutions. If the problem is related to a product, bingo, the viewer becomes involved with the product in a way much deeper than a 30 second spot. Throw in aspirational characters and attractive images and you have a marketing program bordering on mind control.
This is way beyond a simple, money for airtime, product placement deal. Burnett got a big check and a story from Levis. Levis got millions of viewers to sit still for an hour and get emotionally and intellectually involved with their product. Everyone wins except maybe Jen, who sold lots of jeans last night, and probably did not get paid. Butt I’m sure she will be a money-maker on the backside. Sorry.
It’s like Google, the product and the business model work together to create greater value. So does the Apprentice point to a business model for more modest media, like blogging or Podcasting?
At the risk of becoming the “I heart Adam Curry“ blog, I will point out that Daily Source Code spends a huge amount of time asking and answering questions about technologies related to PodCasting – microphones, headphones, editing software, Radio Shack, blah, blah, blah. He throws out problems that are fun for his audience to try and solve, and in return, gets material for his show. Now he needs to close the loop with the sponsors. Thanks to his web site, this could be QED.
So I will throw out a problem. If you were me, how would you monitize this site beyond AdSense?
And don’t worry, unlike Jen, I won’t take all the credit for the idea.
I used to Series 7 registered, but that lapsed many years ago. So this is not investment advice, but a story about open source plus VOIP and the massive disruption that will ensue. Or maybe it’s just a story about a start-up too cheap to pay $75 per line for telephone and voicemail service.
When I read about VOIP, I think, yeah, yeah, Vonage. That will be rough on the Baby Bells but you still need a DSL line. And home users will probably keep their PSTN line as it’s price competitive. Big businesses optimize their telecommunication costs anyway. So it will be bad for SBC, but they will still have small/medium business and most of the home. Well, read on!
Like any start-up we needed a DSL line. To get DSL the valley, SBC makes you buy a voice line for an extra $15 a month. Unless, of course, you want to use the voice line, then every call costs extra. If you want an unlimited voice line with voicemail, it is $75 a month, per line.
So you look at Vonage at their peers, but the business plans are $40 – $50 a month, per line. And if you want true business features like automated attendant and forward-able voicemail, it’s lots more (but less than SBC would charge). So we soldiered on for 4 months with my 10 year old GE answering machine attached to the voice line, using our cell phones for all outgoing calls, least we incur usurious SBC per minute charges. But as we near our corporate launch, this must change.
And then we found Asterisk. By “we” of course I mean my co-founder who does the real work. Asterisk is an open source Linux-based PBX, that is feature equivalent to six figure PBX systems. Like RedHat they sell compiled bundles for a few hundred dollars. But, again, we are a start-up, so my co-founder made Debian recognize the card (Asterisk requires a $100 card for PSTN phone or use of a $60 internet phone) he installed in our beige box PC. Then he configured Asterisk to talk to a couple VOIP termination providers, which is as easy as providing your static IP address. The ones that charge even take PayPal. The most time consuming aspect of setup was going through the configuration screens as there are so, so many features.
Now we have every conceivable telephony feature (ok, no RSS enclosure feed for voicemail, but it’s open source – we could add it). Look at a small/medium business telephony features list – we have that and much more.
And the cost? Free. In coming calls? Free. Outgoing calls? $0.013 per minute to the US. Unless we are contacting another Asterisk installation, then? Free (talk about network effects!). So our global telecommunication costs – about $10 a month for VIOP, $15 to SBC for a voice line we don’t use, $50 for DSL to an ISP (who pays something to SBC for using their lines). Instead of $75 per line, SBC gets about $40 total.
So Open Source disrupts the equipment providers, and VOIP plus Open Source disrupts the service providers.
Now, recent struggles aside, Intel has a habit of making markets. So what if WiMAX works as billed?
SBC gets nothing.
Indexed Forever 