Image via WikipediaI always get a kick out of stories like this and even more so the fact that people get all worked up about this. Basically, it's about privacy issues and how your gadgets will betray you in the sense that you can be tracked and your actions documented. We all know that unless you move off the grid, basically everything you do is tracked. Use a credit card....trackable. Have your phone on....traceable. Drive a car....completely traceable. Walk around in public spaces.....on video. The list goes on. To be honest, I've given up on worrying. Even if you move off the grid, good luck not being caught on video somewhere (which is already searchable based on facial features). Some people (like the Unabomber) may like living in the backwoods but I can't get my Starbucks there. I like my car. I like my credit card. Sometimes I even like my phone. My theory is that the only people who really give a shit about privacy issues are those who have something to hide. Shacking up with your mistress? Hiding from the g/f or wife! Trying to avoid taxes? Good ol' tax evasion! Avoiding surveillance cameras? Uh, criminal or fugitive! You get my point. Sure, we screw up at times and don't want this documented. I'm convinced somewhere I'm on camera picking my nose in an elevator or scratching my butt. No one really cares and if they do (about my nose or butt), they have much worse problems than privacy!
I really like Hugh's comics! Some are just so dead on. He actually twittered this quote before and then ended up posting this cartoon afterwards. So, so true! There are tons of hyper-connected individuals running around and I too have been asking myself whether being hyper-connected is all it's made out to be. I believe it's not worth much at all after giving it some thought. If you don't work on creating value, simply being hyper-connected is nothing else than entertainment and ego-stroking. You at best spread gossip. Make sure that each of those nodes (as depicted well by the cartoon below) is either worth something or you are worth something to them. This takes work! This require execution! This demands follow-up and initiative.
As VentureBeat points out, music is obviously going to play a critical role in Apple's 3G future. Well, this isn't really rocket science....the iPhone still is an iPod. It's also a no-brainer that you will eventually be buying your music off of iTunes while enroute if you so wish. There is no doubt in my mind that with 3G on the iPhone, you'll be able to download music via such connection. VentureBeat argues though that it would be wrong for Apple to try and make money on ringtones, considering these an extension of music in general. To be honest, I think Apple has been doing damn good at making money and getting their devices into everybody's hands. iTunes is also obviously a success. Now as to ringtones, let's look at what VentureBeat says about this:
I sincerely hope Apple isn’t planning on making ringtones a key part of its strategy. If Apple and the music labels were smart they would team up to make it so that ringtones were included with all iTunes purchases made on the iPhone. That could really spark some sales from the device.
If Apple and the music labels were truly partners and working closely together, a lot of things would be different. Yet they aren't and probably won't be near term. It's also as false presumption that it makes sense to include ringtones with the music as an extension of the sale. This may trigger some sales growth of tracks on iTunes very short-term but it's not going to spark a run on the store. Not enough people care. I believe Apple will do it right in terms of offering ringtones to those who want them (and are willing to pay outrageous prices for them) but please don't include them for everyone, which in turn could make my future purchases of tracks more expensive. One thing to remember is that Apple will do what is going to earn them the most money and the greatest margins (ringtones generally are a wildly successful business for others). Thinking out loud what one would like to see from Apple is not how strategy is driven.
According to this article, 3 out of 10 homes have given up on the landline and only use mobile phones. Finally, people are starting to completely make the switch. Well, I guess I was a an early adopter of this trend. I haven't had a landline since 1999. Here are some other interesting trends out of this survey:
The survey also found that:
I don't care what anyone says (nor does Steve) when it comes to luck. In his blog post, "Once You're Lucky, Twice You're Bloody Lucky", he nails it. Luck ALWAYS plays a role. Sure luck is actually taking advantage of opportunities which present themselves (or however else you want to discount it). But when you get to the bottom of it, it's still luck. I think back on all the things which have happened in my career (as well as life in general) and often think to myself "you are one lucky bastard". I used to delude myself sometimes into thinking I was good but there simply were times when I was lucky. Sure I busted my butt for a long time and went that extra yard when others didn't but let's be honest, sometimes it's just about getting the breaks. As soon as you embrace this reality, it makes dealing with failure, which inevitably will come at some point, so much easier!
Here's an interesting article from Private Equity Hub. What I don't quite understand is arguing in one article that the venture capital model is dead while at the same time proclaiming that venture capital will survive as it always does. What's the point? That markets evolve and everyone has to adapt? Oh well! Back to work everyone.
The Death and Re-Birth of Venture Capital
Michael Butler is chairman and CEO of investment bank Cascadia Capital. He is writing a book titled Financing the Future and the Next Wave of 21st Century Innovation, and is serializing it here at peHUB. What follows is an excerpt from the fourth chapter.
A decade ago, every ambitious and analytical business-school student dreamed of becoming a rock-star venture capitalist like John Doerr or Jim Clark. And why not? The returns were robust, the headlines and magazine covers were positive, and the personal wealth just piled up.
There’s a very different kind of pile up today on Sand Hill Road, however. And it looks more like a car crash than a personal cash stash. Very few venture capitalists are crying poverty, but the VC industry is undergoing a wrenching and major restructuring that will cause unfamiliar pain and dislocation for a long time to come.
To put it bluntly, the venture capital model is broken and even the smartest VC’s aren’t sure how to fix it – or if it can be fixed at all.
While they’re looking for elusive answers, the venture business is being partitioned into two sub-segments – the winners, who represent 20 percent of the firms, and the also-rans, who account for the remaining 80 percent.
For the most part, the winners are big, established brand-names like Kleiner-Perkins, Sequoia and NEA, or geographic and/or industry specific funds like OVP and Technology Partners. In both cases, these winners are still generating attractive risk-adjusted returns on capital. And because of their strong and proven track records, these blue-chip firms will almost certainly continue to get the best access to the best deals and best entrepreneurs. This means, of course, that the best pension funds and endowments will keep investing in these elite funds, accentuating and perpetuating the emerging two-tier structure of the venture capital industry.
By almost any measure, the VC business is shrinking today in the wake of the unprecedented Internet market collapse of a few years ago. Between 2000 and 2007, for example, the amount of venture capital invested dropped from $105 billion a year to $29 billion; during the same time period, the number of annual deals fell from nearly 8,000 to just under 4,000. Perhaps more telling is the fact that the number of venture capital firms in the United States contracted by 49 percent between 2000 and 2006.
I believe there are five reasons why the contraction will continue for the foreseeable future in the venture capital industry.
First, the technology and telecommunications sectors, which have been responsible for so much VC growth over the past decade, are slowing down. There are still interesting situations in wireless software, and the SaaS model is intriguing, but for the most part innovation seems less compelling in IT right now. In addition, many of the opportunities that currently exist in new media and on the Internet require very little capital compared to software development and, thus, may lend themselves more to angel investing than venture capital.
Second, it’s unclear whether most venture capital firms can successfully diversify and migrate from information technology and telecommunications into new segments like clean technology, alternative energy or healthcare. It’s true that $3 billion of venture money was invested in clean technology last year, but generating meaningful returns in these still-emerging businesses requires specialized expertise, and many of the tech and telecom focused VC funds don’t seem to have that knowledge base readily available at this point in time.
Third, there is intensifying competition from European venture capital firms, which have sophisticated talent and experience in several of these new and growing sectors, including the clean technology space. Their experience and expertise, combined with the favorable exchange rate, puts U.S. VC’s in a bit of a box – and this probably won’t let up anytime soon. Right now, we’re involved in a number of deals that have come from solid and successful European VC’s.
Fourth, an increasing number of entrepreneurs are seriously questioning whether venture capital mentoring is all it’s been cracked up to be – particularly in light of the start-up carnage that was left in the wake of the Internet revolution earlier this decade. More and more fledgling companies associate a double negative with the venture capital experience: expensive money and ineffective counseling.
Fifth, angel investors are squeezing venture capitalists out of a number of small but potentially lucrative deals. This represents quite a turn of the wheel, because venture capitalists had the upper hand during the last cycle and frequently crammed down on the angels. There is definitely some bad financial blood here – and, quite simply, this is pay-back time. The angels’ increasing significance was demonstrated recently when CleverSet – a software company that recommends online products – relied on them for a good chunk of financing.
So, the once-vaunted VC model is broken – now what? How does it get mended? And how long will it take?
I’ll answer the second question first by saying that, given the long lifecycle of VC funds, it’s going to take some time for the venture capital community to fully adjust to the new reality that has befallen it – maybe even a full decade of true transformation.
And during those 10 years, the VC’s who survive will likely have to become one of three types of funds:
• Regionally focused funds – Funds that are sized appropriately and are focused on a geographic region can be very successful. By bringing local market insight, a network of local relationships and on-site mentoring, geographically focused funds can gain access to the highest quality deals and generate attractive returns. Madrona Venture Group, for example, has done a good job of sizing its fund to the opportunity at hand. Madrona has focused on the Pacific Northwest and has generated attractive returns for its investors.
• Specialized or industry focused funds – VC’s will have to be nimble over the next few years and go where the dynamic companies are – the alternative energy, clean technology and healthcare sectors. These emerging segments are complex – and combine science and sociology; building a new Web browser, for instance, is not the same thing as saving the world from the impact of climate change. Technology Partners is a wonderful example of a fund that has changed its focus and emerged as a leader by focusing on life sciences and clean tech.
• Fund Complexes – The funds that don’t downsize and/or specialize, the ones that remain large, will likely need to become multi-asset class and global to be able to generate the required returns on their capital. Funds such as Sequoia, Summit Partners and Ignition Partners are offering access to some or all of the following: seed, early-stage VC, late-stage VC, growth equity capital, PE, mezzanine debt and public equity capital. And they are making investments not only in the U.S. and Europe, but also in China, India and Israel.
The VC community will likely end up looking much like the commercial banking and investment banking industries – some very large and global players with broad product offerings, and a lot of smaller focused boutique firms that have specialization as their competitive differentiations. The large funds will be more than $1 billion, and the small funds will be between $200 million and $250 million. We’ve learned from the commercial banking and investment banking experience that large and small firms can be very successful, but firms that fall into the middle – that are neither large nor small – won’t be able to generate attractive returns on capital.
The VC world looks extremely dark right now – and we haven’t even seen the worst fallout from the current financial cycle yet. But venture capital will somehow find a way to revive and renew itself.
It always has.
Ever since ADR, the first U.S. venture capital firm, was formed by Georges Doriot in 1946, innovation has been efficiently energized and capitalized in this country. The stagflation of the late 1970’s severely challenged VC’s and the Internet Bubble almost wiped many of them out. Now the industry is a much diminished version of its turn-of-the-century self. Yet when I look ahead, I see the top-tier VC firms – the winning 20 percent – continuing to pick winning companies with winning ideas. That’s more than comforting and sure to stimulate the economic growth this country needs to keep pace in the relentless global marketplace.
Having gone through the pain of unlearning (not by choice) how to write with pen and paper, I am again going through another annoying technology related development. To be a bit more specific, I completely lost the feeling for writing. I have basically been using keyboards non-stop since 1992 or so and I believe the last time I wrote more than a page of anything was senior year of high school. Now, when I actually try to sit down and write something, my writing is almost illegible and I really have to strain to write. It's so slow and awkward. I don't have the need to really write long text anymore but here and there it's nice to write a personal letter or note to someone. I avoid this because my writing looks like a three year olds chicken scratch.
Now, thanks to Microsoft, I've realized spelling is suffering as well. With Office 2007 and Windows XP, you have auto-correct features in your browser and all Office applications. I don't even bother anymore when typing to really pay attention to spelling. When I finish a paragraph or page, I simply look what's underlined in red, right-click and there you have it: the correct spelling, one click away. Don't get me wrong, I love this feature. At the same time, I realized recently that if I don't have auto-correct available I make many more errors than I would have earlier. It was simply then a matter of paying more attention. Now you don't have to.
This is more of an observation than a concern yet at the same time, I wonder what will be the situation in 10 years? Will future generations at some point simply forego writing completely? Will peoples' spelling really suffer? This will be an interesting trend to follow especially considering all kinds of further advances in technology.