Archive for the ‘Current Affairs’ Category

Am I just a greedy VC?

My partner Jason has an impassioned post up about the carried interest debate currently taking place in Congress. No matter how you feel about Congress’ efforts to change the tax classification of VC profits from capital gains to ordinary income it’s worth a read (and keeping an open mind).

Obviously this issue is important to me and to all VCs. And while I know there are differences of opinions on the subject (clearly given the intense debate going on right now) I think Jason does a nice job of talking through the personal (this feels overstepping), professional (there are other markets where innovation is taking place where investor are actually being completely exempt from taxes that will draw talent away from the US) and legal (how do you differentiate between a VCs partnership interest from other partnership interests not subject to the proposed tax change?) arguments against the tripling of tax on the long term profits of investors.

While I wouldn’t say that I’m a “fan” of government, I’ve always been of the mind that some level of government safety-net is appropriate. I’m even, generally speaking, ok with a progressive income tax and as a relatively high wage earner understand that I have a certain burden living in our society to pay a much greater share of the overall tax burden. I point this out not to get into a political debate about the benefits of taxes, the proper level of tax  or even the correct taxing system but to be clear that my views on carried interest are not part of some larger agenda around reforming the tax system or eliminating it all together.

I have many of the same concerns that Jason outlines in his blog post about the move to change the tax treatment on carried interest. I’ve even considered whether the change will either shorten or radically change my own career path.

But as a capitalist and a realist I’d simply point out that taxes shape behavior. Our tax code has examples of this everywhere. Want people to buy houses? Allow them to write off their home mortgage (but don’t let them write off credit card debt – we don’t want consumers to have too much of that…). Want people to give to charity? All them to write that off too. Want to encourage longer-term investing? Tax that at a lower rate than short term investing. Need to encourage people to save for retirement? That’s a good one for tax exemption. Invest in education? Check on that one two.

My point is that tax code changes have real world economic and behavioral consequences. And the consequence of tripling the tax on the carried interest of investors will be decreased investment, less innovation and fewer jobs (and I would guess an overall reduction in tax receipts given the 2nd and 3rd order effects of the measure – which completely defeats the purpose of the proposal which is 100% to raise revenue and “fund” the extension of other tax initiatives).

The US currently leads the world in the innovation economy. From our universities, to our entrepreneurial ecosystem, from the belief that it’s ok to step out and try, even if you fail, to our system for nurturing and funding companies, we have a huge global competitive advantage in innovation that has lead to some of the greatest advances in modern society coming from within the US. Venture Capitalists have been an important part of this trend (companies that are or were once VC backed account for 11% of the US workforce and over 20 of US GDP).

The sky is not falling and the day after the tax code is changed (if we’re not successful in convincing lawmakers what a bad idea this is), little will be different in my job or in the jobs of most investors (although no doubt the lawyers will be hard at work figuring out new investment structures). But there is no doubt in my mind that this massive alteration in how we tax the work of a group of people who nurture and fund innovation in the US will radically change the long term trajectory of the our country’s innovation economy. With the focus on job growth and job creation and with countries like China and India knocking at our door trying to be the growth engines for the next millennium’s global economy, is now the time to put shackles around the building blocks of what’s allowed the US to lead the world in technological innovation? I, for one, surely don’t think so.

May 19th, 2010     Categories: Current Affairs, Venture Economics    

Oppose HB 1192 – The “Software Tax”

My longtime friend Marion Jenkins, CEO of IT consultant QSE Technologies wrote what I think is one of the most eloquent and well thought out rebuttals to the proposed Colorado “Software Tax” (HB 1192).  With his permission I’m posting it here in its entirety. If you feel the way I do about this issue, I urge you to take a stand on this issue.

I urge you to oppose HB 1192, the so-called “Software” Tax.  It is bad legislation and it will add significantly to non-productive administrative and legal overhead and kill productivity within the technology sector in Colorado (including not only technology-related businesses, but virtually every business – and every consumer – who uses technology).  It will also lead to a mass exodus of key jobs and technology talent from Colorado, and it runs counter to many Federal initiatives aimed at creating jobs, improving job skills and implementing automation and efficiency to help the country get out of this recession. It will also lead to a massive expansion of government, whose only function will be to try to interpret and unravel an impossibly complex set of new tax rules.  Those new government jobs will not provide any benefits to citizens, and particularly not provide any benefits directly to underserved populations, they will consist of auditors, analysts, enforcers and the like.

First, some background and disclosure:

1. I run an 8-year old information technology company in Englewood, QSE Technologies, Inc..  My family and I have lived in Colorado (Centennial) for nearly 12 years.  I live in House District 47 (Spencer Swalm) and Senate District 27 (Nancy Spence).  Our business is located in House District 44 (Mike May), and Senate District 30 (Ted Harvey) and most of our ~15 employees live in these same or surrounding Districts in the South Denver area.

2. I grew up on a family potato farm in SE Idaho and I have a PhD in Engineering from Stanford (also known as The Farm).  So I feel I have pretty good mix of horse sense and formal education.  I have been in the technology industry for 30+ years. 

3. I serve as adjunct faculty at the University of Denver, where I head up a graduate program division in healthcare information technology within University College. I serve on the board of directors and many other committees of the South Metro Denver Chamber of Commerce.  I also belong to the Aurora Chamber of Commerce, CHIMSS (Colorado Health Information Management Systems Society), AHIMA (American Health Information Management Association), CMS (Colorado Medical Society), CMGMA (Colorado Medical Group Management Association), CHSM (Colorado Healthcare Strategy and Management) and other business/technology organizations.

4. Among other corporate positions in my career, I have been a Chief Information Officer, Chief Technology Officer, Chief Operating Officer and Senior Research Engineer for small private companies, and also some Fortune 500 and even Fortune 10 companies.

5. This bill will NOT affect our company.  It will not cause us to raise prices or lay off people, or relocate out of state.  That is because we do not sell, or use, anything other than “canned” software, for which we collect and remit appropriate sales taxes.  Therefore I am not trying to protect any personal or business rice bowl.

6. Along with about 15 colleagues from CSIA (Colorado’s technology association) and other groups, I testified in opposition of this bill on Wednesday night/Thursday morning.  (thank you for your time and attention to our testimony, by the way). 

7. Although you sat through our testimony, I don’t think you understood it.  I think you saw and heard the same kind of turf-war, rice-bowl protection that you had been hearing all day.  The purpose of this email is to clarify some facts, because this is an extremely confusing issue.

There are many reasons why I oppose this bill (the way it is crafted, which in my opinion is a net new tax, which should go before the voters; the way all these initiatives were pre-packaged and front-loaded at the beginning of the session, before most citizens knew what was going on; the hearings that stretched into the middle of the night, in an obvious attempt to “wear out” the opposition; the way they are all characterized as “business” taxes, but in reality they will merely be passed on to all consumers – and therefore these are net new taxes on citizens, not on businesses.)

(As an aside, I have lots of other objections.  I object to this “nibbling at the edges” of the state’s budget deficit problem by trying to implement taxes here and there in a piece-meal fashion and splinter any opposition and paint this as a “business” problem, which sets up a “business versus K12 education” issue.  If the state has budget issues, which I believe it does, and needs to raise tax revenue (which has other options available such as cutting staff, eliminating duplication and programs and implementing automation – all of which businesses have been doing for the last ~2 years), then let’s raise taxes.  Don’t set up dozens of new statutes that tax sodas and candy and vending machines and Styrofoam cups and ketchup packets, go ahead and come out into the open and craft a bill to tax everything sold in a grocery store, including food, and/or implement a tax on all services (including attorneys, accountants and consultants) and take the problem to the people and see what they say.)

However, the only thing I am going to address in this email is the enormous complexity that makes HB 1192 simply impossible to implement and enforce, and that is why it should be opposed.

When Representative Pommer introduced HB 1192 to your committee Wednesday night, he positioned the bill in an incredibly simplistic fashion.  He said that people who download “standard” software (like TurboTax) from the internet should pay sales taxes, just like someone who buys TurboTax in a box at BestBuy.  His premise was that the delivery method of software – and whether there was actual media involved (i.e., CDs) – shouldn’t change whether the software should be taxed.  I actually agree with and could support that idea, at least in principle.

The TurboTax scenario seems straightforward.  But at the margins – for really large and really small software packages – this bill is a disaster.  On the low end, think of a download of small mini-apps:  a $.95 ringtone, a $1 MP3 song, a $2 e-book, a $5 upgrade to your GPS.  How can you tax those things, and would it even be worth it to try?  Do you tax a business traveler from Texas who orders TurboTax on his WiFi at Starbucks in Cherry Creek or a tourist from Oklahoma who does so from his SmartPhone while sitting on the chairlift at Vail?  How about a person who moves here from Boston but keeps his Boston phone number on his SmartPhone and uses it to surf the web and order “software?”

These are tricky but important details.

At the other end of the size/complexity spectrum, it gets even worse.  This bill defines “standard” software as any software package – or portion thereof – that is sold to more than one person or entity.  All such “standard” software (or portions thereof) would be subject to tax.  That has huge implications for virtually any business, whose software purchases and implementations are infinitely more complex than a person downloading TurboTax from the Web.

As an illustration, let me share with you the list below, which came to me yesterday in an email solicitation from a company that collects this kind of technical information from big companies and markets it to companies like ours, hoping we will buy their marketing/intelligence lists. 

This is a list of all the technology used by a Fortune 500 Company (not Qwest) listing all their major
technology systems, subsystems and software. 

Technologies:
Hardware/OS/Systems Environment

AT&T Sterling Commerce Yantra Warehouse, Cisco IOS, Citrix MetaFrame, HP-UX, HP-UX 11i, IBM AIX, IBM AS/400, IBM OS/390, IBM VSAM, IBM z/OS, INM CICS, Microsoft Active Directory, Microsoft Cluster Server, Microsoft Terminal Server, Microsoft VPN Servers, Microsoft Windows 2003 Server, Microsoft Windows NT Server, Norton Ghost, Novell NetWare, Red Hat Linux, Sun Solaris 8, Sun Solaris 9, Teradata Data Warehouse, Unix, VMWare, VMWare Server, Wyse Winterm, Avaya Intuity Conversant
Data Management / Business Intelligence
BEA WebLogic 8.1 / Oracle WebLogic Servers 8.1, BEZ Systems BEZPlus Data Warehouse Tool, DB2, File Aid, IBM Cognos, IBM Cognos PowerPlay, IBM DB2, IBM Informatica, IBM Informatica Builders WebFOCUS, IBM Informatica PowerCenter, JD Edwards World, Microsoft Access 2000, Microsoft SQL Server 2000, Microsoft SQL Server 2005, Microsoft SQL Server 7, Omniture SiteCatalyst, OmnitureHBX, Oracle 10g, Oracle 8i, Oracle 9i, Oracle Fusion Middleware, Oracle Hyperion, Oracle PeopleSoft Financials, Oracle PeopleSoft Financials 8.8, Oracle real Application Clusters, Qualys QualysGuard, SAP Business Objects Broadcast Scheduler, SAP Business Objects Crystal Enterprise 8.5, SAP Business Objects Crystal Enterprise XI, SAP Business Objects Crystal Reports 8.5, SAP Business Objects Set Analysis, SAP Business Objects Web Intelligence, SAP NetWeaver Business Information Warehouse, Security Innovation, Sun MySQL, Sybase 10, Teradata Active Enterprise Data Warehouse v2 R6,
Networking / Information Security
Connectria Integration Services, Progress Software DataXtend CE, Tuxedo, BMC Marimba 6, BMC Marimba 7, CA Unicenter, Cisco CiscoWorks LAN Management System, Citrix MetaFrame XP, Citrix Presentation Server 3.0, Citrix Presentation Server 4.0, Citrix Presentation Server 4.5, Citrix XenApp, EMC EmailXtender, HP Mercury LoadRunner, HP OpenView, Microsoft Internet Security and Acceleration server, Microsoft SCCM 2007, Microsoft SMS, Microsoft SQL Server Management Studio, Oracle Enterprise Manager, Oracle Identity Manager, Symantec backup Exec, Symantec Veritas NetBackup, Symantec Veritas Storage foundation, VMWare WorkStation, 123 EDI Shipping Outsourcing, Cisco PIX Firewall, ArcSight Log Consolidation system, Wavelink Avalanche server and client, Sygate Secure Enterprise Solution, Cisco Secure ACS Solution Engine,
Development / Programming Tools
Ab Initio, Adobe Coldfusion, Adobe Dreamweaver, AJAX, Altova mapForce, Altova XML Spy, Apache maven, Apache Struts, Apache Tomcat, Autonomy Interwoven sitePublisher, Autonomy Interwoven TeamSite, Borland VisiBroker 3.4, C, C++, CA ERwin, Citrix, COBOL, Compuware File Aid, Cywin, Eclipse, Embercadero Sapid SQL, Hibernate, HP Mercury Quality Center, HP Mercury Test Director, IBM Rational Clearcase, IBM Rational ClearQuest, IBM Rational Rose, IBM WebSphere Application Server, IBM WebSphere MQ, Java, Java Beans, JavaScript, JSF, JSP, JUnit, Microsoft .NET Framework, Microsoft ADO.NET, Microsoft ASP.NET, Microsoft C#, Microsoft Internet Information Services, Microsoft Office Communications Server, Microsoft SharePoint Server 2007, Microsoft Sybase T-SQL, Microsoft Team Foundation Server, Microsoft Visio 5, Microsoft Visual Basic .NET, Microsoft Visual Basic 6, Microsoft Visual Basic for Applications, Microsoft Visual SourceSafe, Microsoft Visual Studio 2005, Microsoft Visual Studio 2008, Open Text LiveLink 9.2, Oracle BEA JRockit, Oracle BEA Tuxedo, Oracle BEA WebLogic Application Server, Oracle PL/SQL, Oracle Primavera TeamPlay, Oracle SQL*Developer, Oracle SQL*Loader, Perl, Progress Software DataExtend CE, Red Hat iPlanet Web Server, Red Hat JBoss, ROBOT, SAP Business Objetcs Application Foundation, Spring, Sybase powerbuilder, Tibco rendezvous, TOAD, Vignette Builder, Vignette Content Server, Scrum Development,
Enterprise Applications
Amdocs Clarify CRM, Amdocs ClearCall Center, Amdocs Clearsales, Amdocs ClearSupport, AT&T Sterling Commerce Yantra Warehouse Management System, Descartes Mobitrac Transportation Execution System, EMC Documentum, Hodes iQ Talent Management, IBM Lotus Domino, IBM Lotus Notes, Lotus Notes, Microsoft Exchange 2003, Microsoft Exchange 2007, Microsoft SharePointServer, Open Text BlueBird, Open Text Hummingbird RedDot Enterprise Content Management, Oracle Financials, Oracle PeopleSoft 7.5, Oracle PeopleSoft 8.9, Oracle PeopleSoft 8.8, SAP Global Trade Services, SAP R/3,
Other Technologies / ITO Agreements / IT Intel
ABC has created a custom application server using Oracle Fusion Middleware and Oracle WebLogic Server called ABC Unified Strategic Information Optimization Network, or FUSION. It allows the company to eliminate the lines between their separate business units as well as improve customer satisfaction, 123 EDI Shipping Outsourcing, ArcGIS geographic authoring, BGT Partners consulting for B2B portal and CMS, Clarity Consulting for ABC QuickShip Application Development, Computer Aid, Inc. for managed mainenance automotive), Connectriaintegration Services, Cstomer Fsion Database, Dun & Bradstreet Dashboard, Google Analytics, IBM Global Technology services, Interknowlogy consulting for Application development, Loftware barcode and RFID Software, Microsoft Visio, Microsoftproject, Quad Graphics Parcel Direct, Six by Six, Telefonica Datacenter

Look through this list and ask yourself this question…do you think your 0.95 FTE employee in the DOR (which was claimed to be the only headcount needed to implement/oversee HB 1192) would even have a clue as to half of what these software packages are, how they are used, and which ones are “standard” and which ones are custom, or how and to what extent some standard modules may be embedded inside of the corporation’s customized software systems?  I have been in technology for 30 years and I recognize barely about 75% of them.

It would take a small army of experts to figure this out.  The other night I gave you a SWAG number of 25 DOR FTEs to oversee this.  After further thought my slightly more educated SWAG is now well over 100.  An equal number of non-productive administrative/audit people would be needed on the other end, within businesses who use technology, as well as their technology partners.  Every software project would have to be separated into “standard” (taxable) and “custom” (non-taxable) categories.  You would literally have to go through the software code line by line to determine compliance.  And, by the way, software code isn’t even written or measured “line by line” any more.

Any similar company (Colorado currently has 11 Fortune 500 Companies) would have a similar list.  Obviously a smaller company would have a smaller list, but even a 20-person company can easily have dozens of software applications, some “standard,” some custom, and some a mixture.

This is a nightmare.

As a result of your other tax proposals, will people go to Cheyenne or Salt Lake for a Pepsi or a Snickers bar or Chinese takeout?  Will Colorado businesses close down or move out of state if some of their supplies now get taxed?  Will Colorado consumers stop buying things on the Web if they have to pay taxes on them?  Those are debatable. 

Would technology jobs leave the state as a result of HB 1192?  Not only is it a definite yes, but you must understand that it is relatively easy to do so.  Moving a manufacturing facility is hard.  Moving a technology platform is easy.  Any sizable company would find it easy – as well as advantageous – to move their technology to Seattle or Omaha or Minneapolis to avoid the brain damage of auditing and accounting for and paying the taxes under HB 1192.  Not only would that company’s technology jobs move along with the technology platforms, but the jobs of any outside consulting/implement
ation partner would move out of the state as well.  And no large or growing company – and definitely no high-tech company – would consider moving into or investing further in Colorado if faced with this imposing and formidable barrier to technology, automation and efficiency.

There are many other technical issues…SaaS (software-as-a-service).  Cloud Computing.  Virtualization.  Managed Services/Hosting.  Object-oriented development.  Data center hosting.  Disaster recovery and remote/hot site services.  Software re-use.  Service-oriented architecture.  Software toolkits.  Telecommuting and virtual workforce.  Hosted telecom apps and VoIP services.  These are just some delivery methods and technology concepts that are at the leading edge of the technology frontier, and Colorado is at the forefront of these and other innovations.  Every one of them has special circumstances that will have to be investigated – and analyzed and unraveled – to comply with HB 1192.  So instead of spending time on productive efforts like innovation and implementation, companies will have to invest significant time in non-productive audits and compliance.

I want to emphasize again that this doesn’t just negatively impact technology companies like QSE and our peers, it affects every business who uses technology in their business.

Additionally, in Colorado and elsewhere, there is a shortage of students entering STEM – Science, Technology, Engineering and Math.  There are many formal and informal initiatives aimed at training and re-training both youth and adults to enter or shift to the technology workforce.  Several Federal jobs training programs are focusing on these efforts.  In addition, information technology is at the core of green/sustainable energy initiatives.  HB 1192 runs counter to those efforts, and would undoubtedly stifle future growth of talent here in the state, and cause the loss of federal education and training funds.

And lastly, the ARRA/HITECH act earmarks $19.5 billion in Federal funds for the implementation of IT in healthcare, which has shown to help lower our outrageous healthcare costs, reduce costly medical errors and improve patient outcomes.  Providers and other entities are reluctant to adopt automation and technology, primarily because of costs and other barriers.  By taxing software, HB 1192 increases those barriers, and would definitely cause the State of Colorado to miss out on some of those federal funds…they would go to other healthcare entities in other states. 

This issue isn’t about the software industry, or even the technology industry.  It’s about every business and every consumer in the state.  Technology is one of the few industries that is helping to lead the recovery, and helps all businesses become more efficient.  Colorado has grown in talent, infrastructure, and status to become recognized as a critical technology hub, and this bill will absolutely reverse that trend and shift the jobs and the capital investments to other – and eager – states.  But our testimony earlier this week, and this email, isn’t to protect the technology industry from further taxes.  Although the citizens and businesses of Colorado don’t realize it, my CSIA colleagues and I are working on their behalf.  Most of them don’t even know yet that HB 1192 exists, or what negative impact it would have on them.

In summary, I urge you to oppose HB 1192.  Its unintended consequences and confusing definitions are anathema to the economic health of Colorado.

February 1st, 2010     Categories: Current Affairs     Tags: ,

iPad Launch vs the State of the Union Address

Both were compelling for sure, but what did the Twittersphere have to say about it? Buzz monitoring company Retrevo put together some stats which suggest that wile the Apple announcement was big (topping out at 7,000 tweets per minute), the President edged the iPad out (peaking at 9,000 tweets per minute). I’d love to see the graph below with an overlay of what topics caused each of the spikes (they have this for the iPad announcement, but not the State of the Union Address – click through to the article to see the detail).

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January 29th, 2010     Categories: Current Affairs    

Colorado House Bill 1192 Is a BAD Idea

In times of fiscal challenge you can always count on government to come up with some pretty bad ideas to fund deficits. House Bill 1192 is a particularly egregious example of one such boneheaded idea.

The bill as it is currently constructed would place a tax on all software purchased or installed in Colorado. This is a tax not just on the software industry but on every business that uses software. And it’s an incredibly stupid idea.

According to the Colorado Software and Internet Association there are more than 5,500 software, hardware and IT businesses in the state and approximately 175,000 IT professionals (with a total payroll of nearly $5Bn). Across the sate there are thousands of additional businesses that make use of technology to run their businesses. All would be effected.  At a time when we’re trying to encourage business growth and new hiring, HB 1192 will have the opposite affect, stifling job growth and actually lowering overall tax receipts as businesses (smartly) move employees out of state and shift open recs from Colorado to states that don’t impose such a tax.

This sort of thing is unbelievably frustrating. My partners and I (along with many advocates for technology businesses in Colorado) spend countless hours advocating for the state of Colorado (despite the fact that we invest nationally, not just in our back yard).  We’ve invested in companies that have created thousands of jobs in Colorado.  We actively encourage new businesses to form here, existing businesses to move here and people who fund businesses to look locally for opportunities. Passing HB 1192 will be an outstanding way to undermine these efforts.

January 26th, 2010     Categories: Current Affairs     Tags: ,

$5k to pitch your business? Who falls for this??

The NY Times is reporting today on the question of entrepreneurs paying to pitch their companies to prospective investors – “Should Start-Ups Pay to Pitch?”. Highlighted in the piece is a Boston-based group – Revolutionary Angels – that charges companies $4,995 to enter their “business plan competition” (the winner of the competition receives an investment from the group). To be clear on my view of this:

image

THERE IS NO CIRCUMSTANCE IN WHICH ENTREPRENEURS SHOULD PAY TO PITCH THEIR BUSINESS TO PROSPECTIVE INVESTORS.

PERIOD. END OF STORY.

This kind of activity makes me absolutely sick. And the fact that Revolutionary Angels calls their scheme a “business plan competition” is reprehensible.

In the Revolutionary Angels setup they are asking 100 companies to each pay $4,995 to pitch to their group, after which they’ll select one to invest in (with the proceeds from the losers) with a runner up company getting the consolation prize of a smaller investment (and Revolutionary Angels pocketing the remainder of the cash? – it’s not completely clear). You can see who is involved in the group here. The reason there’s no actual venture capitalists on the list is because no respectable venture capitalist would ever be involved with such an underhanded hustle. I really don’t understand what would drive an entrepreneur to participate in such a scheme nor how the people associated with Revolutionary Angels can justify their involvement or the fees they are charging entrepreneurs. Because they give feedback on the plans? Because participating in a competition gives entrepreneurs access to the Revolutionary Angels? Pathetic. And the fact that more than 100% of their investment dollars come from the entrepreneurs they are supposedly helping out makes it even more pathetic.

My view of angel groups is simple. If you’re not rich enough to screen your own potential investments then you’re not rich enough to be an angel investor.

I’ve given the “don’t pay to pitch” advice to countless entrepreneurs over the years, but felt it was time to come out publically and take a stand on this. Kudos to Jason Calacanis for leading the charge against such practices. We need more credible investors to back him up (see Fred Wilson’s thoughts on the subject here; Brad Feld’s here for example).

And if you’re looking for “access”, try emailing me, signing up for my community hours (or my partners Brad or Jason’s community hours, or any number of other credible VCs that are increasingly more open with their time).

And if you’re thinking of entering the Revolutionary Angels business plan competition, save your money.

November 25th, 2009     Categories: Current Affairs     Tags:

Is serendipity lost in the digital age?

Damon Darlin argues in an article earlier this week in the Times that serendipity has become "lost in the digital deluge". His premise is essentially that through services like Twitter, Facebook and others we’ve essentially crow-sourced content discovery and lost is the beauty of discovering "something we never knew we wanted to find" (he uses the example of browsing a friend’s CD or video collection as something that the digital age has killed).  Even services like StumbleUpon or UrbanSpoon, which are designed to surface information that users typically wouldn’t find themselves – Darlin argues – really just gravitate to the mean.

What?!?

The Internet that gives us almost unlimited access to almost unlimited information, which allows us to browse for hours on any subject imaginable, that enables us to follow links from site to site on random topics that pique our interest, that shows us what our friends are up to at any given moment, enables us to see what music the people we know are listening to, to discover new and as yet unheard of content that is related to the things you already like (music, movies, books, blogs, etc) – this same Internet is somehow killing serendipitous content discovery?!? Is he talking about the Internet that the rest of us are on?

Even the specific examples Darlin gives don’t stand up. Finding content through Twitter group think is quite serendipitous. Discovering a new band through a The Hype Machine or a news article through StumbleUpon is not only the Internet acting to surface new content, but it increases the frequency of serendipitous events. The more time we spend online the more we’re likely to find things that we wouldn’t otherwise have discovered ("ser-en-dip-i-tous – to come upon or found by accident" according to dictionary.com). In fact for me, one of the greatest things about the social web (as opposed to the information web of the late 90′s and early 00′s) is it’s ability to bring new ideas and content directly to me. I’m constantly amazed at the variety of new and interesting content that I run across all brought to me from different sources and friends across the web. It’s all quite . . . serendipitous . . .

August 6th, 2009     Categories: Current Affairs    

Foggy

image 

Clear announced last night that they had shut down. The note on their website says the following:

Clear Lanes Are No Longer Available.

At 11:00 p.m. PST on June 22, 2009, Clear will cease operations.

Clear’s parent company, Verified Identity Pass, Inc. has been

unable to negotiate an agreement with its senior creditor

to continue operations.

It goes on further to say that customers will not be able to receive a refund “because of it’s financial condition”. With over 250,000 customers (each paying between $100 and $200 annually) it’s a little surprising to me that they couldn’t figure out a way to make this work. I suspect (as does my partner Jason Mendelson). that the airports were charging more than I would have realized to make Clear lanes available.

Whatever happened it’s a real bummer. I know many people thought that Clear lanes were somehow elitist (pay more and get through security faster) but as someone who travels constantly, it was an extremely small price to pay (both monetarily and in loss of privacy) to ensure not just faster entry into airports but consistency in the time it took to get to my gate. I’ll miss it and hope someone will pick up the assets and get the program up and running again.

June 23rd, 2009     Categories: Current Affairs, General Business    

Subtle signs of change

The initial signs of hope in a market are often just the sense that things are swinging in the right direction. This is why measures such as "consumer sentiment" are so important to the outlook of an economy – when people think things are going well, they often do (and because consumers power over 70% of our economy how people are thinking about spending has a pretty material impact on how the economy actually does).

There’s no venture capital equivalent to consumer sentiment (and frankly how could you poll a group of VCs and get them to agree on something anyway) but I feel that things are on the upswing – at least in the world of early-stage investing. Here’s a few factors influencing my thinking:

  • People are talking about when not if the economy is going to pick up. There was a time not so long ago that people wouldn’t even dare to talk about coming out of this downturn at the risk of sounding too optimistic. Now people are actively debating exactly when the recession will be officially over.
  • Companies are looking at their results and seeing that the bottom didn’t really fall out. This is a topic for a full post, but as I look across our portfolio, there are many companies – particularly our more established businesses – that prepared for the worse but didn’t see it. The fourth quarter of 2008 wasn’t so bad for these companies and most had extremely strong first quarters of 2009 as well. And because they were careful with their cash many have never been in as strong a business position.
  • While plenty of VCs got scared to the sidelines, many (including Foundry) are investing consistently through the down market. We’ve all heard the stories about VC’s sitting on the sidelines – many of which are true – but there’s a core group of early stage VCs that have been consistently looking for new investments throughout the downturn and I see more and more VCs jumping back into the market.
  • People are at least talking about the possibility of a tech IPO market. Fred Wilson has a great post up today talking about the possible return of an IPO market for venture backed companies. The NVCA highlighted this topic as well at their annual meeting last week in Boston.
  • I’m seeing better, not worse, business ideas come through our office. There is no question in my mind that the quality of business plans coming across my desk is higher than its been in a while.  Great entrepreneurs know that this is a great time to start a business and they’re doing just that.

As a VC I’m paid to be both optimistic and realistic. In this case I think I’m being both.  Thoughts?

May 4th, 2009     Categories: Current Affairs    

Sam Zell at CU!

Reposting from my partner Jason Mendelson’s blog about an upcoming event at CU Boulder featuring Sam Zell. This will be a great event.

 

In the continuing Entrepreneurs Unplugged series, next week Sam Zell will be visiting the university.

April 22nd, at noon in the large (Boulder NewTech Meetup) courtroom at the law school.  More info here.  It is free, but you must register, so keep that in mind.

Sam is always an interesting interviewee and speaker and even more so this year with his recent sale of Equity Office Property and sell of the Chicago Cubs.

April 15th, 2009     Categories: Current Affairs    

WSJ Venture Capital Blog

I’ve been enjoying Scott Austin’s Venture Capital Dispatch. It’s a great source of information, easy to read and is a great summary of information for those of us who don’t have time to read the Journal every day. Thought it was worth a pointer.

February 18th, 2009     Categories: Current Affairs, Venture Capital