Diary of a Geek VC

NewTeeVee Live 2009 #1

Thu, 12 Nov 2009 14:25:33 -0500

At the NewTeeVee Live conference in SF today. Very interesting mix of tech and media players, showing their stuff and making predictions for the future.

Some observations:

Avner from Boxee presented - less specific about the move to Beta and the Boxee “box” to be released soon. He was very good, promotional, but in a good way. I still worry they are toast because of he moves of other players with entrenched positions and already connected to the TV (BluRay, Game consoles, etc). Said that in 10 years, there will be more Apple subs than Comcast subs. I’d take that bet!

Clicker also presented - and I loved it. An EPG for OTT and other content (music videos, movies, TV). Wonder how they’ll get access to live content?

Canesta - free space remote control using hand gestures. Very Jetsons, but I wonder if it can really change user behavior. That being said, Fujitsu is releasing a new TV with this integrated. Worth watching.

Elemental - enterprise-class Video encoder/transcoder using boxes full of Nvidia Tesla cards. Very cool, but I was confused as to whether enterprise focus made sense?

Eric Flanigan of MTV spoke about the digital impact of such Comedy Central shows as South Park, Colbert Report and Daily Show. I love this guy. Interesting insights about the on-demand / long term value & applicability of such shows as Colbert, with 160 shows/year. Time shifting a day or two is relevant, but he wondered out loud whether DVD of a season made sense.

Amy Banse of Comcast is now being grilled about TV Everywhere. Very thoughtful approach to the video ecosystem - not just a “Comcast is best, so who cares about Netflix” talking head. More to follow ...

My Video Summer Vacation

Wed, 9 Sep 2009 10:06:49 -0400

Now that Labor Day has passed, the perennial question is being asked: “What did you do for your summer vacation?”

I spent the bulk of my summer immersed in the video economy, talking with a lot of well-informed and interesting people, evaluating several startups (5), culminating in the investment in two companies in the space (sorry no details yet).

What I learned was very interesting and somewhat surprising, so I figured I’d share some of the themes in hopes of getting some good dialog brewing. In this post I’ll be describing the core theme I noticed - Convergence & The Battle for the Living Room. In subsequent notes, I will try to tackle mobile video and how all this will be paid for.

The battle for the living room is far more complex than I imagined, even though its first level is easy to understand - I call it the “Set-Top-Box Skirmish.” It’s really the Coke-vs-Pepsi-vs-Dr.Pepper battle royale among Cable (62% share) /Satellite (32%) / Telco (6%) providers as they try to dislodge single digit subscriber %‘s from one another, through clever commercials, direct mail offers and give-aways (have you gotten your free netbook yet?). It’s all about bundling, HD and VoD in this fight as each of the combatants tries to one-up the other.

As these players duke it out, the second front of the war is in its early stages - let’s call this the “Over-the-Top-Onslaught” - where the Internet is used as delivery network. At a rudimentary level, this war began years ago with the delivery of video to the PC by the likes of Broadcast.com and more modernly by YouTube. The state of art has advanced greatly over the ensuing years and there is now a barrage of ways of getting very high quality and oft time illegal professional content over the Internet to your TV set. The bulk of this Internet video is being watched on the PC, but the experience provided is very personal. The only way that Over-the-Top (OTT) can hope to narrow the 44:1 lead of TV is by moving onto the TV and into the “group” watching category - and in this vein I don’t that the PC is the likely winner (sorry Media Center, Boxee et al). I strongly believe that a dedicated (and existing) device category will win the battle - and the competitors are already gearing up. While the content and control of OTT is really version 1.0 - witness Netflix on Samsung Blu-Ray players (great quality video but (a) content is very limited now and (b) you must load your queue from a web browser) but I am told we can expect an onslaught of new connected devices at CES this coming January. The most exciting development to me this past year was the Internet-connected TV announced by Vizio, LG and others. With a wider array of content (VuDu which is an awesome service) these TVs are a glimpse of what’s yet to come. I expect the peripheral players (BD-DVD, Game Systems) will have a big opportunity- as they upgrade to support similar content as a way of enabling existing TVs.

You would think that the traditional video service providers should be worried about these OTT developments; they are. And while a full-fledged offering won’t be available for a while, they’re not sitting still. They see the same data - sooner than most -- and looking at Comcast’s moves to embrace the Internet (thePlatform, TVeverywhere, Fancast), I believe the battle is gearing up.

Some statistics to ponder:
Americans are watching more TV than ever, according to the September 2009 Nielsen A2/M2 Third Screen Report. As of 2Q09, the 284m Americans with TVs spend an average of 141 hrs each month watching TV more than 44 times that of Internet. The move of Internet video into the living room means more than 40b minutes of video and its associated advertising and sponsorship revenue will be up for grabs.

It’s interesting that Mobile and Internet viewing are nearly identical ... more on this later as I try to figure out what’s going on.

What Makes Great?

Thu, 16 Jul 2009 11:39:37 -0400

For the past several months as I have been meeting with entrepreneurs and company executives, I have been asking them the same question:

What is the key quality that makes a company great?

In my unscientific survey with a statistically insignificant sample size (N=~20), answers varied to an extent, but summing to a single word, would be commitment.

Respondents elaborated on their feedback, citing the commitment of the team to consistently adhere to the mission and core values of the company, persistence in never giving up when times looked dark.

And then there was my good friend Vince, who runs sales for a global tech giant, and has seen more than his share of successful companies big and small. He didn’t have to think for more than a moment when he uttered: ruthlessness.

Ruthlessness has such a pejorative association - one thinks of terrorists, pirates, the Yankees -- how can it be a key ingredient in making a company great? Surely there are companies whose personas are thought of in a ruthless light - Enron or the Yankees for example -- but they are usually considered to harbor criminals.

Webster’s 1828 Dictionary defines ruthlessness as follows:

a. Want of compassion; insensibility to the distresses of others.

The more I thought about it, the more I am convinced that Vince is right. But I am also convinced that the kind of ruthlessness that helps make companies great is just another facet of commitment.

Great companies take the steps that are in the best interests of making their business succeed, even if those decisions are, at times, unpopular or insensitive. These days it frequently means laying off employees who have given their all in pursuit of the company’s goals, in order to help lower burn rates to get through lean times. But it also means pulling out all stops to get that crucial customer, to recruit that key employee, or to line up a set of partnerships that will lift the company’s credibility. Think of Vinod Khosla waiting all day in the lobby of Computervision to steal a lynchpin deal away from Apollo.

Malcolm Gladwell’s book, Outliers, aptly subtitled, “The Story of Success,” focuses on individuals and the reasons for their extraordinary achievements. It’s a great (and fast) read that I recommend. In a Q&A on his website, Gladwell makes some comments about his book that are quite relevant to the topic of a company’s success:

My wish with Outliers is that it makes us understand how much of a group project success is. When outliers become outliers it is not just because of their own efforts. It's because of the contributions of lots of different people and lots of different circumstances— and that means that we, as a society, have more control about who succeeds—and how many of us succeed—than we think.

I realize that Gladwell wasn’t thinking about the success of a startup company - so I am taking strong poetic license here. But it’s my blog, so that’s ok.

Great companies are driven by outliers (individuals or collections) who are supported by a strong cast of committed team members - who in concert have a ruthless approach to winning. Sometimes that approach offends their constituents, sometimes it captivates them. In either case, they win. Particularly when their competition doesn’t exhibit the same desire.

So you may hate the Yankees as much as I do or maybe more. But the fact is that Derek Jeter doesn’t suck, despite the protestations of t-shirts sold outside Fenway. And neither do A-Rod, Johnny Damon, Mariano Rivera or any of the other thugs in that lineup. They have a ruthless desire to win and have been more consistent (I’d argue more committed) than any other MLB team. As a life-long Red Sox fan, it pains me to write this, but maybe startups can learn a lot from the Yankees.

Enough Already.

Fri, 29 May 2009 14:08:42 -0400

In September 2007 I posted (see it here) a suggestion that the locals stop whining about how bad the startup economy in Boston is relative to Silicon Valley.

This inferiority complex continues to be fueled by all the whining whirling around - about which company has moved to CA or shutdown, and which VC firm has shut down or moved or not invested in months. Phooey! These are such non-events in the grand scheme of things, we should all just be green-conscious and stop wasting any more bits on advancing the neurosis.

Consider the following facts in contemplation of a technology 12-step program for Boston:

1. Silicon Valley dominates venture capital dollars for enterprise software, networking equipment, consumer Internet and semiconductors - and has done so for quite a while and is unlikely to change anytime soon.
2. Thus, there are more enterprise software, networking equipment, consumer Internet and semiconductor companies started and funded in Silicon Valley.
3. So, the clusters of the most important companies in enterprise software, networking equipment, consumer Internet and semiconductors are found in Silicon Valley.
4. And, these important companies routinely buy Boston-based startups in enterprise software, networking equipment, consumer Internet and semiconductors sectors - to help them enter new or adjacent sectors, creating value for our employees and investors,
5. Then, engineers and marketing executives in the Silicon Valley companies routinely leave to cultivate new ideas in enterprise software, networking equipment, consumer Internet and semiconductors - as do their counterparts in Boston.
6. See step #1.

So what? We’ve become an outsourced R&D center for Microsoft, Oracle, Cisco, Google, Intel, et al, in enterprise software, networking equipment, consumer Internet and semiconductors. You can complain that VCs don’t go for the long ball enough and sell too quickly. Or that there aren’t enough strong product and customer marketing executives in Boston. Or that entrepreneurs just aren’t creating and VCs are just not funding the “big ideas” in these sectors. And you would be entirely correct. So what?

Enterprise software, networking equipment, consumer Internet and semiconductor sectors have reached a level of maturity with consolidation of vendors and market share. Will the leaders of these sectors be toppled at some point; sure - no empire lasts forever. But there needs to be some inflection point in order for this to take place. There are certainly some candidates for the sea change - virtualization and the cloud, true mobile broadband and others. In the mean time, we should expect to continue to see big tech companies - based in the Valley - buy little companies - to fill tactical and strategic needs. Particularly in a recession economy where R&D spending on anything that isn’t revenue positive or critically strategic is nil. And since still we’re one of the top spots for investing in these sectors, no big surprise that we get our fair share of M&A.

This doesn’t mean Boston is second rate; it means we’re not tops in these sectors. Who cares. Rather than bitch and whine, I prefer to acknowledge the situation (part of our 12 step program) and look for investment opportunities that either leverage this structure or focus on spaces whose leadership is up for grabs and where we Bostonians have comparative advantage - like robotics, MEMs, analog, video, med-tech, green-tech, and others.

How do we keep the great brains (from MIT and elsewhere) in Boston? As VCs, we need to fund them early and often. We need to find and cultivate talented marketing people in addition to great engineers. (easier said than done) And we need to be bold.

Great companies are bold; take advantage of the opportunities in front of them, build teams that exude optimism and commitment and don’t stop moving forward regardless of the obstacles before them. Silicon Valley doesn’t own the patent on boldness. Let’s stop acting like they do. It’s enough already.

CDN Summit at Streaming Media East 2009

Tue, 19 May 2009 16:12:14 -0400

I was a panelist at the CDN Summit at Streaming Media East in NYC May 11. My pal Jonathan Seelig was on the panel as well.