Otherwise know as making investments in areas where you actually know something about the industry, market, and users.
Continuing the theme of summarizing from Silicon Valley - one of last week's memes was 'Angel List makes it too easy for investors to "Spray and Pray" ' . Dave McClure (Master of 500 Hats) is a founding partner at 500 Startups, an internet startup seed fund and incubator program in Mountain View. His post from yesterday collects links, and explains with typical Dave attitude why value added investment is important, and why a background in engineering, building products, marketing, getting customers and revenue is something investors should have.
".. a quantitative, high-volume investment strategy filtered based on reasonable assessment of team, product, market, customer & revenue along with domain-specific expertise, and selective follow-on investment with incremental knowledge of company metrics and progress CAN result in good outcomes.
or at least i hope so, because that's what i'm doing."
Posted here because we agree strongly with this thesis, and are making domain specific expertise available to people who understand that they need it.
There have been several new guides to the Valley posted recently - collecting the links here.
The Valley is a virtual place as well as a real place - and it believes strongly in itself. Some days it feels like a collective self-delusion - if all these people didn't believe so strongly that they could build huge user communities and that investors would value what they built, that the place would dry up and blow away.
Robert Scoble has a good summary of the places which capture the origins and recent history. Steve Blank lists more of the places where you can get a current sense of what's going on, if you have enough context to understand what you are hearing.
The Valley has about 10m people in it, but it's not completely built up. There are parks and open spaces, though they aren't as convenient as the London Royal Parks. If you are interested in living here, it's worth driving to and walking in some of the residential areas - having first checked Zillow, for example, to understand which might be in your price range. For certain areas, house prices are more affected by Google and Apple's stock price, or the secondary market in Facebook shares, than by the number of repossessions.
If you are actively looking for investors, then AngelList and CapLinked are required reading.
Last week's Nanog meeting was in Miami, with Terremark as sponsor, again. (Terremark is about to be acquired by Verizon).
Matt Petach took detailed, almost verbatim, notes for much of the meeting - like me, he was listening and watching the video stream, not attending in person.
The highlights, from my viewpoint :
Distributed Denial of Service attacks are ramping up again, according to the Arbor security report. There was at least one attack (DNS reflection) at 100Gbps during 2010.
400Gbps (16 x 25G streams) is the next target beyond 100Ge
The second Arbor talk was about mobile networks - after the RAN and the backhaul, the traffic from them runs over the same infrastructure supported by Nanog operators, but there is very little
cross over in interest. 75% of mobile operators say security is poor, bad, or non-existent.
Jim Cowie (Renesys) ran a panel sesion in the afternoon which reviewed mobile network operations, and in particular the GPRS roaming exchange, modelled after AMSIX, and the proposals for IPX (not a Novell protocol, but a private over the top network for mobile traffic, and the issues with it for voice)
Jan Schaumann, Yahoo! described their L3 load balancer (L3DSR) development - Yahoo Mail is using it, and they will roll it out to other properties. Twitter is using this too - Yahoo will opensource
the kernel modules and iptables(8) plugin available for Free BSD and RHEL. A10, Brocade, and Citrix have built hardware support.
The silliest presentation was from Neil Farquharson, Alcatel-Lucent - his first time at Nanog, used the opening of the film Bambi (he'd been watching it with his kids) as an analogy to justify a unified control plane across IP to optics. He was encouraging people to come to a BoF at Denver.
IPv6 Deployment experiences wasn't streamed, though there are slides from Level3 (deployment experience, Hurricane Electric (deployment history, details), LACNIC (v4 runout effects), and SpaceNet AG (v6 routing table).
IPv6 day discussed - Yahoo!, and Akamai. There's a lot of brokenness .. the Day is an attempt to get a better idea of how much brokenness.
Shyam Mani, Mozilla, describes their experience in turning on DNSSEC, including the initial breakages.
BGP routing: Rob Shakir on his IETF draft which aims to reduce the impact on service availablity of session reset.
avoid sending notification in first place (avoid teardown!)
recover RIB consistency (something went wrong, but can we continue functioning?)
restart BGP hitlessly--avoid forwarding impacts while getting out of error condition
monitoring--as protocol gets more complicated, need to make sure it's still doing right thing
Route Flap dampening revived - Lixia Zhang presented her students' work - suggests decoupling flap detection, flap suppression.
Jim Cowie had a nice animation of how the Internet in Egypt disconnected - it reconnected again 5 days later.
Discussion of IPv4 runout.
Nanog 51 Agenda with links to slides and video
Last week's big ripple through the twittersphere was caused by Yuri Milner, again (his fund, DST, made a splash with its funding of Facebook and Groupon in 2009). He (personally, not as CEO of DST) and Ron Conway's SV Angel fund, are offerring $150,000 to each of the approximately 40 companies in the most recent Y-combinator group.
Lots of people wrote about it, first in breathless 'this changes everything' tones from Davos, and later in more measured 'there's lots of other fish in the pond' terms as there was more time to think through the consequences. My take is that it shows what can be done with comparatively small amounts of money by investors with the courage of their convictions. There will likely be more companies which can get their FMCA (Fast Moving Consumer App) out to market without requiring late stage or even early stage funds. Having achieved entry to Y Combinator, the startups have its contacts, its support network, to which this money adds heft. Other incubators have a model with which to approach potential funding sources.
The story on Techcrunch
Roger Ehrenberg (managing partner, IA Ventures) blog
Brandon Watson (Microsoft, ex Soros Private Equity) comments
Digital Sky Technologies background
Personal interviews with YC people
This time of year is when the weather in the valley makes it one of the most attractive places to be. We've just had more than 10 days of mild sunshine, with no frost, no rain, and day time highs around 16C. Roses are blooming, pear and early flowering cherries are in blossom, and there are ripe raspberries on the new bush in my garden.
New York, on the other hand, had 0.5m of snow during the week. Bejing looks to be cold and sunny. London has been somewhat warmer, but all those cities require coats, hats, gloves and heavy shoes - here it's been shorts and sandals weather, at least for youngsters in the middle of the day. Business goes on - in Menlo Park and Palo Alto roads were congested, traffic at a dead slow. 101, that sensitive barometer of business activity, was heavily congested in the SE direction but running at the limit going NW from San Jose to Mountain View .. both of those samples taken at around 5.30pm.
On the business front, Musemantik (from Edinburgh) are sharing a booth at the Games Development Conference taking place in San Francisco at the end of February. Contact me if you are interested in meeting with the founders to learn more about tools which formalize and computationally control real-time emotion enhancement, using new or existing music, to make a more intense experience for game players.
Last week Peter Thiel (ex PayPal) talked at the NextGen conference about the investment perspective he uses for the Founders Fund.
He's interested in things which can make a big difference - if you are starting a company, you are taking so much risk that you might as well try to do something big. Pick a contrarian field, rather than dive into the current bubble. They are interested in artificial intelligence, robotics, space, and next generation bio-technology, among other things. They look for talented people passionate about changing the world. Only some thinking should be outsourced to others. Companies with a complex sales cycle are underestimated.
All of this is encouraging for someone who has made a habit of looking out for the ideas and technologies which are likely to have long term fundamental effects, as an indicator for where to invest time and attention. It feels very different from the 'chase the current meme' which appears to drive many investors' decisions.
Talking of current themes, Brad Feld said today he's seen several proposals for 'the Quora of X' - people taking advantage of the meme for curated Q&A to use it as an explanation for their latest idea.
Quora is one of the better Question and Answer forums - I joined it last August. To get started, one can follow Facebook friends, Twitter followers, and/or topics. Anything one writes is public - so over time, answers accumulate into something that looks a lot like a blog. There's some thoughtful design keeping the pages simple in appearance, while linking back to the original questions to preserve context. There's an accumulation of reputation, too, as logged-in readers can vote up and thank for answers. So far, it's not obvious what the business model will be (and the question has been asked).
Robert Scoble, who tracks interesting technology trends and write about them, recently discovered Quora, and is enthusiastic - when Robert is enthusiastic, several thousand of his followers know all about it, and quite a number of them joined Quora too. It seems to have survived that onslaught.
Roger Ehrenberg, at IAVentures, has been writing long form answers in the Venture Capital and Startups topics - a couple of days ago he asked (on Twitter) whether he should cross post his answers from Quora to his own blog. Quora makes it easy to send a post to Twitter pointing to a new Quora answer. Adam Lasnick, who's a Google Webmaster, has a good list of pros and cons.
Like him, I conclude that the visibility, associated possibility of helping more people, and ease of use outweighs the disadvantages - like having much less visibility into who sees your writing. You note, however, that I'm writing this as a blog post on my own site - it's not a question, and some of the audience for my blog hasn't (yet) found Quora ...
Stackoverflow is a longer established Q & A site, much more tightly focused for programmers - reputations built there are an obvious target for recruiters, as Robert Scoble pointed out yesterday. Hunch is also driven by questions, and gives answers - initially it looked like a trivia game, but has become more obviously a way to recommend products by matching people's preference patterns.
All examples of crowd sourcing - building a site where the users of the site build the content and the value. Facebook are past masters at this (and Goldman Sachs agrees, given its $375m ($75m to Digital Sky) investment). We are being their digital peasants. Time to build our own castle ?