Archimedes launches to focus on Web 2.0 opportunities

Archimedes LLC is a partnership specializing in the development of companies focused on Web 2.0 technologies and solutions. We are looking to develop companies that take advantage of the way Web 2.0 has changed the architecture of the Internet from a passive publish and read web into a two way web. These companies will generally have answers to questions like "How does Web 2.0 change the way _______ will be done?" See the "Our focus" section for more information. TechCrunch is our Web 2.0 blog for tracking developments in the space.

What we do?

Archimedes Ventures incubates companies from the ideas stage, to development of prototypes and through to launch of working services. It typically takes a company to its ‘A’ round phase, or – if it is appropriate – it’s sale. At the ‘A’ round stage, along with other investors, Archimedes Capital Continue reading "Archimedes launches to focus on Web 2.0 opportunities"

.Net and VC Loyalty

Robert Scoble has asked the VCs to respond to an eWeek article titled Is .Net Failing to Draw Venture Capital Loyalty?.  There is not much for me to add to this article as we all know that the only loyalty VCs have is to their Limited Partners to generate long-term capital gains.  This means we do not fund a company because of what technology platform it chooses to develop on but rather what problem the company and product is solving and how big that opportunity is.  It reminds me of a panel that I spoke on in 1997 at the Red Herring Java Technology Conference.  The moderator asked me what types of Java companies we were interested in and my reply was that we do not look for Java companies, but rather solid management teams that are solving large problems in innovative ways.  If Java happens to be the right technology platform to use, then so be it.  Nothing has changed since then.  As Brad Silverberg from Ignition rightly says in the eWeek article, "We’re technology agnostic here at Ignition." To that end, let me talk about .Net.  I have spent time over the last few years with .Net evangelists and they have been helpful in certain situations.  That being said, most of the fund’s portfolio companies (90%+) are not using a .Net platform.  When I dig deeper into technology and platform decisions, I like to think in 2 separate buckets, the consumer market and the enterprise market.  On the consumer side, one big value for Microsoft has been its hold on the desktop as Tim Oren strongly points out, but as we move more and more into a web-based world its strength is diminishing.  Look at Google, Firefox and new scripting services like Greasemonkey and Yubnub which are increasingly offering users more and more functionality through a web-based interface.  I am sure Microsoft will get it right with Longhorn but it has taken way too long and many a more nimble, startup has out-innovated Microsoft and decreased its competitive advantage.  While the OS is important, Microsoft has lost its complete and utter dominance as we move to a service-oriented world where broadband is everywhere, apps are in the cloud, and the browser becomes king.  All that being said, I will not make my decision to fund a startup based on whether or not it uses .Net.  For example, if you want to see a great app built on .Net go to a friend’s web service, Phanfare, and try using the application. On the enterprise side, the only reason I would Continue reading ".Net and VC Loyalty"

Jobs at Gurunet (Answers.com)

I have received many an interesting resume through this blog.  Given that, I thought I would let you know of some job opportunities at Gurunet, creators of Answers.com.  The company recently opened a New York City office and is looking to hire 2 in Business Development (one to help manage traffic partnerships and the other to manage content relationships), 1 in Marketing, 1 Online Advertising Sales Rep, 1 Linux Sytems Engineer,  and 1 Office Manager.  If you are interested, either send me a resume or send your information to jobs@gurunet.com.  More details can be found here (Download gurunet_open_positions.doc). The post Jobs at Gurunet (Answers.com) appeared first on BeyondVC.

LP Conference

I am not sure how many entrepreneurs understand the structure of venture capital funds but the bottom line is that while VCs manage funds, we ultimately report to our investors or Limited Partners (LPs).  It is not our money, and we have a fiduciary responsibility to manage it properly and generate the returns our LPs expect of us.  And like you, we have to go out and raise capital every 3-5 years for a new fund and similar to entrepreneurs we need to network with the right people, have the right meetings, and go through extensive due diligence.  Every year the Dow Jones Private Equity Analyst puts together a show where fund managers can listen to what the LP community is interested in and where they plan on allocating their dollars.  This year’s show was billed as an opportunity to meet "more LPs per square foot" but truth be told, it was a place where I could meet more VCs or private equity managers per square foot.  In the early morning, a show of hands revealed about a 20% LP audience and 80% fund manager group. It reminded me of a typical VC/entrepreneur conference where you have panels of VCs talking about where they want to allocate capital and entrepreneurs trying to flag them down to hear a pitch.  In these conference you typically have a similar ratio, 20% VCs or those with the money and 80% entrepreneurs or those seeking funds.  Anyway, as I had time to think about it, it might be helpful for entrepreneurs to understand how VC funds operate to better understand our motivations and to better align interests.  At the end of the day, VCs are in the capital gains business.  We make money when our LPs make money which means that the companies we fund and entrepreneurs that we back need to be successful.  Clearly when VCs and their LPs negotiate their agreement, economics are the most important topic at stake.  While VCs get management fees to pay the bills, it is the carried interest portion or % of profits that VCs receive that really drives our thinking and aligns our economics with performance.  In any typical fund, we except 1 to 2 deals to be homeruns with 10x or greater returns, 3-4 to be pretty good returns, and the rest to either get our money back or lose money.  What that means is that every one of our deals needs to have significant return potential and market size for us to think about investing in a deal.  In addition, companies should be capital efficient (see an earlier post on Continue reading "LP Conference"

The laws of supply and demand for VCs and IT Buyers

There is a supply and demand equation for every startup’s product or service.  In early stage companies, I sometimes see too much from the supply side and not enough from the demand part of the equation.  In other words, inventing great products that no one wants to buy is a waste of time, money and effort.  While there are not nearly the amount of startups on the East Coast as in Silicon Valley, being in New York I do have tremendous access to Fortune 500 companies.  One of the ways we like to invest is by talking with the buyers in the market, the CIOs and CSOs, and understanding what their pain points are, what solutions they are evaluating, and how open they are to working with early stage companies.  We have gotten many a referral using this methodology and it has helped us develop our own investment thesis on certain markets where we can look ahead far enough into the future but not so far ahead that we invest in just another technology looking for a problem to solve.  We also like to speak with strategic partners and understand gaps in their product portfolio (to the extent they will share that with us) to further triangulate our thoughts on the market.  Bill Burnham has a great post on thesis-driven investing and why it matters in today’s competitive venture world. Tying together a demand-driven approach to investing means that you have to have access to the IT decision makers with the budgets.  This is typically not easy as every tech vendor in the world is pounding on their door to give them a pitch.  That being said, if there are more IT buyers like James McGovern that understands the value that VCs can bring to IT buyers then we will all be in great shape funding companies that solve real problems. James, an enterprise architect at a major Fortune 100 company, recently wrote a post  on ITtoolbox explaining how his brethren can continue to innovate and stay ahead of the curve.  He goes on to say:
The methodology used today within corporate America is fundamentally busted. Sitting around waiting for a vendor to show up on your doorstep with the right solution at the right time is simply gambling (I really wanted to say irresponsible). Enterprise architects need to not sit on their butts waiting for the "right" solution to magically appear. Instead they need to make sure the venture capital community understands what problems we face so that they fund the right portfolio companies. Competitive advantage within corporate America via the use of technology isn’t gained by implementing Continue reading "The laws of supply and demand for VCs and IT Buyers"

Nickels and dimes don’t add up

I recently helped negotiate an employment contract for a new hire at a portfolio company.  It was clear from the very beginning that this new VP of Marketing was the right fit for the company and that the chemistry was there.  Both sides were excited about moving forward until we got to the employment contract.  In theory, we were in general agreement on salary range, bonus, etc. but what ended up scaring us was the fact that every issue, big or small, was negotiated to the nth degree.  There was no give from the other side and when issues such as vacation days were hotly contested, I got quite concerned.  In the end we passed on the candidate.  We reasoned that if he was this difficult during a negotiation for his contract that he would be just as difficult to work with.  I am not sure if he relied on his lawyer too much or if it was just his style, but either way negotiating every nickel and dime is not how to get deals done.  I felt that the basic element of trust was never established in the negotiation.  My only words of wisdom for you is that In any negotiation, make sure you mark down your most important points and put them in a bucket.  Place the less important deal points in another bucket. Try to put yourself in the company’s shoes to understand their major points as well.  I encourage you to ask for everything but at the end of the day be smart about what you really want-try to win on the big points but don’t be afraid to give in on the small issues.  At the end of the day, nickels and dimes do not add up. The post Nickels and dimes don’t add up appeared first on BeyondVC.

Fundraising is a distraction

I was speaking with a friend yesterday who recently signed a term sheet to raise a Series B round.  While he did not hit it out of the park with the valuation, it was a nice step-up none-the-less and would provide his company with the capital to move forward and stay ahead of its competition.  He and I both fully acknowledged that he could have pushed the valuation higher if he spent time with more than two venture firms, but we both agreed that the right thing to do was take the money and build the business.  This was an easy decision because fundraising is a distraction and valuation isn’t everything.  When you are a lean and mean startup where you are just beginning to build your management team, every second you spend fundraising means more time that you are not working on your business.  I have seen too many entrepreneurs go on the VC tour, spend too much time on fundraising, and consequently miss important milestones.  In the end, the extensive fundraising process ends up backfiring since the VCs get concerned about lack of progress.  So the next time you are faced with the prospect of raising money painlessly and quickly, the slight discount you take on your valuation today will be well worth it in terms of what you can do to build your business and continue innovating your product or service. The post Fundraising is a distraction appeared first on BeyondVC.

What does Sarbanes-Oxley have to do with donuts?

I had lunch with a friend of mine yesterday who is an officer with a public technology company.  As we started discussing his business, one of the topics of conversation was Sarbanes Oxley.  His company just went through an expensive Sarbox audit to get into compliance and while his company passed with flying colors on most of the important issues, his company failed the audit.  Why?  Here is the short story.  One of his sales reps was hosting a client meeting and bought $15 worth of donuts.  The rep got a signature and approval from the CFO on the purchase.  Why did they fail?  The accountants said that the rep needed to get 2 signatures, one from the VP Sales and one from the CFO.  If the rep could buy $15 worth of donuts with only one signature, then think about what else he could buy.  That too me is quite inane and ridiculous.  There has to be some threshold, for example, on when 2 signatures are necessary for an expense report.  This is a perfect example of why Sarbox is expensive for public companies.  While I believe that Sarbox is a good thing and better and more stringent accounting is necessary, I also think that there is alot of waste ineherent in the regulations and that it needs to be reexamined. This brings me to another point.  I had the opportunity to speak on a panel the other day hosted by Venture Scene New York.  The panel focused on exits or liquidity events and how VCs thought about them.  The clear trend that I am seeing is that companies really have second thoughts about going public these days due to the costs and requirements of Sarbox.  That obviously is not the sole reason many companies that can go public choose to be acquired but it is one of the top few.  In addition, it is no surprise that you see many public companies, particularly smaller ones, looking to go private as well.  Something has to be done to make Sarbox more relevant and less onerous, particularly for smaller companies. The post What does Sarbanes-Oxley have to do with donuts? appeared first on BeyondVC.

Venture capital in China

I recently caught up with my friend Derek Sulger, founder of Linktone (Nasdaq: LTON) and current founder and CFO of Smartpay, a Paypal-like play in China (I really like what Derek is doing with this one-no credit in China, use the mobile phones for debiting from bank accounts).  Derek and I are college friends and we certainly have come a long way from college when he finds my email on Google under a heading "Geeking out with Ed Sim" (thanks to Jeff Clavier for this one!) because his mobile device with all of his data on it is cracked on his flight from China.  That being said, we had a great chat on VC in China and opportunities he sees there. First, from his perspective, he would rather pick one or two ventures at a time then spread out investments VC style.  If you think about it, there have only been around 7 or 8 internet-type companies that have gone public in China since the last bubble in the US (Linktone is one of those) when the Sina.coms were out in the market.  Given that, he would rather pick a couple sure bets and really work with them cradle to grave.  It is also tough to have any real governance and control of an investment by just sitting on a board in China, especially if you are monitoring a deal from thousands of miles away.  Secondly, he said it is tough to find good, experienced talent.  That is one of his gaiting factors in ramping up his ventures.  Finally, from an investment perspective, he would rather go consumer than enterprise.  His first business was a systems integration play which spawned Linktone and Smartpay.  He said it was difficult because the private companies you are selling to are really quasi-government agencies.  It is tough to get paid and very tough to protect your intellectual property.  At least on the consumer side, if you price your product or service appropriately, you can build a real PAYING user base and protect yourself from competitive threats with your base of subscribers.  Look at the history of China going from Boeing to the automakers like GM which did joint ventures with companies in China only to have their IP recreated and used against them.  I am sure GM could have protected themselves by charging less for their Buicks! So there you have it from an experienced entrepreneur in China.  His thoughts make a ton of sense. The post Venture capital in China appeared first on BeyondVC.

Welcome GreenPlum and Bizgres

I have looked at a number of open source projects over the last year and mostly agree with Bill Burnham’s comments that many of these open source plays are "marketing gimmics for startup companies."  Many of these companies are trying to start a new project from scratch, hoping to build a community brick by brick.  In addition, without the ability to create a community, it is hard to build a real sustainable revenue model.  Finally, open source does not matter if there is no customer need for the solution.  That being said, I am quite excited about the relaunch of one of my portfolio companies, GreenPlum, which is bringing the power of open source to enterprise business intelligence.  (Stop reading if you are not interested in a pitch for a portfolio company)
Quite simply, Greenplum is using an open source database optimized with supercomputing architecture to bring terabyte scale datawarehousing to enterprises.  Leveraging this architecture, Greenplum will be able to offer significant price performance benefits over existing BIG IRON solutions.  In addition, Greenplum is working with Josh Berkus and the PostgreSQL community to launch a new project, Bizgres, whose goal is to build a complete database system for BI exclusively from free software.  From a business perspective, what I like about our strategy is that we are building off an already existing and strong community of PostgreSQL developers.  Secondly, rather than pursue a broad platform play for all databases, we are focusing on a large but focused market in BI.  We believe this is a great way for open source to enter the enterprise as the market is riddled with expensive solutions, BI is a top 3 initiative in most enterprises, data is growing like a weed in most places, and because we are not asking CIOs to bet their transaction systems on open source.  Finally, our revenue model is not based fully on a support/service play.  The open source DeepGreen product will target small-medium sized businesses or anyone with data marts and reporting apps in the 10-300 gigabyte range.  GreenPlum will sell licenses for any company that wants to to deploy the DeepGreen MPP product to scale to multi-terabyte environments.  While it is yet another spin on open source, I am quite excited about what GreenPlum is doing and truly hope that by leveraging the success of PostgreSQL, staying focused on a targeted market, and employing a dual license model that the company will be able to rise above the noise.  As I have mentioned in a previous post, one of the clear benefits of open source, especially if you leverage Continue reading "Welcome GreenPlum and Bizgres"

Working with partners

I can’t tell you how many early stage companies I talk to tout their great list of partners.  I always step back in amazement at how a small company can support more than one, really large partner in the beginning.  In fact, I remember being in a meeting with a strategic partner once and having them tell me that we would break if they put their resources behind our product.  You have to realize there are 2 kinds of partners – technology partners and real partners.  In my mind, if you and your partner are not generating revenue for each other than it isn’t a real partnership but rather just a Barney press release.  Yeah, you know the "I love you, you love me" kind of partnership that sucks precious resources from a startup and yields no value and no customers. So how do you make a real partnership work?  In theory, it is very simple but requires a ton of hard work.  Here are a few rules I like to use when working with partners.  Rule #1 – Don’t rely on corporate; engage at the field level. 
Many early stage companies try to create partnerships from the top down without recognizing that the real action is in the field.  If you can bring your potential partner customers and lots of customers, you will get attention and be in a much better position to negotiate a real partnership. Rule #2 – Focus, narrowly focus your opportunities.
Many of your potential partners are huge enterprises, and it is easy for a small company to get lost in the shuffle.  Try choosing a group in the large organization (it depends on how the company is organized) where you can effect a real P&L and create a strong value proposition.  In some companies that might mean focusing on a vertical like energy or financial services while in other companies it may mean picking a specific function like business intelligence or compliance.  Either way focus on groups where you can make a real impact.  Rule #3 – Your partner’s sales force needs to get comped
Once you are able to demonstrate a handful of customer wins, it is time to get a deal done.  No matter what kind of deal it is, make sure that your partner’s sales force is comped for selling your product.  If there is no comp for the sales force, your product will not move in a highly leveraged way. Rule #4 – Dedicate the proper amount of resources to make the partnership successful.
Once again, lots of companies think that once you sign Continue reading "Working with partners"

Go early, go late, or go home

After having returned from vacation last week, I had the chance to reflect on the current venture and investing market.  Yes, one of the big challenges is that there is still way too much money sloshing around in alternative assets.  As I think about how to make money in this competitive environment and where to make new investments, I keep coming back to the thought that there is still opportunity very early or very late in a company’s life cycle.  On the late side, the tech sector is clearly maturing, growth is slowing, and forward P/E ratios relative to the S&P are pretty equal or even less indicating strong value.  Combine this relative value with the fact that many tech companies, particularly large software companies, derive 50-70% of their revenue from annual recurring maintenance and you have an opportunity to buy out many of these businesses due to their predictable cash flow.  I see this as a trend that will only accelerate in the next few years as you have venture funds, LBO shops, and even hedge funds get into the tech buyout action.  Witness the recent Sungard deal and others.  If the private investors are willing and able to pay $11.3b for a company then no public software company is sacred.  This includes companies like Siebel and BMC who both recently missed their earnings targets.  There is plenty of value left in these software companies that the public does not see, and therefore plenty of money to be made by smart investors. On the early side, I continue to believe there is much innovation to be done.  As the VC funds get larger and larger, they are under increasing pressure to put more dollars to work in every deal.  Therefore, it remains quite difficult for the larger funds to dole out money in $2-4 million chunks, and the valuations are quite attractive at this stage.  As a fund, we typically like to lead or co-lead the first institutional round (post-angel) where the company has a strong entrepreneur, innovative technology, and a handful of customers to prove the market need.  Where I do not want to be is in a Series B or Series C round in a "hot, momentum" company.  I have had a number of these companies come through my door, and I keep asking myself how a company which is only a feature of a much larger offering will create a significant return for the fund after having raised too much cash at too high a price.  When I see "hot" companies with revenue less than $5mm raise capital at $50mm Continue reading "Go early, go late, or go home"

Competing with the big boys

I was talking to a portfolio company CEO today about his sales pipeline and one of the key items of interest for me was understanding competitive dynamics.  Besides looking at the raw numbers, I like to understand whether or not we are seeing more or less competition, why we are winning, and why we are losing.  As I started to dig into this area over the last two quarters I have noticed that the big boys or incumbents have started to show up in more deals.  In my mind that is a good sign because incumbents don’t enter a market unless they believe it is worth pursuing.  I also typically do not mind competing with the larger players as they are generally less agile and less innovative than startups.  That being said, incumbents tend to add confusion in the marketplace and lengthen any startup’s sales cycle.  Their typical tactics including saying they have the product when they don’t, promising they will have the product in one to two quarters (maybe three or four or never is the real answer), or giving it away for free in a bundle of other things that the customer buys.  The last one is a tough one to counteract – I mean if the customer gets it for free, then it doesn’t have to be as good as an innovative startup’s product, does it?  So how do you compete against these tactics?  First, as a startup you have to get away from a feature/function battle because you will always lose against a big boy.  If a customer has already bought a product from an incumbent, they are more often than not willing to stay with that incumbent if they can deliver the extra feature/function soon enough in a good enough way. What I like startups to do is win with the product roadmap and vision.  Show the prospect how you solve their needs today better than the incumbent but more importantly why you are different and how your approach will solve their future needs.  If you can differentiate on this level, it gives you a much better chance to win.  One other piece of advice is that you must qualify the opportunity early in the sales process.  If the incumbent is esconced in the account, you may be better off walking away quickly in pursuit of greener pastures.  As I got off the phone with the portfolio company CEO today, what made me happiest was not hearing about all of the wins against the incumbents, but how we walked away quickly from those types of deals. Just today the CEO Continue reading "Competing with the big boys"

When competitors are acquired…

It is clear that we are moving towards a consolidation phase in the technology sector.  M&A activity has been heating up over the last 18 months as strategic acquirers are looking to bulk up and broaden their product offerings.  During the last few months, we have had a few board discussions on this very topic.  The conversations were not about us trying to shop any of our companies as I firmly believe that companies are bought and not sold (see an earlier post).  Rather, our discussions focused on what happens when one of our competitors are acquired.  Usually when a competitor is bought at a huge price the first reaction is why it wasn’t me.  The second reaction usually becomes fear as you begin to worry about what your competitor’s product will do in terms of market share with a huge sales force and partner channel, strong brand name, and global infrastructure to support the customer growth.  Having been through this a number of times, this is the point at which you need to take a deep breath, stay the course, and look at the situation in a positive light.  First of all, the majority of acquisitions fail.  Secondly, your competitor will be inwardly focused and quite distracted for the first 6 months trying to integrate with the parent company.  Finally, depending on how the acquisition was completed, employees will begin to leave as soon as they get the bulk of their money off of the table.  When a competitor is acquired, rather than sulk and worry about why it wasn’t you, try to aggressively exploit the situation and use it as an opportunity to grab market share and poach some experienced and talented personnel from your nemesis.  Last year, for example, one of my companies was able to build an incredible sales team overnight, saving us six months of hiring and giving us an opportunity to hit the market harder and faster.  So the next time this happens remember that you will more likely than not be in a better situation after your competitor is taken out of the market leaving you with plenty of opportunity to grow. The post When competitors are acquired… appeared first on BeyondVC.

Cisco, a value play?

I was reading Barron’s this morning and came across an article (sorry-need subscription for this) claiming Cisco’s potential appeal as a value stock.  It is hard to believe that this high flying company which once was the largest market cap company at $600b is now potentially a great value play.  The hot growth sector these days is energy and now Exxon Mobil is the largest market cap company at $400b.  Anyway, this table from the article says it all.  The P/E ratios (range from 18.7 to 19.6)of the tech giants like Cisco, Microsoft, Intel and Oracle are equal to or less than non-tech large caps like J&J, Wal Mart, and Coca Cola (range from 19.4 to 21).  In fact, Cisco’s 2005 P/E at 17 is less than that of the S&P 500’s at 17.4.  When most people think tech, they think high growth but this chart and these P/E ratios should really bring us back to earth.  I don’t disagree with Larry Ellison’s assertion a couple of years ago that the technology markets are maturing.  That is one of the reasons we see all of these huge mergers happening as companies seek to expand their markets, their product lines, and revenue.  That being said, there are still large pockets of growth which will provide startups with plenty of opportunity to succeed.  Cisco, for example, is spending heavily in new markets like security, VOIP, storage, and wireless.  The great news is that in pursuit of growth many of these big players are not afraid to pay up for the right products (think of the $450mm Airespace acquisition in the wireless area as an example). The post Cisco, a value play? appeared first on BeyondVC.

Know when to say “No”

I have said many times before that with respect to doing deals that saying No is as important as saying Yes.  Let me elaborate.  A portfolio company has recently been in trials with a potential strategic partner about a reseller relationship.  We got in first, set the criteria for success to leverage our technical and business advantages, and were selected as the winner.  We had the most customers, the best product, and best customer support.  There was one huge caveat-one of our competitors who came in second place was willing to do the deal at a 50% discount.  The strategic partner asked us to do the deal at that price if we wanted the win.  Of course, there was much deliberation on our side and as we ran the numbers over and over again there was no way we could understand how this competitor could ever make money on the strategic partnership.  From our calculations, it would take a couple of years to breakeven off the deal under the very best circumstances.  Trying to make the deal work for both sides, we went back to the potential partner and asked them to give us an NRE (non-recoverable engineering expense) and to handle level I customer support.  At the very least, if the partner handled the first tier of customer support, we could be marginally profitable.  The potential partner said no, and we walked away from the deal.  Trust me, it was a tough decision, and we tried to rationalize why it made sense.  However, when the deal is not a win-win situation it is very hard to make it work successfully.  From my perspective, one of the huge problems is that there is tons of VC money out there and lots of me-too deals as Brad Feld elaborated in a post recently.  A space gets hot, lots of venture money pours in, and only a few companies survive while the rest vaporize.  We do live in a competitive world and taking market share and killing your competition is part and parcel with being in a startup in a large market.  That being said, what killed many companies during the bubble was pursuing market share at all costs.  I feel like that mentality is coming back in the market.  In my mind, losing money on every new customer signed up is not a long-term winning strategy unless you think you can get financed to infinity (yes, many did during the bubble).  At some point in time, to be a real business you have to generate cash flow from internal operations.  Continue reading "Know when to say “No”"

RSS Ads

From day one, I got into blogging not knowing what to expect and figuring out the best way to learn about a market is to dive into it and become a user.  So I did that 18 months ago assuming that the time I spent as a blogger would either help me find compelling investment opportunities or provide me with in depth knowledge to help existing portfolio companies leverage this new opportunity.  Since becoming an avid blogger and reader, it is clear to me that embedded ads in RSS feeds will be a key way for content owners to monetize their assets.  First, the fact of consuming RSS feeds will typically reduce traffic at many publishers’ websites giving them less opportunity to monetize their assets.  Ads in RSS will help publishers overcome the lower traffic to their sites while still providing their users with up to date content.  Secondly, ads embedded in RSS feed gives great targeting opportunities for advertisers and publishers.  Hopefully this will allow for greater clickthrough rates.  Given these factors and the fact that users want free content, I believe ads embedded in RSS will become a defacto way for publishers to monetize their assets and for users to continue to consume content for free.  I also believe that as we morph into podcating and vlogs that publishers will find ways to monetize their content through automated embedded audio and video ads. Give this some time as there is not enough content out there, but I see a world where a new service is created which will allow rich media publishers to automatically embed audio and video ads as simply as contextual based text ads.  Given this backdrop, I am excited that Morever Technologies (a portfolio company) and Kanoodle recently launched a partnership called FeedDirect RSS Ads.  Quite simply, FeedDirect will allow content owners to not only monetize their assets with content-targeted sponsored links via Kanoodle but also get maximum distribution through the Moreover network.  All it takes is a few clicks to sign up and begin generating revenue.  As a VC, one of the cliches we often talk about is eating your own dog food.  In other words, entrepreneurs and VCs, where applicable, should be users of products or services they create or in which they invest.  To that end, I am changing my RSS feed to incorporate the FeedDirect service.  From a transparency perspective, I plan on sharing some of my data with you as my RSS feeds get converted.  To subscribe and test out the FeedDirect service, please change my feed to this link.  If these ads Continue reading "RSS Ads"

Speed versus flexibility

A number of companies are developing software and sytems which rely on packet processing at high speeds to deliver their respective functionality.  This includes companies in the networking and security space.  The debate over custom ASICs versus off-the-shelf components has raged on over the years.  Over the last five years a new class of chip has arrived on the scene called the network processor.  It is supposed to give the engineer the speed of ASICs with the flexibility of software.  If you are interested in learning more about NPUs and the debate over the merits of NPUs versus ASICs, I suggest reading this article by Douglas Comer in the Internet Protocol Journal (link via Martin Tobias).  Douglas sums up the debate as follows:
Although the demand for speed pushed engineers to use ASIC hardware in third-generation designs, the results were disappointing. First, building an ASIC costs approximately US$1 million. Second, it takes 18 to 22 months to generate a working ASIC chip. Third, although engineers can use software simulators to test ASIC designs before chips are manufactured, networking tasks are so complex that simulators cannot handle the thousands of packet sequences needed to verify the functionality. Fourth, and most important, ASICs are inflexible.
The inflexibility of ASICs impacts network systems design in two ways. First, changes during construction can cause substantial delay because a small change in requirements can require massive changes in the chip layout. Second, adapting an ASIC for use in another product or the next version of the current project can introduce high cost and long delays. Typically, a silicon respin takes an additional 18 to 20 months.
Given the need for flexibility and speed to market (particularly in the security space), a number of companies I have seen over the last few years have taken advantage of NPUs to deliver product with good enough performance with more up-to-date functionality than their ASIC brethren.  As we move on, I expect to see further improvements in NPUs in terms of speed and programmability as we all continue to recognize that the value is in the software. The post Speed versus flexibility appeared first on BeyondVC.

Linuxworld Boston

Last year at this time, I was at Demo in Arizona watching a couple of my portfolio companies launch new products and networking with other VCs and entrepreneurs.  Given my travel schedule of late, I decided to go to Linuxworld in Boston for a day and follow Demo from many of the bloggers like Jeff Nolan.  It seems that the consensus view from Demo was that there were lots of interesting products but nothing that blew the audience away.  I, too, can say the same about Linuxworld.  After a few meetings in the morning, I decided to walk the expo hall to see the various offerings.  I saw my fair share of companies that sold into the high performance computing (HPC) market with various clustered file servers, data replication, and workflow application software.  I also saw a number of companies offering tools to better manage deployment and performance of Linux boxes.  Then there were a few companies selling enterprise applications like document management platforms and antivirus and antispam software on Linux-not terribly exciting.  Finally, there were various companies going after the desktop Linux market with operating systems and applications-while I found some of them intriguing, it is still quite early.  One area I did like was the market for software compliance.  As we move to a componentized world where developers increasingly build in pieces of software from a variety of sources, how does a company know what they are using and from whom and more importantly what the licensing rights are for those components.  2 early stage companies going after this space are Palamida and Black Duck software.  I had a chance to speak with one of the founders of Palamida, Theresa Bui Friday, and came away quite impressed.  The Palamida software works like an antivirus scanner looking into code and checking against its compliance database to catalog your code base, identify whose components you are using, and then providing the user with the associated license and contact information.  Increasingly IP compliance is becoming a big deal, especially when you talk to CIOs, and incorporating this type of automated scanner early in the development process can save customers a ton of headaches and potential dollars from law suits.  I view this market as part and parcel with the source code scanning market.  Increasingly, secure coding is being built into the QA process and companies are coming out with automated scanners to check for vulnerabilities before products go to GA.  According to Reflective and NIST (full disclosure I am an advisory board member) it costs less than $0.10 to scan code early in Continue reading "Linuxworld Boston"

HBS Compensation Survey

Professor Noam Wasserman of HBS along with individuals from J. Robert Scott, Wilmer Cutler Pickering Hale and Dorr LLP, and Ernst & Young LLP put together an annual compensation report for venture-backed companies.  If you are venture-backed and interested in participating and receiving a free copy of the report to baseline compensation for your employees, I suggest going to CompStudy to get started.  I cannot tell you how many times executives at my portfolio companies ask me for comp numbers for certain roles in their geographic area.  While there are biases in any report, it is helpful to get a few of these different surveys to make sure your new hire’s compensation requirements are in the ballpark.  One final note-if you want to be included in the survey, please fill out by February 28. The post HBS Compensation Survey appeared first on BeyondVC.