WayTooEarly

UNI – Acquired tastes in food and investing

HLM — 2009-05-11T15:02:36-04:00

Between Idealab, First Round Capital, the New York Angels, and just plain email, I see about 50 new business plans a week. Many of these are “instant pass” – they don’t fit my investment objectives, nor those of my three or four half time jobs with FRC, Idealab, etc. While these may be heartbreaking for the entrepreneurs involved, I don’t lose that much sleep over them.

There is another category, which can potentially be big hits, and these are the ones that take most of the time – due diligence, meetings, thoughts about how to work them. They lead to the 20 or so First Round investments each year, to Idealab’s new company startups, the NY Angels 5-10 investments, and several personal investments that I make. And over the long run, they’ve proven to be worth my investment of money and time, taken as a portfolio whole.

The heartbreaking deals are those I call UNI. As a Japanese sushi, uni (or sea urchin) is somewhat of an acquired taste. It is a bit slimy, but can have a wonderful sweetness to it. I acquired a taste for it during my many trips to Japan in the 80s and 90s, and order it whenever it’s fresh. I also see a lot of businesses that taste sweet, but have a somewhat slippery texture, I call these UNI - User, not Investor. These are deals where the product excites some of my sensibilities, and I can quickly see that I, and maybe many other early adopters I know, would easily become users. But I either don’t see a business model, or see how it gets to be a very large company. In many cases, I can see getting to a $10-20 million business throwing off a few million a year. But there is either market or no vision of how to get it to $50-100 million. These are wonderful business for the entrepreneur, friends and family, and some angel investors. They generate cash flow and great lifestyles. They just don’t work for the venture business.

Many of the ideas we see that build on the social network or new communications platforms fall into the UNI category. As a big user of Facebook, Twitter, et. al., tools that help me do it are most welcome, and I try many of them. As businesses, most of them don’t have the ability to generate much revenue. The same seems true for the iPhone app business. Lots of neat apps (see the humorous iPhone ad you’ll never see on TV), but not many generating enough revenue for long enough to build venture scale companies.

So please don’t feel offended if I pass on your deal, after showing great excitement for your product. You may well have a winner – for small scale investors, but cannot generate the scale that works with venture math.

@Martin RIP

HLM — 2009-01-30T11:28:06-05:00

Actually, I doubt that Martin wants peace - he always wanted to be where there was some interesting action. I, as many others, was shocked to learn yesterday that Martin Schaedel (@Martin), involved early with Farecompare and internet investor and entrepreneur, had been killed in a plane crash at Santa Monica Airport, where he had been taking flying lessons for the past week.
   I only knew him since October, when I met him at Betaworks day in NY. But it's a measure of how internet techology works that he and I became friends very quickly. We clicked at Betaday, and had lunch a few days later - giving our backgrounds and finding things in our interests that intersected. of course he was young and dating supermodels, and I have a forty one year marriage and six grandchildren, but those differences were not at all relevant to people who love life and everything about it.
   Ten years ago, I might have seen him every few months and felt that he was an acquaintance. Now, we got on each other's twitter streams and sent recommendations and comments about travel, restaurants and people to meet. it made for a much more friend relationshsip than merely acquaintance.
   After his trip to Asia last Christmas, when I was chiding him for not knowing that it's now called Myanmaar (he said it was tough to get the visas for Burma), he emailed to say he was going to be in LA after Sundance, where he had checked out a film one of my cousins worked on, and did I know folks he should meet. I suggested the founders of GumGum (a First Round investment where I'm on the board), and they set it up for Wednesday. They did meet (see photo - probably the last one of Martin), and had such a good meeting before lunch that he came back for a few hours after lunch to set up next steps.

Then he told Ophir and Air he had to get to Santa Monica Airport for a 4 pm flight with a friend in an aerobatic trainer (the Italian Marchetti). It crashed shortly after takeoff, cutting off two lives in their prime.
I feel richer for having known him even the short four months that I did, and see the great value in these modern tools that can connect lives more richly than ever before. And I hope that he has gotten into the VIP rooms wherever he's ended up - he'll add to their fun as well.

We still love startups

HLM — 2008-10-14T21:19:30-04:00

I've always liked looking at new ideas and companies early (or way too early, as this blog's title notes). And I'm pleased to say that the economic turmoil has not dampened my enthusiasm, nor that of my partners at First Round Capital, nor that of other early stage players such as New York's Betaworks.

I attended a wonderful afternoon of presentations by 16 Betaworks companies, some, such as Twitter (which bought the Betawork's backed Summize, now search.twitter.com ), that are well known, and others just appearing for the first time. Some that First Round had passed on, though we loved the product, e.g, Someecards.com - a great site.

And now, I'm pleased to let you know that our San Francisco based folks (Rob Hayes, Christine Herron and Kent Goldman), are going to hold "office hours" at the University Cafe in Palo Alto on Tuesday, October 21st from 11-1. They'll listen to new ideas and talk about the economic climate. More details from the creator at Kent Goldman's Cornice blog, and an RSVP link on Christine's blog.

Demo and TechCrunch50 - Startups are going strong

HLM — 2008-09-09T09:41:08-04:00

For the first time in many years, i won't physically get to either the 18th year of DEMOFall or the second year of the TechCrunch50 (it was 40 last year, supposed to be 20). But through the magic of the world wide web, I can see how vibrant the startup and new product economy really is. Demo has videos up of their new products, and TechCrunch has Qik and ustreams which let non-attendees like me see the good stuff in real time.

DemoFall has 72 companies/products being introduced, some from big companies like Best Buy and Real Networks, but most from startups like SpinSpotter that help to find truth in the stuff you're reading, or alerts.com that lets you set up information push on things of interest. And there's the new Plastic Logic Reader, which is exciting to a Kindle user like me. Of course, they've raised $200 million, which is a little more that FirstRound normally does, so we're not investors.

TechCrunch50 has 52 companies (selected from over 1,000), including OtherInBox, which lets you give special emails and keeps most of the marketing junk mail (not spam), out of your normal inbox, and Yammer, which is a secure enterprise usable communications site, with capabilites of Twitter, IM etc. all protected and tracked.

At FirstRound Capital, we normally look at 2,000 deals a year to make 20 investments, and both of these great conferences provide tremendous raw material (although I must admit we prefer to see them before they've gotten the exposure). But it's really great to know that there are thousands of high quality startups still being created in the US and elsewhere, and that even in this tough economy, the new economics of capital efficient startups is thriving.

Wirewize: Connecting the CE Future to your CE Past

HLM — 2008-06-25T18:13:55-04:00

We've all faced the problem of bringing home a great new piece of consumer electronics (plasma TV, DVR, 5.1 surround system), and trying to connect it to the existing system. Even for those considered tech gurus by their slightly more challenged relatives, this is not a simple problem.

First, one finds the the right cables may not be readily at hand. This either means another trip to the store (or web store), or making do with the wrong cables and lesser connections (e.g., S-Video instead of HDMI). And deciphering the back panels of various manufacturers equipment, with those wonderful icons (some designed for Martians, no doubt), is another intellectual challenge.

About two years ago, Dean Summers, founder of Partsearch Technologies (an Idealab company), came up with a better idea. This led to his leaving Partsearch and starting CE-interactive, and the launch of their Wirewize.com site. (First Round Capital is an investor in this venture).

You can set up a locker by selecting the electronics gear that you already own. Almost 10,000 of the top amplifiers, TVs, cable boxes, game consoles, etc. are already in the database. When you want to add a new piece of gear, wirewize.com can tell you what cables you'll need for the best connectivity, and show you detailed pictures of each back panel, with hard to mess up instructions for where to connect each of the cables that it told you to get.

Presto, fewer returns or return trips, better quality pictures and sound, and the ability to return at any time to wirewize and see if there is upgraded software for your devices (yes, much of the CE world now does this). And you can read many of the manuals online as well. Right now, the free version can be tried at www.wirewize.com. I've already used it to find a better way to connect my TiVo Series 3 and my Panasonic system.

Lessons From The Jungle

HLM — 2008-04-06T12:02:47-04:00

Those who follow my Twitters know that I've just returned from two weeks in South Africa and Zambia, including six days in the game parks at Kruger seeing animals in the wild. I was amazed at how close we got to the animals - who apparently think of a big open Land Rover as an interesting, but non threatening large companion. Lions, leopards, rhinos, elephants and the like were in touching distance, while the zebra and giraffe did seem to run at our approach. Maybe they were smart enough to know why the gun was mounted next to the driver.

I find it hard to resist seeing the jungle situations as metaphors for the venture and startup world. First, Google and Microsoft are the Land Rovers. They're very big, they're out there, but you have to live your life and go after your own prey, in which case they'll ignore you. This works well for the lions and leopards, who can go after meat knowing the elephants are vegetarians, and will only trample them if they get in the way. And their trampling won't usually be to get the food source - they have their own. In our world, this means focus on your own products and customers.

If you have low gross margins, you need to be very big. Elephants excrete, without processng, about 2/3 of their food. Their digestive systems are pretty inefficient. But even on that 33% gross margin from their calorie intake, they have gotten extremely big. What they don't use, however, provides interesting input for others - here a leopard is eating some of that dung to get at minerals and other nutrients that are easier to find this way.

Specialization is often a way to get big, without conflicting with other parties. The giraffes mostly eat the high vegetation that the elephants, rhinos and hippos can't reach. Rather than going for the low hanging fruit - they go after the highest stuff, but have adapted their bueiness model accordingly.

Visiting the awe inspiring Victoria Falls (which the natives call the thunder that smokes), you see the critical nature of timing. Here are the falls when we were there in March (with flows of millions of kilolitres per second). Here it is in November - almost totally dry.

All in all, it's a trip I recommend to everyone - you recharge the batteries, see where we came from (my 23Across profile makes it clear that my DNA is out of Africa, as is true of all the humans), and puts into context our technology based society.

Of course, I should note that hundreds of miles from civilization, with very slow internet connectivity at the lodges, and no cell phone service in the lodges, you have time to ponder a beautiful sunrise . Or so I though till we went out on a drive one morning, and, once out in the middle of nowhere, my Blackberry started to vibrate - having caught signal from the only tower for 50 miles. I left it in the lodge for the next rides.

Look Ma, No Wires

HLM — 2008-01-14T15:47:10-05:00

There was one new technology that I saw at CES that really does have promise for the future - wireless power. Though it's been talked about for years, and many schemes have been tried, there are now some truly revolutionary methods for transmitting enough power not only to charge cell phones or iPods, but also to run big PCs and desk lighting. Of course, all the power on Earth owes it's debt to old Sol, our sun which transmits it's power to the earth in visible and infrared ranges. And there are some products that use that directly. The Solio hybrid energy chargers are solar cells that charge an internal lithium battery, which then feeds USB connectors (with the iGo tip system), so that you can keep your phones, etc. charged up directly from the sun. One of the products has a clip to go on your backpack, another fans out 3 cells to get even more power.

Bt for a real look at the future, you should see what Powermat, eCoupled and Powercast are doing. Powercast is using RF technology to send the power, while Powermat and eCoupled are using inductive techniques. Powermat is based on the RFID tags and some very clever drive technology and seemed the best of the lot to me. In addition, there is Wipower and some other folks working in this very hot area. Some of the key issues are how much power at what distance. Milliwatts at Meters is Powercast's view, while Powermat seems to be able to have much higher power loads with devices placed on their mats (which are only a few millimeters from the device they're powering).

Here's a light just stuck (magnetically) on the wall, drawing power from the wall surface mat.

One of the nice side benefits to Powermat is that of energy conservation. Since you don't have all those "vampire" power charges plugged in, you're not wasting nearly as much power. And the Powermat system can sense how much power is needed and deliver it on demand, resulting in what could be significant savings. It will certainly be nice when I can just lay out the powermat, plug it in, and then drop my PC, cellphones, iPOds, cameras, and a small desk lamp, and know that I've saved the charger weight, the tangle of cables (which drives my wife nuts), and be saving power as well.

I'm hoping to be able to make my desks at home and office Powermats in the next year, and lighten my charger load (physically and electrically).

eBooks - No Longer Way Too Early - Kindle vs Sony

HLM — 2007-11-23T00:46:14-05:00

I've had the Sony Connect Reader for the last six months or so, and have found it a useful way to lighten my load on trips. I read about a book every other day, and more on airplanes, so I've always wanted a good eBook. As some of you know, I'm Chairman of Franklin Electronic Publishers, which has sold almost 40 million eBooks - our electronic dictionaries, spell checkers, bibles, translators and other works. They make great Christmas gifts and can be ordered online :) We tried a Digital Book System back in the mid 90s, and even published Nicholas Negroponte's ground breaking "Being Digital" on our eBook format. But the screen size was too smal to make it work.

I've been watching the eInk technology for many years, and it is finally ready for prime time. it's the nonvolatile display technology used in both the Sony Connect Reader and the new Amazon Kindle, which I received yesterday. I find it quite easy to use in sunlight, on airplanes and in taxis, although on redeye flights, my neighbors sometimes complain about the fact that I do need the overhead light on to read easily. Here I am showing off both the sony and the Kindle at our 40 person Thanksgiving Dinner.

The consensus feeling is that the Kindle is a better product. And I must agree, even though it's only 24 hours since I put the first book on it.

The Sony has three font sizes, while the Kindle has six. Family members from 8 to 95 looked at the book, and every type size had at least one champion, with both the 8 and 95 year olds liking the largest font. The Amazon product is based on MobiPocket technology, a company they acquired a few years ago, and one in which Franklin was a major owner. It's a bit cleaner and clearer than the Sony. The Kindle also has a better hand feel, with the ability to turn pages from either right or left sides. In the Sony you can use a rocker near the bottom right, or buttons in the middle of the right side, It just feels a bit more natural on the Kindle.

But the best feature is that the Kindle really is designed as a system and service. Using Sprint's EVDO network as the Kindle Whispernet allows books to automatically download in minutes. And it also lets me get the W all Street Journal or New York Times overnight, and ready for reading on the train to work in the morning, albeit at what seem steep prices, given that I can read them online for free (NYT) or less than half the Amazon cost (WSJ now - going to free once Mr. Murdoch finally gets real ownership). And I can get the first chapter of any book free, to see if I like it or not.

So while it's still early, and I'm not sure how big the audience is for a $399 device (or Sony's $300), it's no longer Way Too Early. If you travel and read a lot, or want to keep your early adopter credentials, by all means get a Kindle.

Eating Our Own Dog Food

HLM — 2007-10-17T12:16:11-04:00

As an early adopter, I usually "eat our own dogfood" as our companies get early betas, etc. But as life gets more complex, some of the more mission critical tasks I do won't brook too many crashes. This is especially true now that I'm on Vista, and a reboot is 10 minutes or more. So I'd gotten somewhat out of the habit. Fortunately not completely so.

This morning, I was searching for a CD by an obscure jazz singer, Katie Eagleson. Looking on Amazon (often my first quick look), led to a $39.98 price for the CD, which just seemed way out of line. Then I thought "I wonder what Bigger Boat would suggest?" Full disclosure - Bigger Boat is a First Round Capital investment, and I'm a board member. I had used it a year ago when we launched, but got out of the habit. A quick search on Bigger Boat instantly took me to an $8.90 download of the CD - a quick $31.08 savings!

I've also been using the beta of Xobni which gives quite interesting information on my large (12GB) Outlook files. I've installed and uninstalled it twice, but it's clearly moving forward and helpful. Now to start seeing what one of our newer investments, Mint can save me:)

So yes, it's a good practice for venture capitalists to eat our own dogfood. Not only can we better advise the companies, often they can help us in the same way we hope they'll help all their other users.

John Rain Has an iPhone and I don't, but I've tried one

HLM — 2007-06-28T17:41:40-04:00

John Rain, the Japanese-American assassin anti-hero of Barry Eisler's great series or novels, already has his iPhone, and they're not even on sale. I was reading Requiem For An Assassin, the latest in the series, which came out a few weeks ago. Rain arrives in Palo Alto from Asia, and needs to buy his tools, so he goes into a Cingular store (pre ATT) and buys an iPhone. He proceeds to use it for calls, and to monitor a GPS tracker he's put on someone's car. He does, of course, assassinate a Silicon Valley CEO while making it look like natural causes (his specialty), something I've often thought of doing at the end of interminable board meetings.

Fortunately, I met a friend last night who,as an important member of the press, already had an iPhone, and got to play with it. The key reviews (Baig, Levy, Mossberg, Pogue) all pretty much have it nailed. The virtual keyboard is not an issue, the screen is gorgeous, the hand feel and design is tops, and the lack of Exchange server connectivity and the use of only the slower part of the EDGE network are killers. If i got one (which I do not plan to in this version), I'd try and put a screen saver picture of a Scharffenberger dark chocolate bar on it, since it's about the same size, and just as sweet.

I'm going to see Steve Jobs' other debut this weekend, Pixar's Ratatouille, and just put my Blackberry on vibrate.