Diary of a Geek VC

iRock?

Fri, 5 Feb 2010 17:42:02 -0500

Too many people have already chimed in about the iPad - mostly negative. My favorite of course is the old MadTV commercial, but the graphic above is a close second.

I’ll be quick today - I was right about the device’s name, iPad, but really missed it it terms of my expected feature list. And while I am going to buy an iPad, I will do so with the same sense of optimistic skepticism (figure that one out) I had with my AppleTV until I have had the chance to use it myself. BTW - my conclusion about the AppleTV is best conveyed by it’s current location - unplugged, in a utility closet.

PS - working on a post about startup economics for next week. Prompted by conversations with Ryan Janssen and Peter Levin.

iPod or Newton?

Tue, 26 Jan 2010 08:37:58 -0500

My love affair with Apple officially began in 1994 when I was starting business school and obsessing over the forthcoming Apple Newton. I romanticized it to be the solution to surviving my MBA, a one stop note-taking and calendaring device that would vault me into the forefront of learning. I found out the handwriting recognition was poor and the Newton couldn’t store more than one page of notes. I never bought one.

Tomorrow, Apple will be launching something - and everyone expects it will be their entry into the tablet/e-reader space. And everyone, including myself, believes it will be a radical innovation. What will it do? We’ll find out tomorrow, but the best G2 I have seen is from the folks at Flurry, who have analyzed traffic seen around One Infinite Loop in Cupertino, on about 50 unknown devices that seem to imply the phantom tablet. Flurry noticed that the devices downloaded apps (like iPhone, iTouch) in the following distribution:

Not surprisingly, games & entertainment (likely video) leads the pack, although I would be surprised if Steve were aiming the iWhatever at the DSi or PSP.

My bets (and wishes) for what we’ll see tomorrow:

• Print Media: I suspect Apple will take a shot at print media (big duh), specifically magazines and textbooks. I was on a panel at CES a few weeks ago where the topic was e-readers, where these two applications were front and center and I voiced my prediction.

• Video: I love my iPhone, but it stinks for watching full length feature films.

• Universal Remote Control: I would love to see Apple include RF control to make the iBlank a universal remote for the home - TV, Audio, and home control.

• The New Dream Machine: I loved the new Sony Dash shown at CES, but but the iStar in an angled holder and it instantly becomes a clock-radio, weather station, digital picture frame.

What I worry about:

• Battery Life: The Kindle lasts at least a week without recharging. The iPhone with all connectivity turned on lasts for an hour.

• Typing: I hope they have included haptic technology, like that from Immersion, to make the input experience more realistic.

• Screen: I am a huge fan of e-Ink’s displays as they are incredibly readable for print-style media. I would be shocked if Apple has included the e-Ink display and worry that what they have used may hinder longer term readability.

Whatever tomorrow brings, I am excited to find out - and suspect unlike the Newton, I will buy one. More after the news.

UPDATE:

Just saw this on CNBC which seems to support text books are a coming to the iTrapperKeeper:

The Curse of Being First

Tue, 19 Jan 2010 18:52:22 -0500

Most startups need to be first in their category, particularly in uber-competitive segments where customer acquisition becomes a barrier to entry. So it stands to reason that VCs would want to be the first in line to engage with a promising new startup. This is not always the case. In fact, the pole position often means we are the first to give a founder/CEO a piece of critical feedback about their company that they’re not ready or interested in receiving - becoming the equivalent of telling them their baby is ugly. And the result is we get shown the exit; not necessarily for being honest or for being wrong (which we might just be), but sometimes for being the first to declare the observation out loud.

Over the years I have seen this happen several times, usually due to one of the following critical conversations:

1. Valuation - we present what we think is a fair value and the entrepreneur thinks otherwise. This is the fastest route to the door.

1. CEO - we think a more experienced exec would be better to run the operations, particularly if the CEO lacks some key skills needed to drive the operations of the company.

1. Capital Raise - often times we have a much different opinion of how much money a company should raise in its round; often it’s related to valuation (company wants to raise less than we feel, to sell less of stock; or raise more, in order to get a higher post-money value).

1. Business Model/Strategy - Perceiving weakness or immaturity in some core element of the strategy - which may affect capital uses among other thing - we suggest more thought and review be considered before committing to the course.

1. Team - During the course of diligence, either based on references or instinct, we conclude that some core team member(s) is not “backable”

As I think about what I just wrote from the entrepreneur’s point of view, it’s little wonder that we get shown the exit for daring to say these things. How arrogant it is to render such opinions having only spent a short amount of time evaluating a business that a founding team has put their blood, sweat and tears into not to mention, bet their livelihood on? What the hell do we really know about their business? Are we just applying some sort of standard filter, like an SAT?

Some VCs may not share the same opinions and therefore avoid falling victim to the curse. Others may share the opinions, but say nothing for fear of losing the deal. I was taught that doing the old bait & switch is a bad way to conduct business, even at the risk of losing deals.

So my approach is to be very blunt with entrepreneurs and signal my concerns early in a process. If they’re up for the conversation, I prefer to engage in a dialog that is not comprised of definitives or declaratives until I have done enough diligence to have an informed opinion.

Truth be told, my strategy fails frequently. But I feel comfortable knowing that I have been open and honest. Exposing the delicate issues early helps me in two ways. First, when the curse appears, my “cycle time” for deal evaluation decreases, allowing me to process more projects. And second, when the curse has spared me, I often find great new investments for Flybridge built from the outset on very open and frank conversations about the important issues.

By the way, the inverse of the curse - being the last to broach the volatile topics does often work, particularly when others have already primed the conversation. But it’s tough to finesse being “last” without losing the deal to another firm that has moved faster.

Empire State of Mind

Mon, 21 Dec 2009 14:47:40 -0500

In New York,
Concrete jungle where dreams are made of,
There’s nothing you can’t do,
- Jay-Z, Empire State of Mind

Completely amazed. That’s the best way to describe my recent two days in NYC (Dec 17th and 18th) with Nate Westheimer. As a die-hard Red Sox fan (although born a New Yorker as my Manhattanite wife is always quick to point out) it somewhat breaks my heart to admit it, but I’m in a NY State of mind now when it comes to the startup scene in the Big Apple.

This is not to say I have lost any excitement for Boston, but there’s something very fundamentally entrepreneurial going on in NYC that I’d love to see imported to Red Sox Nation.

Here are two great examples of what’s going on:

NY Video Meetup - Top Startup of 2009

Upon late arrival thanks to air traffic, I attended the NY Video Top Startup of 2009 competition at Columbia Business School. For those of you unaware of the NY Video group, it’s a 3yr old organization created to help NYC video startups network and grow their businesses. It is the world’s largest web video group, with nearly 3300 members. NY Video meets monthly, and nearly 120 startups have demoed for their cohort over the years. This was the first-ever award competition, and the room was packed with nearly 200 people from the online video ecosystem. Each of the 6 finalists (started as 5, but a demo glitch gave the alternate a chance) gave a 5 minute demo and then the attendees live SMS voted 5min as the champion, yours truly among them. You can see a video of the entire event below.

Free Lunch Friday

On Dec 18th, Nate and I raced over to the Incubator at Rose Tech Ventures (RTV) to attend their Free Lunch Friday (thanks David) and hear Ryan Janssen, the outgoing RTV EIR, present a very frank and sobering analysis of why any advertising-supported web business will have a very difficult time making their business model work. I hope that Ryan posts his slides from that session - the economic calculus he broke down was both insightful and easy to understand; and downright scary. His conclusion was that most startups are dreaming if they think they’ll get to profitability based on advertising support.

What was most remarkable about both these meetups, was the level of candor among the attendees. Startups were sharing lots of information openly and taking questions and feedback in the same spirit. Sure, competitive juices were flowing (including Mike Sommers from KickApps trash-talking Brightcove), but the scene reminded me more of the open dialog seen in the valley or maybe even a bunch of grad students congregating to review their Ph D work. The questions asked in both sessions were thought-provoking and blunt. The audiences were paying close attention, which in itself is eventful.

I have long stated that you can virtually smell the aroma of a well-functioning startup. It may be time for a corollary about a supporting ecosystem - as the momentum was palpable around the city. And unlike Boston, I noticed no sense of inferiority complex in my meetings - as in all things New York, they were unapologetic about their boldness. The Hub could learn well about gaining this type of swagger.

NYC has a lot going for it as a startup base. It remains a center of gravity for traditional media, advertising, culture and finance - all great ingredients for creating startups. There is an active and growing funding network with angels and VCs alike. Work spaces like RSV’s Incubator and Sunshine Suites help to make NYC more affordable. There is a growing list of successful companies, including DoubleClick, About.com, Cyota, RightMedia, and Tacoda Systems, that created a generation of successful entrepreneur/founders who have stayed. And several newer companies, like FourSquare, TheLadders, Meetup, Etsy, Thumbplay, and Gilt Groupe, all seem poised for greatness.

This is not to say that everything is rosy for the startup scene in NYC. New York remains a very expensive place to live and work - despite shared work spaces in Manhattan and cheaper rent in Brooklyn. Companies lament about finding indigenous software development and engineering management talent. The university linkages between academia and entrepreneurs that are so vibrant in Silicon Valley and Boston, are still immature in NY, despite world class universities. And finally, while there is tremendous gravity among financial technology and new media projects, there is a lack of diversity outside these areas, making NYC more susceptible to the cyclical shifts in popularity that plague technology investing. Nonetheless, I remain impressed with the great entrepreneurs I have met and believe that most of these challenges are surmountable given time and success. (except the cost of living of course)

I look forward to spending more time in the New York area going forward. Given travels much of January, my next scheduled dates will be February 3/4 and I am eager to fill my calendar.

Office Hours Wrap Up

Mon, 21 Dec 2009 06:40:40 -0500

Office hours were terrific - thanks to the ten groups that came in to meet me. Without divulging any state secrets, I did want to provide some details of overall session and thoughts on how to make it better the next time. Overall, I really enjoyed it, got good feedback from some of the folks who came in and am looking forward to the next session in 2010.

The format was rapid-fire speed dating: ten 20-minute sessions in a row, which meant no real opportunity for power-point, although one guy tried (more on this later). Given such a compressed schedule, I started each with the simple question “what would you like to accomplish in our time together” - and then let the entrepreneurs take it away. I am not sure

The ten entrepreneurs presented businesses/ideas that fell into the following categories (broadly defined):

• Green Farming: 1
• e-Commerce: 5
• Physical Security: 1
• “Let’s Get to Know One Another:” 1
• Content/Entertainment: 1
• SaaS/Cloud Platforms/Applications 1

What worked well for me:

1. Those who came in with one or two specific questions

1. Those how had simple demos or one/two page PPT, or no PPT at all - but great grasp on their concepts and therefore were very succinct

1. Those who were not trying to get me to invest in their company in 20 minutes

1. Clear time boundaries - our assistants were great at playing time keeper and giving the 2 minutes warning.

1. Meeting a bunch of new entrepreneurs and hearing some great - and in come cases wild - new ideas.

What worked poorly for me:

1. Rambling conversations where the “ask” was unclear; one session went for 18 minutes of a PPT pitch, leaving no time for any of the questions the entrepreneur wanted answered/considered.

1. Too many sessions in one day? My friend and Flybridge advisor Nate Westheimer does weekly office hours in NYC and suggests doing it more frequently (weekly, biweekly) but only for one hour with four 15-minutes slices. I was energized the entire time, but will take it under advisement.

What worked well and poorly for the entrepreneurs? I am eager to get more feedback! So please comment.

I intend on holding office hours again in Jan/Feb of 2010, and look forward to seeing some new faces soon.