Another day, another high profile blogger

Another day, another politician or high profile executive launches a blog. This time it is FCC Chairman Michael Powell and Sun’s Jonathan Schwartz. According to Michael Powell, he decided to blog because he wants to interact direcly with his constituency, creating a dialogue and urging Silicon Valley to get involved. He goes on to say:
One reason I am participating in AlwaysOn Network’s blog is to hear from the tech community directly and to try to get beyond the traditional inside the Beltway Washington world where lobbyists filter the techies. I am looking forward to an open, transparent and meritocracy-based communication—attributes that bloggers are famous for! Regulated interests have about an 80 year head start on the entrepreneurial tech community when it comes to informing regulators what they want and need, but if anyone can make up for that, Silicon Valley can. This is important not just for Silicon Valley—it’s essential to insure that America has the best, most innovate communications infrastructure.
Both Jonathan and Michael are launching blogs to stay close to their community. What I find interesting about these blogs is that one chose to leave comments open and the other chose to not allow comments. As I have said before in an earlier post about Why I Blog as a VC, it is the 2-way interaction and instant user feedback that makes blogging so valuable for me. I am curious to see how Michael Powell handles the comments on his blog and to understand whether or not he is truly trying to create an “open dialogue” or if he is just blogging for PR value. As for Jonathan, I really believe he is missing out by not opening his blog for comments and allowing his readers to turn his post into living, breathing ones. Now that high profile executives and politicians have bought into blogs, I am still waiting for product companies to use citizen’s media (blogs, RSS, etc.) as Jeff Jarvis calls it, to create true interaction with their customers. I am not just talking about using RSS to subscribe to a Top 10 list of products sold for the day or week or to update customers on an upcoming product release. What would be great is if product companies could figure out ways to use this new medium to build long-term relationships with its customers, to create ongoing focus groups for a product or service, and to collaborate with customers on product development. Another great way for product companies to leverage this medium would be by allowing me to create custom RSS feeds/stored searches on the fly for certain products or services. Sure, I can do that via email, but the interesting aspect Continue reading "Another day, another high profile blogger"

Thoughts on the enterprise software market

maintenance_trend Everyone is talking about the slowdown of growth in the enterprise software sector as one of the main reasons driving consolidation talks at companies like Oracle/Peoplesoft and Microsoft/SAP. We all know that the enterprise software business characterized by large licenses and 20% annual maintenance revenue is lucrative but also hard as the big get bigger and the little guys disappear. Given the number of negative preannouncements this week from enterprise software companies, this Forrester graph from a CNET article summarizes the market quite well. Looking at this graph, it is no surprise that companies are looking to consolidate. Given that maintenance revenue is such a large percentage of overall revenue and growing and given that it is also highly profitable, why shouldn’t some larger players in the market consolidate the industry, keep the maintenance revenue and cash flow, and stop everything else? With that backdrop, I find it quite interesting to learn that CA’s ex-CEO, Sanjay Kumar (the master of these deals), advised Oracle on their Peoplesoft acquisition. According to a New York Newsday article, here is what Sanjay had to say on Oracle’s strategy of buying Peoplesoft and gutting it:
At the same time, Phillips said Kumar advised “he would have the same plan post acquisition but just would not have said so up front. Everyone knows but you can’t say it and freak out the customers up front.”
As for which employees to keep and which to discard, Kumar, whose CA acquisitions were notorious for scuttling thousands of workers, offered clear advice.

“Don’t get rid of the presales folks; only the sales,” Phillips quoted him as saying. “The presales guys know the products and customers and they will get you easy add-on sales . . . and it would be crazy to forgo that revenue and those relationships . . . You don’t need the sales guy — those are for new account hunting.”

What does this mean for me from a venture perspective? Well, what I have believed for a long time is that it is hard for early stage companies to build direct sales models predicated on “elephant hunting” and going after huge deals. Each sale is incredibly long and expensive. In addition, as you can see from a number of large public software companies, revenue is lumpy and therefore less predictable as customers wait until the last day of the quarter to squeeze you for a larger discount. Despite this, we are still bullish on software companies selling to enterprises. In our mind it just requires a rethinking of what business models will work and why. Think seed and harvest – lower price points, more volume, lots of upsell over time. Think of software models with leverage – Continue reading "Thoughts on the enterprise software market"

Jamdat Mobile files for IPO

Russell Beattie has a thorough post on Jamdat Mobile’s IPO filing. This is significant because this is the first so-called “wireless application” play to hit the market. For those of you that don’t know, Jamdat is a provider of global wireless entertainment applications and enabling technologies that support multiple wireless platforms to wireless carriers, handset manufacturers, media companies, and independent content developers. Looking at Venturesource, I see that Jamdat was first funded in March 2000 precisely the time when VCs thought wireless was the next big thing. Many of these companies are no longer around, but it is nice to see Jamdat make it through such turbulent times, only with $33 million in VC funding. As an investor, the difficult part of any consumer wireless play is that the wireless world is a walled garden and not an open network like the Internet. This means you are dependent on the carriers for deals and access. This is starting to change but even if you want to go to your own sites through your wireless phone, it is not easy. In addition, imagine the competition to get distribution from the carriers-there are lots of little guys knocking on the door. On the upside, if you are able to get the deals, you have an incredible ability to scale. Just look at Jamdat’s numbers: $90k revenue in 2001 with a $5mm loss and $7mm revenue in Q1 2004 with $740k profit which is an annualized revenue runrate of $28mm-not too bad in a few years. As Russell points out, I am sure a successful Jamdat offering will spur renewed interest in wireless companies. That being said, I just view wireless as another pipe, an increasingly important one that every software or web-based company will have to be aware of and leverage. Speaking of wireless, there has been lots of talk about Time Warner launching its own branded wireless service over someone else’s wireless network. Not only does this make a ton of sense in terms of the phone company/cable bundle packaged wars but also from a content and programming distribution perspective. If you believe that wireless devices and phones will continue to become an increasingly important way for end users to access data and eventually music, photos, and video, then what better way to control the economics of distribution then by reselling your own service. The post Jamdat Mobile files for IPO appeared first on BeyondVC.

The A-Player Domino Effect

Like any active, early stage venture investor, I have spent a fair amount of time helping my portfolio companies build a management team. And like any venture investor, I wish I could boil hiring down to a more scientific method to make sure that each person we bring on to a company is better than the next. However, that does not always happen. The one constant in hiring, however, is the “A-Player Domino Effect” which basically says that when you hire an A-Player, they bring lots of other A-Players to the table. Think about it this way. Why do so many people want to play for the Yankees? Sure, it is the cash, but it is also the opportunity to work with other A-Players to win a pennant that lures A-talent to New York. Same with the Lakers-Gary Payton and Karl Malone took pay cuts to join the Lakers and Shaq and Kobe to win a championship. I am not saying that in order to have a successful company you have to have a lineup of proven all stars since team chemistry plays a huge role. In fact, every company may have a different definition of what an A-Player looks like. Look at the Detroit Pistons, full of chemistry and a solid bunch of hungry players, who took out the all-star laden Lakers in the NBA Finals. However, in many of my successful companies, the first couple of VP hires made all of the difference in the world in terms of attracting strong talent and positioning the respective companies for success. For example, one of my companies just brought in an experienced VP Sales from a competitor in the market. Once he signed, he brought on 2 of his top sales performers from his prior company along with the former head of sales engineering. This was great as it helped us fill out the team below the VP-level and brought the company known quantities who had worked with the VP Sales successfully at other companies. Another portfolio company brought on a great VP Engineering who brought 3 of his top guys with him. In each case, both VPs had a few people willing to follow them to the next opportunity. It is obviously a great sign when this happens. It shows me that someone can build a team, engender loyalty, and perform at a high and successful level. Every company or investor may have a different definition of an A-Player but one thing I can say for sure is that hiring an A-Player does not necessarily mean you have to hire the “big name” or “proven all star” in the industry. Many times, I have found A-talent from up and Continue reading "The A-Player Domino Effect"

A personal server for everyone (continued)

Jeff Jarvis has an updated post on a “place for my stuff” furthering the “stuff as a service” paradigm. On my thought about having a personal server in the home, Jeff goes on to say:
I still don’t agree because: (1) Consumers won’t understand why they should make a capital investment and it will be a hard sell — witness the trouble TiVo has had getting going. (2) Consumers hate installing anything. (3) A service is more efficient — it can offer you a terrabyte of storage but no one will use it all. (4) A service can constantly update itself with new software. (5) If the storage sits in the cloud, you can play your stuff on any device in the home — or anywhere else — without having to network anything; if you store your stuff on a home-based server in the den, it’s not going to be easy to get to yourself from the bedroom TV. (6) It’s possible — possible — that an in-the-cloud service can deal better with copyright issues. That is, you can store a legal copy of (or link to) a show or song among your stuff in the cloud and play it anytime anywhere and copy it onto limited devices (a la iPod) but not endlessly duplicate and distribute it.
Jeff makes a number of good points advocating the service over the personal server. I have no doubt that today the service is a better opportunity, and that there are a number of constraints such as what Jeff outlines above. However, in response to his points I believe that technology will continue to change rapidly, prices will continue to drive down, and ease of use will constantly improve (plug and play all-in-one devices will become a reality in a couple of years-just look at the growth of wifi in the home as an example of how fast a new technology can spread). As for the practicality of an in-home all-in-one device, having an IP address for your personal server would allow you to get it from anywhere including your bedroom TV (no different from getting it from the Internet, especially if your home network has a faster connection). So it is not an either or proposition-the personal server idea will take time but it will happen in the next couple of years and be yet another viable option for the consumer. As for what opportunity is bigger, sure the service side will be, but that does not mean a service and personal server are mutually exclusive business models. Why couldn’t Comcast give away Mirra personal servers, charge consumers a monthly fee, and have a cloud-based backup in addition to the backup on Continue reading "A personal server for everyone (continued)"

A personal server for everyone

Jeff Jarvis writes about having a place for all of his digital stuff. He goes on to say:
: I want a place on the Internet where I can store all my stuff so I can get to it from anywhere on any device to consume, modify, store, or share. This stuff could be anything — my movies, music, to-do lists, shopping lists (for the family to update), contacts, documents, search history, bookmarks, photos, preferences, voicemail, anything, everything. And it should come with the functionality necessary to execute all those verbs I listed (e.g., a nice little list-making ap).
I want the ultimate — in the words of George Carlin — place for my stuff.

Count on this: It will be a big consumer business. I said below, in the middle of another post, that this could come from phone or cable companies, from Google or Microsoft or Yahoo, or from a new company (VCs: pay attention!). A server for everyone and everyone on a server.

I totally agree with Jeff about having a place to store all of my stuff, but I am not sure if I want it all stored on the Internet. Rather I want it stored at home on my personal server but accessible through the Internet 24×7. As you know there is a battle that has begun over the ownership of the home networking market. Lots of companies are jockeying for position to be the digital entertainment hub for the home. Will the hub or personal server be the PC, your Tivo or cable box, or some other consumer electronic device? As more and more of my precious data is in digital format, I have become incredibly paranoid about backup and recovery. Currently I am using a Maxtor 250gb One Touch device to back up all of my files. This is nice, but wouldn’t it be great if I could put an IP address on it and layer some other applications to share this data with others? Why do I need it hosted at Yahoo or some other web-based service when I can easily plug in a device and have my stuff accessible at 54mb over my home network and remotely over the web? I used to believe that the hosted model was the way to go for the backup market, but increasingly I am of the belief that everyone will have their own personal server at home and through a broadband connection be able to access and share their files with anyone in their trusted network. This takes care of privacy and security issues for me while also allowing me to have my stuff accessible from anywhere. Take a look at Continue reading "A personal server for everyone"

Moving towards an on-demand world

I have always been a big believer of the hosted software or ASP (application service provider) model since we made our first investment in LivePerson in January 1999. One of our main competitors of that era was Kana, which at that time, did way better than LivePerson in terms of customers, revenue, and market capitalization. I wrote a post months ago showing how far Kana had fallen, and how LivePerson stuck with its hosted software model and finally hit profitability. Back in those days, the sales people at LivePerson and Kana were not only fighting a product battle but also a religious war of enterprise licenses versus the hosted model. And back then, many large enterprise customers were not willing to have their data hosted with an early stage, private company. The world is changing. Recently Kana announced its new “on-demand” model jumping on the hosted software bandwagon. Comments from the Kana release sound familiar-Siebel and others are increasingly talking about an “on-demand” model and customer flexibility. RightNow Technologies is another company in the CRM space that is delivering an “on-demand” solution, filing for an IPO last month. So why is the hosted or ASP model coming back strong from its near death experience during the Internet boom? First and foremost, without customers there is no business. Today’s customers are increasingly getting over data hosting concerns and are warming to the pricing and flexibility of subscription pricing and “on-demand” software. They are tired of the traditional enterprise license model, the lengthy implementation costs, paying for site licenses instead of on usage, and failed projects. Secondly, the cost side of the equation has changed dramatically. Hosted software vendors have learned from their erroneous ways and no longer need to build a data center for unlimited demand. Additionally, the pure costs of building a data center and using bandwidth have decreased significantly. Finally, the “on-demand” model is proven as a number of companies are already profitable-look at Salesforce.com, RightNow, and a couple from my portfolio, LivePerson and Expertcity (GoToMyPC). Given these trends and the success of some of the companies above, it is clear that the new “on-demand” wave is just starting, and we will continue to see enterprise software companies like Kana move in this direction. The post Moving towards an on-demand world appeared first on BeyondVC.