Three New Investments

September 12th, 2013

SJF recently has made three new investments in Web-enhanced businesses:

Easy Metrics:  A SaaS-based labor management system.  Financing led by Alan Kelley

Think Through Learning:  A SaaS-based education technology company.  Financing led by Arrun Kapoor

Versify:  A SaaS-based business intelligence company serving the utility industry.  Financing led by Cody Nystrom

Exciting to be teaming up with a number of new companies in the past few months.

Facebook: Now a Utility

August 26th, 2013

A couple of family reunions this summer confirmed a sneaking suspicion that Facebook is somewhat “out” among teenagers.  The blame seems to be partly attributable to adults.  As a niece of mine said, “Facebook used to be cool until parents came along.”

So, where are teens heading?  Many are heading to Instagram, which seems to be an area that can still be claimed almost exclusively by younger people.  As one person noted when comparing Facebook and Instagram, “If you were 16 years old, would you rather go to a party with only your friends (Instagram) or a party with your friends, parents, grandparents, and a whole bunch of other people (Facebook)?”  Furthermore, Instagram takes some of the pressure off of writing clever comments.  Pictures speak for users.

But it may not be so binary.  Facebook may not be heading for a demise among teens.  I think that this Fortune Article had a nice take on the current status of Facebook, noting that Facebook has become a utility for teens.  It may no longer be cool, but it is still a part of their lives.

Alan

Thanks, Dave Morgan

August 7th, 2013

I love this quote from Dave Morgan, who founded Tacoda.  When commenting on the merger between Omnicom and Publicis, he said:

“I think it’s a total misdirection to think that you can leverage the scale and advantages of big data if you’re bigger. Quite the opposite,” Morgan said. “These aren’t technology companies, and you don’t get better tech development out of consolidation. You’re not going to create the next MediaMath, or Videology, or Facebook, or Google out of this.” – See more at: http://www.mediamath.com/news/the-real-story-behind-publicis-omnicom-has-nothing-to-do-with-tech/?utm_source=hs_email&utm_medium=email&utm_content=9925342&_hsenc=p2ANqtz-953GfpJQbBh20J6DPzFCSJMikQbfWrI5TcVV_4gf6LZUUGQtjBQoj5xuh9UYCPttoSVFKNbh9XQSj3t78p2q9E0vYH5g&_hsmi=9925342#sthash.5j5wpAWa.dpuf
“I think it’s a total misdirection to think that you can leverage the scale and advantages of big data if you’re bigger. Quite the opposite,” Morgan said. “These aren’t technology companies, and you don’t get better tech development out of consolidation. You’re not going to create the next MediaMath, or Videology, or Facebook, or Google out of this.” – See more at: http://www.mediamath.com/news/the-real-story-behind-publicis-omnicom-has-nothing-to-do-with-tech/?utm_source=hs_email&utm_medium=email&utm_content=9925342&_hsenc=p2ANqtz-953GfpJQbBh20J6DPzFCSJMikQbfWrI5TcVV_4gf6LZUUGQtjBQoj5xuh9UYCPttoSVFKNbh9XQSj3t78p2q9E0vYH5g&_hsmi=9925342#sthash.5j5wpAWa.dpuf

“I think it’s a total misdirection to think that you can leverage the scale and advantages of big data if you’re bigger. Quite the opposite,” Morgan said. “These aren’t technology companies, and you don’t get better tech development out of consolidation. You’re not going to create the next MediaMath, or Videology, or Facebook, or Google out of this.”

 

Not bad company for MediaMath to have.

Tesla’s Unique Valuation

July 17th, 2013

I have been thinking about Goldman Sachs’ downgrade of Tesla today.  I haven’t seen the full report, but I have noticed that Goldman Sachs did a reality check on 2017 earnings and looked at market share achieved by some of the best luxury cars historically.

On one hand, I applaud Goldman’s reality check.  On the other hand, I think Goldman is likely missing the bigger picture.  Tesla reminds me of Apple in about 2004.  By that time, Apple had crossed levels of design and brand cache that were very different from what people were used to seeing n its category.  That helped to propel a growth cycle that was much stronger than most everyone expected.  My bet is that Tesla outperforms the market over the next five years.

Similarly, in the venture business we must have investment disciplines, because they tend to work across a portfolio of investments that each have risks.  At the same time, it is also our task to be on the look out for companies that are truly extraordinary and not miss opportunities by letting formulaic approaches tied to historical frameworks eclipse our appreciation of the bigger picture in unique circumstances.

To be clear, I am not saying that valuation should be disregarded for exciting companies.  I am mainly saying that we venture capitalists should continue to push ourselves to continue to see opportunities from new perspectives and remain open minded, which is in a way a different kind of investment discipline.

Alan

30 Millionth Work Order Processed

September 28th, 2012

Congratulations to ServiceChannel for processing its 30 millionth online work order.

MediaMath Leader on Facebook Exchange

September 13th, 2012

Congratulations to MediaMath for being an early leader on Facebook Exchange.

Tripl and Social-Enhanced Commerce

August 27th, 2012

Many entrepreneurs have been trying to tap the trusted connections found in facebook for various social and transactional activities.  For example, a number of entrepreneurs have explored the idea of selling, trading, renting and recommending used items from friends and friends of friends.

A classic chicken-and-the-egg issue usually arises in that a person is often limited to finding items on a platform where his or her friends have happened to sign up as well.  Accordingly, the momentum often dies quickly.

Tripl stands out from the pack in part because it automatically pulls in facebook pictures from friends’ trips and displays them in a graphically pleasing way.  Interestingly, many pictures residing on facebook, Instagram and other places are already geotagged.  If you use the service, you will quickly find that you can track your friends’ travels without their having to sign up on Tripl.  The chicken-and-the-egg problem is addressed.  As Tripl develops, I imagine it can layer travel business activities into its offering, thus creating a social-enhanced commerce application that scales and operates in a fertile industry.

I think Tripl is going to be a winner, and I think other social-enhanced commerce companies could learn from its ability to jump start the network effects.

LinkedIn A Year Later

June 3rd, 2012

Despite a disappointing IPO by social media leader facebook, LinkedIn has held up fairly well during the past year.  Since its IPO on May 19, 2011, the shares have dropped about 3%.  The S&P 500 has fallen about 4% during this same period.  The day after LinkedIn’s IPO, I wrote that individuals should think twice before dismissing the company’s 24-times-sales valuation as ridiculous.  So, far that observation seems to be holding.

LinkedIn also continues to show the power of a meshed network compared to a hub-and-spoke network.

Alan

A View Into Kickstarter

February 28th, 2012

Although this video providing an inside look at Kickstarter has been around a while, I think it merits being put up on this blog as well.  It is quite interesting.

Pinterest

February 12th, 2012

My new favorite Pinterest page.

“Good” and Technology

December 30th, 2011

I like the question “If you could invite any six individuals to dinner, who would they be?” I also like one of the responses that I have seen to this question: “I would get a bunch of wine and invite Jon Stewart, Bill O’Reilly, Stephen Colbert, Glenn Beck, Keith Olbermann, and Ann Coulter.”

On my short list of the individuals I would invite is Kevin Kelly. Kevin is the founding executive editor of Wired Magazine and a fascinating author. His 1998 book New Rules for the New Economy was tremendously helpful to me in navigating the boom and bust of the Internet market while I managed an Internet mutual fund. His newest book, What Technology Wants, is considered by many, including me, to be brilliant.

So, it was a special treat for me when I was given the opportunity to take a walk with Kevin on a beach today in San Francisco. I was able to ask him some questions that I knew he would have a special take on, such as his view of Singularity.

Regarding topics that are relevant to our work at SJF Ventures, Kevin had never heard of impact investing, and he doesn’t follow the venture capital world. But Kevin has given a lot of thought to the relationship between technology and “good.” So, I was eager to hear his thoughts on this matter.

I started by explaining that in the world of impact investing, the positive impact elements of cleantech are fairly clear and readily acceptable. He politely inserted that he believes that over time some of the technologies that we deem to be clean today will be seen less clearly as clean in the future. (Another topic for another day.) And then we turned to more traditional technology, which many individuals struggle to associate with good or bad.

So, which kinds of technologies did Kevin consider “good”?

Kevin believes that technologies that increase choices for individuals tend to be inherently good. The Internet is a prime example, for it greatly increases the opportunities and choices presented to individuals. As part of this theme, Kevin noted that we all have unique qualities that are special. So, technologies that provide us more choices and open opportunities to connect with that which is special about us are inherently good.

Kevin also cited technologies that expand dimensions of participation, increase common wealth, and enhance qualities of relationships.

Kevin further noted that he associates “good technologies” with those that are convivial, or breathe life into the world and our experiences. Weapon technology would be the opposite.

Finally, Kevin noted that the type of technology, or the species of a certain wave of innovation, can be important. For example, a smart phone like the iPhone or Android was inevitable, according to Kevin. But it matters which choices the developers made when creating the phone. Is it an open system like Android or a closed system like the iPhone? How damaging to the earth are the materials that are used?

I am still digesting Kevin’s comments. Our view at SJF Ventures on the fit between impact investing and technology-enhanced services is that we look at the output of the service to determine if it passes the sniff test of creating a positive difference. Some specific examples, such as an online community that brings together diabetes patients, are clear fits to us. Some verticals, such as education software, are clear fits to us. And some horizontal themes, such as services that yield strong employee engagement and empowerment, are clear fits to us. There are also some themes that we deem to be positive, such as tools that democratize access to information, that might not have been captured by traditional views of socially responsible investing.

The fit between technology and positive impact is one that we continue to ask ourselves and push ourselves to define or frame. I am very thankful for people like Kevin who have thought deeply about the relationship between technology and “good.” It helps provide some fantastic fresh thinking on what that marriage between technology and impact investing should look like.

Alan

 

From Ideas to Success

December 30th, 2011

In his most recent book, What Technology Wants, Kevin Kelly provides some colorful examples of the tendency for new innovations and scientific advancement to to be created by multiple individuals around the same time.   Scientists at Bell Labs won a Nobel Prize for inventing the transistor in 1948, but German physicists independently created a transistor in Paris two months later.  Charles Darwin and Alfred Russel Wallace both put forth the theory of evolution at approximately the same time.  The light bulb encountered at least 23 inventors prior to Edison, according to Robert Friedel and Paul Isreal, making Edison “the very last ‘first’ inventor of the electric light.”  A more systematic analysis of this phenomenon was conducted by sociologist Warren Hagstrom, who surveyed 1,718 U.S. academic research scientists.  Over 60% said they believed that their worked had been anticipated, or scooped, by others.

We at SJF certainly see signs of this phenomenon in the venture capital industry.  At times there are waves of new business plans around new themes, such as  crowdsourcing, smart thermostats for the home, smart grids, collaborative consumption, group texting, etc.

The degree to which this tendency for simultaneous innovation indicates that certain technology developments are inevitable versus copycats is a topic of interesting discussion.  But as a venture capitalist, I am struck by the reminder that unexpected competitors can burst on the scene with a frightening degree of frequency, making the development of a leadership position challenging.  Serial inventor Danny Hillis put it to Kevin Kelly this way, “There might be tens of thousands of people who conceive the possibility of the same invention at the same time.  But leass than one in ten of them imagines how it might be done.  Of these who see who see how to do it, only one in ten will actually think through the practical details and specific solutions.  Of these only one in ten will actually get the design to work for very long.  And finally, usually only one of all those many thousands with the idea will get the invention to stick in the culture.”  Whether Danny Hillis’ numbers are accurate, directionally they make a strong point.

The next logical thought, then, is “So, it’s all about execution.”

And the next logical thought after that is “It’s all about the entrepreneur.”  A couple of recent books elaborate on this commonly held belief.  In Jim Collins’ sequel to Good to Great, titled Great by Choice,  Collins cites the attributes that allow companies to thrive despite the forces of uncertainty, chaos and luck.  Those attributes include management’s fanatic discipline, creativity in gathering empirical information, productive paranoia, and “level 5 ambition.”  In Making Ideas Happen, Scott Belsky writes that success is strongly linked to management’s strong organizational skills and ability to tap its community.

I think it certainly helps tremendously to have a management team that is highly intelligent and passionate, but I personally believe there is a tendency for venture capitalists to put too much weight on the “fanatical” and brilliant CEO.  As illustrated above, management teams often face the reality that creating a product or service that sticks in the market is difficult, no matter how talented the entrepreneur may be.  Market validation often speaks louder than management’s capabilities.  Furthermore, there are a number of investment opportunities that do not rely on the next Steve Jobs for success.  A successful company may be created because its founders  have toiled away at an industry for years and come to dominate a niche market.  A business may have created both a critical mass of users and fantastic network effects, driving self-reinforcing success.  Or a company after several years may have developed a well-oiled machine  that is difficult for others to replicate.   Or a company may have created a lock on data assets that are tremendously valuable.

There are certainly other examples of ingredients that can lead to success.  My point is that, yes, execution is hugely important, but I believe that successful venture investing means remaining open to the factors that can drive a company from the idea stage to the successful stage.