Congratulations to ServiceChannel for processing its 30 millionth online work order.
Congratulations to MediaMath for being an early leader on Facebook Exchange.
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.
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.
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.
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.
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.
Congratulations to MediaMath for being named one of the leading demand side platform companies according to Forrester’s in-depth report.
Many market participants believe that in order for the European financial crisis to not spiral into a chaotic economic collapse the European Central Bank must signal a willingness to buy a near limitless amount of government bonds. That arguably will provide private investors with confidence that a floor to the massive problems exists, emboldening them to purchase European government debt and other risky assets.
Fitch echoed this sentiment when it lowered France’s credit outlook this week:
“Of particular concern is the absence of a credible financial backstop. This requires more active and explicit commitment from the ECB.”
But many market participants also believe that the the ECB and other European policy members will ultimately do the right thing once austerity measures are solidified and when a financial emergency emerges. That is the the bet. That is why equity markets and bond markets have held up decently well despite an extremely concerning environment.
It’s hard to figure out the ECB’s real thinking, but I was struck by some comments made this week.
Look at what ECB President Mario Draghi noted, which was picked up by the WSJ:
The ECB’s purchases of government bonds are “neither eternal, nor infinite,” Mr. Draghi said in a speech in Berlin, stressing it would take “a lot” more than monetary-policy measures to restore market confidence in the euro zone.
Asked whether the ECB should copy the U.K. and U.S. in printing money to buy government bonds, a policy known as quantitative easing, Mr. Draghi said: “I don’t see any evidence that quantitative easing leads to stellar economic performance” in those economies. EU treaties forbid monetary financing of government debt, he added.
And the WSJ further reports these comments this week from German Bundesbank president and ECB governing council member Jens Weidmann:
The idea that the ECB should turn on the printing presses to help finance some debt-ridden euro-zone states should be put to rest for good, Mr. Weidmann said. Central bank “independence is lost when monetary policy is tied to the wagon of fiscal policy and then loses control over prices,” he said.
It certainly is possible that the ECB is simply posturing in order to force European countries to get their financial act in order, but it is also possible that the ECB truly has no intention to provide a massive backstop to this crisis under any scenario. A very scary thought.