Archive for the ‘featured’ Category

Now Blogging on Medium

October 7th, 2015 No comments

As I return to venture investing, it looks like the Medium platform is a better place to be posting my venture analyses and thoughts.

You can check them out over at

A few of the more interesting posts:

Do Angel Investors in California Outperform the Rest of the World? (Hint: Yes. By a lot.)

Venture Haves and Have Nots

How does Venture Money Change with the Market?

“VC Bubble” a Reflection of Public Markets


Apps are for Creating iPhone Evangelists

April 22nd, 2010 2 comments

Apps as Powerful Word of Mouth Enabler for iPhone User-Evangelists

I witnessed a very common scene in a restaurant the other day: a woman had her iPhone out and was showing off some App to her friend.  It stuck me that this was both a powerful customer acquisition mechanism for Apple, and the creator of powerful incentives for Apple with respect to Apps and App developers.

From Apple’s perspective, the most important role of an App is to induce an existing iPhone user to become an evangelist for the product by showing off the latest greatest coolest funnest App to their friends.  Think of Apps as a customer acquisition enablement tool for Apple.  Given that motive, it is in their interest to have a constant supply of fresh, innovative, interesting eye-candy Apps.  It is NOT in their interest to have a single App stay in the top 25 for weeks on end. It is also NOT in their interest to have some App make its way into the top lists through some other means other than user popularity.  It’s not just that Apple doesn’t care that it is difficult to promote/buy your way in to the top lists, they actively don’t want you to be able to do that.

We need to recognize that the system has been designed by Apple to produce a constant flow of fresh Apps at the top of the list, and build App business models accordingly.

This is consistent with the Apps are to iPhones as Songs are to iPods approach that Apple is taking.


Democratization of the Startup Process

October 27th, 2009 2 comments
Capital Efficiency Sea Change Drives Democratization of Startup Process

Capital Efficiency Sea Change Drives Democratization of Startup Process

Much has been written about the dramatically reducing costs associated with getting a new company off the ground in many technology sectors.  There are many ways this new Capital Efficiency impacts the startup world.  It seems to me that there is a huge Democratization of the startup process, which should empower many entrepreneurs who would never have even gotten off the ground even a few years ago.

In the old standard company formation/maturation process for a technology startup, there were five sequential stages (simplifying tremendously):

(1)  Have Idea

(2)  Raise Capital

(3)  Build Product

(4)  Sell Product

(5)  Scale Up

Almost always, the most fundamental risk facing a startup is the Market Adoption Risk at the Sell Product stage.  The question of “will the dogs eat the dog food?” is generally where most startups fail.  But, before an Entrepreneur could even ask the question, they needed to undertake the herculean (and humbling, and long, and distracting) process of Raise Capital.  There are lots of Need/Nice-to-Have attributes required to be able to do this process:

(1)  Ability to go without salary for the many months the process takes

(2)  Introductions into Venture Firms, since they generally don’t like cold calls

(3)  Located in Silicon Valley

(4)  Ability to “Present Well”

(5)  Willingness to undertake this herculean task

Without these attributes, many potentially great ideas stayed at the idea stage, because the entrepreneur didn’t happen to have the attributes required to even undertake the Raise Capital stage.  But, the changes that enable Capital Efficiency in sectors like Mobile, Gaming, and Consumer Internet, have made it so cheap to put product into the market that entrepreneurs can go straight from Have Idea to Sell Product without any outside funding.  Of course, that first version will lack some bells and whistles, and the “Selling” part may be a bit hypothetical in that first version, but it is often possible to get customer adoption metrics with only tiny amounts of out-of-pocket expense for a team of one or two entrepreneurs.

This eliminates the need to Raise Capital right at the outset, and levels the playing field for entrepreneurs who don’t happen to have the full set of Nice/Need-to-Have attributes.  This democratization of the startup process has a huge positive impact on the ability for entrepreneurs to get businesses going, and the ramifications of this change are only just beginning to be to be felt and understood in the startup and venture ecosystem.

Some significant possible Democratizing results of Capital Efficiency:

  • Entrepreneurs outside of Silicon Valley are just as able to put product into the market.  All they need is a decent Internet connection. I believe this is the biggest potential impact of Capital Efficiency, and should be a huge benefit to places with highly skilled technical and creative talent.
  • Entrepreneurs without the ability to go with salary needn’t quit their day jobs (but watch out for the terms of any IP rights documents you signed).
  • Entrepreneurs without introductions to venture firms, or presentation polish, can skip straight to wowing the market with real users. When you get a kabillion users, it will be easier (but still a significant effort) to raise the money you need to scale your business.

Five Open Paths in Mobile

October 28th, 2008 No comments

There has been a lot of discussion around “Open” as it applies to Mobile, with plenty of expert commentary regarding the definition of Open. But, it seems to me that from the Entrepreneur’s perspective, and therefore for the Venture Investor, the most important aspect of Openness can be summarized as:

I don’t want an overly powerful player, who can cap my upside, between my company and my end customers.

Paths to End Customers

Paths to End Customers


By definition, the delivery channel for any Mobile functionality includes a Mobile Operator, who owns spectrum, has billing relationships with the end customers, and has broad marketing reach.  One can have an interesting philosophical discussion regarding whether or not this is a good thing for society, but the reality is that powerful players in supply chains take advantage of that power for their benefit.  They find ways to bring in your competitors, substitutes, and new entrants; they may even backward integrate to compete with you directly.  An Entrepreneur can rationally decide to work directly with the Mobile Operators, and sell through them, but the path is often a long and costly one.  I have successfully funded great companies like OZ Communications (acquired by Nokia) and InnoPath Software that do precisely this, and it took many years and tens of millions of dollars for each to reach profitable operation.  Alternatively, an Entrepreneur can attempt to side-step the Mobile Operators’ power.  It appears to me that there are five potential Open paths for doing this:

  1. Mobile Browser as the Access Mechanism.  Just as on the PC, a native application can provide a richer/more unique user experience, but there are lots of cases where the browser is good enough, and avoids down-loading an app or involving the Mobile Operator in pre-loading an app.  While today’s Mobile browsers seem limited relative to today’s PC browsers, they are pretty good compared to the PC browsers in place when many of today’s Internet giants got their start.  And, as the Mobile Operators and Handset Vendors respond to the browsing success of the iPhone, the quality of the average Mobile browser is on a rapid improvement curve right now.  As with PC browser based business models, the primary challenge is monetizing the users through some effective form of advertising or direct charging mechanism. 
  2. Voice and SMS as Universal Open Clients.Circuit switched phone calls, and Mobile Originated and Mobile Terminated text messages, are commodity priced in almost all geographies, and are generally free from Operator meddling (despite Verizon’s recent threat to charge three cents per application originated SMS).  Voice and SMS text capabilities are the universal clients in Mobile.  Sure, they have limited functionality, but there are interesting business models that can be built up based on these two types of “pre-loaded clients”, and almost everyone already knows how to use these clients.
  3. Mobile Applications. Just as in the PC environment, there are likely to be situations where an application’s deeper functionality is more important, and others where a broswer-based solution’s broader reach is more important.  If your solution needs to access the camera, the address book, the phone, etc, you need an application (at least, until the Mobile browsers get a whole lot better).  You “just” need to figure out (a) how to live with a business model where you only support a modest sub-set of the phones out there because the long-tail in handset platforms is incredibly long and costly to support, and (b) how to get distribution of your app onto handsets.
  4. End-to-End Mobile Offering.  Unlike the other four paths, this one is generally neither cheap nor quick, but it does afford a path to creating huge franchise value. BlackBerry, iPhone, and the Amazon Kindle are examples where the time, effort, and expense, to bring an end-to-end solution to market have resulted in an offering where the Mobile Operator is essentially only an (important) supplier. The end customer first and foremost buys the specific solution (which may or may not include voice), and generally has an ongoing billing relationship with that solution provider. Line up plenty of financial backing before stepping onto this path!
  5. Live with Operator or Facilitator Based Billing.  The revenue share split may be tolerable, and the host operator may refrain from competing with you forever—or, they may wait for you to work out the kinks and prove the existence of the market, then compete with you.  Premium SMS or the App Store are attractive in that they allow you to get up and running quickly, deal with the difficult billing back-end, and (for the App Store scenario) are a great distribution mechanism.  The question to ask yourself is: “if it looks like I am on a path to building a multi-billion dollar business, what prevents the Mobile Operator (or Steve Jobs) from competing with me, and/or denying me access to my end customers?”  The Mobile Operators eventually learned how to sell Ringtones, much to the chagrin of the third party providers who invented and popularized the idea.