Tom Willey and I went along to the Expo at the Wolfe Rd facility last week. It was very crowded, maybe 400 people in a space which'd have been comfortable for 250. Lots of enthusiastic young companies, and a few people with more experience.
Having watched 20 or so of the 32 presenting companies, here are notes.
Zeromail reminded me of Microsoft Outlook, about 3 versions back, before it was completely overtaken by featuritis. http://zeromail.com
MediaFunnel is a 'dashboard' for enterprises who need to manage a social media presence over many properties. Use it to find what is being said about the brand, as well as to coordinate a public presence. http://mediafunnel.com
Realglobe Inc run a cloud hosting service called C4SA in Japan - they aim to sell it in the US too. http://www.realglobe.jp
Narvalous is building a social game - avatars, 3D and all.
Carbon Lighthouse will take on energy management for your buildings to save you money and emit less carbon. This would make more sense in geographies with a functioning carbon tax regime. http://www.carbonlighthouse.com
eThor (not a useful name) has built software to connect mobile end systems to retailer's Point Of Sale systems - the example was food orders, but it's broader than that. http://ethorlink.com
Mobilitas SpA have built a platform for designing location-based mobile games - from Santiago, Chile
Snackr is open source code to create an alternative display for things in your RSS feed. I have all I can do to get through the updates for 400+ items in my feed, without having random items from it scrolling on my desktop. Wonder what they are really building ? http://snackr.net
Summary - some real products, lots of things which have been done before, many things which hadn't settled on a revenue model. Glad I wasn't judging, though there was a list of 70 companies, investors and big corporations, at least half of whom had actually sent someone to judge, from the look of the crowd at the front of the room.
Expanding on a comment from earlier in the week - the market for ideas is global.
So is the market for startups to implement ideas, and for people to work for those startups.
This was a response to a post on the Picklive (UK Fantasy Football) blog, describing Dave McClure's reaction to a question about language for a startup's description of itself. Tim Morgan suggests that UK companies shouldn't try to be Silicon Valley companies, but focus on doing something where they have a focus - by which he means an economic comparative advantage, I think.
Later he says that "the UK market is easily big enough for a startup to get traction and later become global."
This is certainly true for some things - particularly entertainment software. It may not be true for markets where there are very few UK based early adopters, or where the implementation of the idea requires actual hardware.
The UK market is comparatively small - the adjacent European market is fragmented by language/tax/law/currency.
The US market, and specifically Silicon Valley, has demonstrated success at selling technology into and buying from much bigger markets, including China and India (look at how many people from there, or with parents from those countries, live in the Valley). The Valley speaks (American) English, among other things. It's by far the easiest stepping stone to the global market. You don't have to move the whole company here - but having a sales and marketing presence here tightly coupled to the UK product management and developers will make scaling up and long term success much more likely.
The UK used to know how to do this, but has had much more success creating global scale financial services companies than it has had building big technology companies in the last couple of decades.
Too much tweeting, not enough blogging, recently. Here are the last few tweets from both my streams, with a little more background. Maybe each of these should go to Google+, and I may start to comment more there - when there's more to say than fits in the 140 character discipline imposed by Twitter, but not enough that I want to keep the words in my own space and track the analytics for them there. For me, LinkedIn and G+ compete for attention; Facebook is much more, though not completely, social than professional.
VCwatch is the twitter name I use for, literally, watching what Venture Capitalists are up to - turns out many other people are similarly interested. Other people starting or contemplating starting businesses, some people who service startups or VCs or both, and investors of all kinds are the followers.
Identity is a space in which I've been interested since spending some months corralling the different parts of Cisco which were involved with it, back in 2003. It is used as a catch-all for the concepts of authorization and authentication - who can use which resources, and to what extent are they whom they claim to be. I've known Mike Volpi since he ran Business Development at Cisco, and have been watching his recent work at Index Ventures, and Index Seed, with interest.
500 Startups is a hybrid startup incubator and seed fund, located in Mountain View (which is the next town to Los Altos, closer to the San Francisco Bay) founded by Dave McClure. It runs Demo Days, where mentors and potential investors get to review a large number of short presentations from the current cycle of startups. Mathew Linley at VentureBeat writes a couple of sentences summary on 15 of them for Day 1 http://venturebeat.com/2011/08/16/500-startups-batch-1/ , and another 15 for Day 2 http://venturebeat.com/2011/08/16/500-startups-demo-day-2/
Worth reading through if you are interested in what kind of companies Dave takes in to 500 Startups, and how much progress they've made.
Annejohn is the twitter name I use for 'other stuff'; technical material about infrastructure, items about the gaming space (since one of my investments is in Musemantik, who build tools for adding music to games), and more personal things.
Flash memory has evolved hugely from the days when it was a convenient replacement for floppy discs and came on 'thumb drives' - it's now a significant part of the data systems storage architecture design, fitting between on board RAM and spinning media for data access speed. Knowing the guys at Violin Memory (Morgan Littlewood and Matt Barletta are former colleagues) this piece mentions them as one of 10 companies in this space. Fusion-io just completed its first quarter as a public company and announced very positive numbers.
Tibco has been interesting since I worked with it to get its software certified for use on London trading floors, along with hardware from Alantec (a maker of low latency multiport ethernet bridges) in the early 1990s. This article is an interview with the CEO, Vivek Ranadivé, explaining the importance of capturing, analysing and taking action on data in 'real time'; ie time intervals short enough to make purchasing suggestions to users while they are still paying attention to whatever caught their interest and triggered the vendor's filter.
Bryce Roberts is a co-founder of O'Reilly AlphaTech Ventures - here he is writing about how "Training a generation of entrepreneurs to live as cash efficiently as possible during the market discovery phase of a startup, to me, is the biggest innovation happening at Y Combinator these days". We agree strongly, and think that the support of an incubator should be applicable to business types which need a longer horizon than are supported by Y Combinator, 500 Startups, or Technstars - businesses which are building components of infrastructure, which have enterprise customers and may actually build hardware.
Is this kind of expliction of interest? Let me know at firstname.lastname@example.org or by replying to @vcwatch or @annejohn
Cunning Systems evaluates product and service ideas in computing and communications. If you would like to discuss an idea, contact us at email@example.com
There have been some interesting ideas in what the science fiction world classifies as the 'hard science' category offered for review in the last couple of weeks. These are intruiging - seeing what people claim can be done with innovative physics - and frustrating - since the proponents can't or won't say enough about their idea to make it possible to do a proper assessment.
The end result is that one says "that's a plausible claim, especially given the background of the team", or not, basing the plausibility on independent knowledge of other products or other research. Usually what people are really asking, though, is whether it is possible to build a business from the idea.
From long experience with getting commercial enterprises to adopt new technology, the rough rule is that the results they derive from making a change have to be 10X better than the current solution to make it worth disrupting business as usual. This rule is particularly applicable to performance gains and process or component changes. One big exception to the rule is in the rare case where the new thing defends the business from attack, or ransom demands. From the point of view of the company with the new idea, the ideal situation is one where a really big business absolutely depends on their technology, and will take steps to either acquire the technology for itself or have one of its trusted business partners do so, in order to gain continuity of access to the idea.
As any of you who follow my Twitter updates (@annejohn) will know, there are regular posts marked 'Infrastructure'. Fundamentaly, Twitter, Facebook, Google, Amazon, Apple and hundreds of businesses like those would not have anything like the reach and market that they do without the existence of the public Internet. The Internet exists as a collaboration between national and international Service Providers, purchasing core IP routers from Cisco and Juniper. The 'cloud', consolidating very large groups of servers into a small number of locations (data centers) where they are connected with access switches and more routers, has grown in effectiveness enormously in the last few years, driven particularly by Google and Amazon.
When commercial enterprises were building their own private data centers, they could, and did, seek out 'best of breed' suppliers of switches, routers, storage, and servers. Accordingly a diverse set of infrastructure companies emerged to serve that need. At this point in the cycle, software and applications developers don't need to create and provision their own data centers. They can buy access to computing power at Amazon or Rackspace, for example, at whatever granularity in time, CPU capacity, memory, operating system mix, and bandwidth suits their business model.
Correlated with this (it's not clear that it's a consequence) there is a phase of consolidation going on in the suppliers of hardware which go into big data centers.
Yesterday Intel announced it is to acquire Fulcrum, a fabless maker of 10G Ethernet switch chips. Today Dell is buying Force 10, which makes 10GE switches.
As Andy Bechtolscheim makes clear in a rare blog post, this development makes it easier for competitors to Cisco, like Arista Networks, to buy merchant silicon switch chips without having to make the enormous investment in engineering resource which Cisco did, to build its own switch chip designs. It would be interesting to construct a productivity and profitability index, to compare Fulcrum development with the output from the business units building the Cisco Nexus, 6500, 4900, 4500, and 3900 series switches. Broadcom is the other big competitor for Intel - Broadcom bought Dune, which made remarkably sophisticted switch chips, at the end of 2009.
As various of the analysts have been pointing out, these acquisitions leave Brocade (which bought Foundry in mid 2008) out (there had been rumors that Dell was considering buying Brocade). Extreme also makes 10GE switches.
Speculatively, consider other components of the data center - like reliable rapid access for remote devices. Web content optimization (Akamai, Limelight, etc) is part of this - so are companies like Zeus and Aptimize, which are to be bought by Riverbed. Also critical are companies like Ciena and Infinera, making it possible to get ever higher data rates over the long distance fiber cable connecting the data centres.
Security needs to be embedded into all of the components in a data centre solution, without being over implemented (multiple layers of encryption can happen but are likely to hinder more than help) or making it too difficult to pick the right compromise between useability and protection.
Hardware infrastructure is critical to many businesses which normally can take it for granted,just by paying a monthly or useage based fee. There are some big businesses, Intel, and Cisco being examples, without which the software apps business would not be possible.
This was written for a West coast based American. It doesn't attempt a complete catalog. If you have corrections or additions, let me know and I'll update it.
General observation is that there are a lot of small scale startups, most of them with clue about their specific idea/feature, but not about how to run a business. There's an opportunity to do a 'collect smart people and ideas', and form them into scaled up development teams, with sales and product marketing based here on the West coast.
- Scottish Enterprise, a Scottish government funded group, has created this by making grants available against matching funds at small scale (up to $150,000) per startup - doled out in stages and audited with substantial overhead in time and cost for the startups. Lack of bank lending is another factor which contributes - small companies can't get bank loans for operating funds.
- There are a few VCs based in Edinburgh and Glasgow, with small funds compared to here. There are some angel investment groups too - they are slow and conservative.
- Areas of focus - cleantech gets government funding and attention. Because of the long history of exploration in the N Sea, there is a rich cluster of engineering firms at all scales who are innovative and are used to world wide operations.
- There is a noticable bio-tech cluster - the National Health Service is actually easier to work with and more supportive of new things than the US medical business.
- Dundee has a well established gaming cluster, rapidly adapting to free to play mobile games from the original large budget PC and console games development they used to do.
- Edinburgh has a set of B to B and B to C businesses - Hubdub (games for sports fans) is a sucessful exception.
Earlier this week, the International Game Developers Association (Silicon Valley chapter) and Silicon Valley Fundraising held a joint event hosted by Cooley LLP at their Palo Alto offices. Speakers included Jason Citron and Ben Savage, CEOs and founders at OpenFeint and Sibblingz respectively, Mark Weeks, a Cooley partner, Marc Burch, angel investor, and Benjamin Wan, game builder and investor.
Several themes emerged.
The business of games is changing again - the momentum is no longer in PC games, nor console games, but in mobile games - iOS and Android as the operating systems, phones and tablets as the physical interface. This was a dominant theme in the panel recomendataions for developer focus. Om Malik's article about the Alive Web, springing off from turntable.fm, has a similar theme - new entertainment is about doing something and enjoying it more because of your interaction with others doing the same. OpenFeint has built tools to be incorporated in games to encourage social network interaction while playing.
There's a big change in the business model happening in parallel. App games can be 'free to download', if they charge for virtual goods in the game. Players' competitive nature motivates them to purchase things which are used to more quickly gain points and achieve higher levels. One of the panellists cited numbers - 'free to download' game apps are downloaded 17 times more than apps for which there is an initial fee; players who make an in-game payment spend 3 times more than players who pay an initial fee. It would be good to know the source of those numbers - there wasn't an opportunity to ask during the meeting. Skpye gets business this way - lots of free use, some users who pay more for extra features - enough that they have 40% per annum growth rate in paying users.
Gamification - March Burch was very encouraging about enterprises's need for gaming techniques used in training tools, and his readiness to invest in companies offering suitable technology.
There were half a dozen tables, with demos for various games. I talked to OpenFeint and Fractal Games, as well as to Pam Washburn, SVP Business Development for Cooley who was hosting the meeting. TwitchGames introduced themselves later.
Y-combinator, TechStars, 500startups, and Seedcamp have been generating the most publicity, but there are many hundreds of incubators - and they range from the 'shared office space, power, network and telephones' model to the full on 'platform' , where the startup teams build the product, while sharing access to everything else a company requires to operate.
This is one of those topics where every time I look at Twitter or my RSS feed another worthwhile link appears - so post, and update later.
Incubators, or accelerators, have been around for a long time. Y-combinator and TechStars, in particular, have demonstrated repeated success as measured by 'graduation' from the program - companies which get have used their initial funding to demonstrate traction, and which have been acquired for useful multiples of their initial valuation. These two, like Seedcamp in Europe, are focussed on high volume consumer services delivered using the Web or as a mobile phone app. In the networking business we call these 'eyeball companies' - part of their value is their reach to many millions of consumers, some fraction of whom pay for their use of the service, and most of whom will consume advertising along with the service - often the advertising is the primary revenue generator.
Many necessary products, including the infrastructure over which these services run, are not amenable to this model - they require more investment, building hardware, and sales through channels with some degree of customization. I've been pursuing the question of whether an incubator would be a useful model for bringing together small companies with lower volume but high value markets who could usefully collaborate, while sharing a 'platform'. One example of this platform implementation is Innovation Works, in Beijing.
The Accelerator Group describes the operation
" Innovation Works houses 400 young people working away at building a wide range of companies. About 30 of these are directly employed by Innovation Works and are called the ‘platform team’. These folks (average age I guess about 27/28) are business, finance and marketing graduates whose job it is to attend to the formation, funding, administrating, recruiting for the start-up companies and helping them with their ‘go to market’ plans. In fact, they do everything other than build the product itself."
16 June 2011 Updating (again) to add YouWeb to the incubator list.
21 June 2011 Updating to add TechCrunch article on Kaufman Fellows Research study on European incubators, and Mark Littlewood's discussion of the same topic at NESTA today.
28 June Updating to add links for the newly launched Appsterdam community for apps developers to self organize in Amsterdam.
12 July - Three additions - AngelPad (Xooglers, in San Francisco), Tandem (not the computer company) Entrepreneurs in Burlingame, CA, and PwC's accelerator for Luxemburg, using Plug and Play as the Silicon Valley base.
Last week I attended and talked at EIE'11, the investment conference run by the Informatics department of the University of Edinburgh. The focus is on creating interest in the startup companies spun out from the ideas of the academic staff and students.
Wednesday afternoon was essentially investors talking among themselves. The most useful perspective came from Deborah Magid, Director in the IBM Venture Capital group, visiting (like myself) from the Bay Area. She was very clear about IBM's approach - they need to see $10m in revenue to consider an aquisition - they get involved with much smaller companies through the partner program and competitons like Smartcamp.
Thursday was for pitches - some in person, and some by means of a series of 1 minute videos, 1 per company, presented back to back in sets of ten. There was a useful collection of data about numbers and amounts of investments into Scotland by Stuart McKnight, Managing Director at Ascendant Corporate Finance. Sandy Ferguson, Senior Partner at MBM Commercial gave perspective on the lack of interaction between the billions of pounds of capital being managed by insurance and pensions companies in Scotland and the startups seeking funding, contrasting that with the investment approach taken by, for example, Calpers, which invests less than 10% of its large portfolio in 'alternatives' which include venture capital.
Nigel Eccles talked about Fanduel, and I talked about Musemantik - both spinouts from the Informatics department, at different stages of development.
There's a list of the exhibiting and pitching companies at the EIE'11 website. Most interesting to me were Contemplate - for finding concurrency issues with Java code, with two large London investment banks as initial users; and D-light, who have developed a modulation scheme useable over LED lighting - think wifi, but using light instead of wireless frequency.