Tuesday, May 31, 2005
Monday, May 30, 2005
Sunday, May 29, 2005
The 3 Stages of Truth by Arthur Schopenhauer (German Philosopher)
- First, it is ridiculed
- Second, it is violently opposed
- Finally, it is accepted as self-evident
It’s no secret that most startups see an opportunity most others have missed so it’s inevitable that they’ll get a reaction that follows this quote.
Saturday, May 28, 2005
Friday, May 27, 2005
I'm always thrilled to send business in the direction of these sorts of firms. Some examples (not comprehensive) that provide most of their services in the Pacific Northwest include the following:
- Commercial Real Estate: Broderick Group (Paul Sweeney and Jeff Watson), Washington Partners (Pat Pendergast)
- Legal experts: Beacon Law Advisors (Chris Hurley and Ian Thompson), Dorsey Whitney (Mike Brown -- despite his expression in his pic, Mike's a great guy that smiles a lot :))
- Financial and Acting CFO services: Foster & Co (Cortney Foster), Tatum Partners (Chuck Gottschalk), SmartStarters (Doug Woodward)
- Equipment Financing: Vencore (Chris Fenner), Sound Leasing (Brian Hill)
- Web Hosting: Savvis Seattle (Dan Marsh) -- learn from some of the successes mistakes from similar companies
The members of the advisory board include the following people:
- Larry Gildersleve -- vacation industry veteran
- Ian Morris -- HouseValues CEO and Microsoft veteran
- Dave Jones -- Managing Partner of Altus Alliance
- Tom Poole -- serial entrepreneur and consultant
- Chris Hurley -- founder of Beacon Law Advisors
Nice job Chad & Brian!
“Comparison, a great teacher once told me, is the cardinal sin of modern life. It traps us in a game that we can't win. Once we define ourselves in terms of others, we lose the freedom to shape our own lives. The Holy Grail can be found only by those who lead their own lives.”
While this is a quote applied to individuals, I think it applies well into business as well. The winners I've observed or been a part of redefine the rules rather than just follow others in the market. They also aren't solely focused on beating their competition. Rather, they are thinking about their customers and their needs -- kind of obvious but often forgotten.
Thursday, May 19, 2005
Not long ago, Microsoft announced they were going to make their intellectual property more available through a new group called Microsoft Intellectual Property Ventures. The
Chase Market Velocity (CMV): Start to finish, how long was the process of working with Microsofts Intellectual Property (IP) team?
Bryan P. Mistele (BPM): We started engaging with Microsoft in November and closed our deal the middle of February. Subtract the two weeks at Christmas and that would mean it took us 3 months from start to finish. Overall, I was impressed with how fast Microsoft could move.
CMV: Was the fact that you were ex-Microsoft make a difference in making the deal happen? If you were an ex-Sun employee, how different do you think it would be?
BPM: Being an ex-Microsoftie made a big difference. I could speak the language, the technical due diligence went a lot easier, I knew many of the people involved and was perceived as a friendly party. If I was ex-Sun, it would have been harder not because Microsoft would have anything against an ex-Sun person, but because they probably wouldnt have the same network and as with any business deal, who you know is as important as what you know. This was especially true since we were the first company to do this. Now that they have a program established, a team helping facilitate these IP discussions, I imagine future companies (and independent companies) will find the process much easier.
CMV: Are there any other technologies that you are considering licensing from Microsoft?
BPM: The Microsoft Research team is continuing to do leading-edge research into the areas of traffic analysis and prediction. Some of this work we will be able to take advantage of for free under our agreement, some of it we may choose to license at some point in the future.
CMV: What kind of assurances do you have that the IP is defensible? If there's a dispute where a 3rd party claims infringement, how is that handled?
BPM: Microsoft maintained ownership of the patents themselves and the responsibility for prosecution. We have perpetual rights to these and derivative patents. If there is a dispute with a 3rd party over these patents, it will naturally be between Microsoft and that 3rd party.
CMV: Was any kind of market validation done on the technology beyond the internal "beta" of Microsoft employees using the technology?
BPM: Inrix did do quite a bit of diligence on the market opportunity meaning we contacted many potential customers across a variety of channels to validate interest, the opportunity, the perceived value of the predictive capabilities and our overall business strategy. These conversations led directly to the development of our business plan, pricing model and gave us a good deal of comfort about the assumptions we had made regarding the competitive landscape.
CMV: How did the VCs that funded/didn't fund look at the fact that you were licensing IP from MS?
BPM: 90+% of the VCs we talked to viewed the Microsoft connection as extremely positive it provided us a level of credibility around the technology and science that as a startup we wouldnt have achieved otherwise. More importantly, it provided us the opportunity to come to market very rapidly (within months of closing our Series A), which is very unique for a startup. We view this as one of the main advantages of having licensing IP from Microsoft. Some VCs (especially in the bay area), had concerns about Microsoft and didnt believe Microsoft was opening up to licensing IP.
CMV: Did you ever talk about Microsofts Corp VC fund investing in Inrix?
BPM: In our initial conversation, we decided not to pursue this. We felt it would be more advantageous for Inrix to be perceived as an independent company rather than a Microsoft-controlled entity because our potential customers included folks like Google, Yahoo, MapQuest, etc. which might have concerns working with a Microsoft-affiliated entity.
CMV: How will the researchers who developed the technology be available to you? Beyond paying royalties, is there any ongoing involvement by MS?
BPM: There is a good period of time where the Microsoft researchers will continue to be available to us to successfully transfer the technology, answer questions, brainstorm, debug issues, etc. Our overall goal in structuring our relationship was to create a scenario whereby both companies would be motivated to make Inrix a success. Therefore, even beyond the contractual obligations, we feel Microsoft will make every effort to help Inrix become a success because its in their best interest to do so.
CMV: Are there any requirements that you continue development on a MS platform?
CMV: What was the purpose of the Microsoft conference you just attended? From what you could tell, what kind of people attended?
BPM: The Microsoft VC Summit is a combination of Microsoft executives and VCs. It is an annual event where Microsoft reaches out to the VC community to help build better relationships, explain Microsofts roadmap and look for potential areas to work together. Inrix was asked to attend because this year IP Licensing was a big, new initiative for Microsoft and we were the first company to license technology from Microsoft. As such, we had a good opportunity to explain to the VC community how great it was to work with Microsoft and the benefits of doing so.
Wednesday, May 18, 2005
David Kaefer is the Director of Business Development for Microsoft’s IP Licensing group. The Seattle area’s largest A round in the last year went to the first licensee of this new effort (Inrix) to more broadly license Microsoft’s broad base of under-utilized IP. It’s worth taking note when something as significant as that happens so thought it was worth sitting down for a chat with David. The technologies they are making available tend to be "pre commercial" in that they aren't quite ready for primetime in terms of a final product form in areas that are getting funding. They tend to be standalone products or at least a substantial feature of a bigger product.
Chase Market Velocity (CMV): How are you going to measure the success of the program?
David Kaefer (DK): Success of this program is indicated in many ways, but in the short term it is shown with every licensing agreement we sign. Because of the nature of these agreements, the ultimate success and benefits from this program will be borne out over the long term.
CMV: The first licensee (Inrix) was all ex-MS people? While I assume you don’t have to be an ex-MSFTie to license the technology, why would an ex-Sun person (as an example) consider licensing your IP?
DK: Inrix technically wasn’t a part of this IP Ventures program, but rather that agreement occurred as a result of the kinds of inquiries we received on a regular basis and is an example of some of the impetus for the creation of the IP Ventures program. This program is open to all comers, and we hope that it is interesting to all parties regardless of their former employer. The program offers rich, stand alone technology that is best utilized by a party who has the capability of taking it from the prototype phase into the production phase and ultimately to market. We want to talk with any interested party who has those capabilities.
CMV: What's a typical deal structure? Equity? Royalty? For how long?
DK: Each agreement is negotiated on an individual basis. We can accept cash or up front payments, but we recognize that many start ups need to conserve cash. Equity or royalties or any sort of creative combination of the two are what we expect to see on a regular basis in these agreements. The length of each agreement will also vary on an individual basis and will depend on the parties, the technology, the perceived market for the technology and other relevant factors.
CMV: You have 20 technologies listed on your site that are available. Why these 20? How many others will come out? Are you going to be focused in particular areas?
DK: We started with these twenty based on feed-back we received from the venture capitalist organizations we spoke with. They helped us identify the technologies that are most marketable and the ones that are receiving the most VC backing right now. We expect many others to be unveiled over time, but it’s impossible to predict exactly how many or when or even the particular technology focus of the innovations added to the IP Ventures program in the future.
CMV: What makes these technologies something MS wants to share vs. other R&D that isn't shared externally? Which do you think are most valuable of what they are licensing? Why?
DK: The main reason these technologies are being shared is that we see a market opportunity for them. They are not currently being used by Microsoft in the manner in which another company could use them. We think that all of the technologies available under this program are valuable.
CMV: What kind of assurances do your licensees get that the IP is defensible? If there's a dispute where a 3rd party claims infringement, how is that handled?
DK: Each agreement will be negotiated individually to the mutual satisfaction of the parties. There are many ways that the potential liabilities can be borne and distributed amongst the parties and each agreement will factor in the unique indemnities and assurances necessary for the parties involved.
CMV: Has any form of market validation or input taken place for these technologies? Do you know what markets are likely to be interested in the various technologies? Is there an objective person/team providing that validation?
DK: Right now, the primary form of market validation has been the input of the VC’s and entrepreneurs we have been talking with in the last few months. For example, we have had discussions with VC’s like 3i plc, Advanced Technology Ventures, MDV-Mohr, Davidow Ventures, OVP Venture Partners, and Insight Venture Partners. The true test will occur when the technology is released to the market, but we feel confident that the outsiders we’ve spoken to represent a broad cross-section of the market place with a sophisticated business sense about which technologies are best to pursue right now.
CMV: What's the process once someone sends a mail to the team expressing interest?
DK: The complete details about how to take advantage of this program are available at http://www.microsoftipventures.com.
CMV: With corporate VC investment on the rise, will MSFT ever be a financial backer of these companies in addition to providing IP?
DK: That is not how we envision our participation in these agreements but it isn’t something that we would necessary rule out.
CMV: How will the researchers who developed the technology be available to the startup?
DK: To operate this program successfully, we recognize the need for a high-touch approach. We intend to work with the licensee to provide them with what they need to implement this technology into their products. Access to Microsoft researchers may be important to transfer basic know-how about the products that isn’t well documented in some other form. Access to these researchers will be a consideration for a number of the deals.
CMV: How do you plan to reach out to the entrepreneurial and VC communities to make them aware of what has been developed?
DK: Our outreach has already begun. We have been meeting with VCs and entrepreneurs over the last few months. We have spoken to large groups of VC’s at the NAVC conference in
CMV: Are there any upcoming events where people can learn more?
DK: To this point, we have done 1:1 meetings with VCs as well we are included in forums Microsoft puts on that target VCs. We have also had meetings with established companies looking for specific IP. What often happens is we share some of what we have and they indicate specific areas they are looking for. In some of those cases, we have technologies that are applicable.
CMV: Have you reached out to angel alliances or individual angel investors?
DK: We are experimenting with a variety of different groups to reach out to. While we have spoken with individual investors, it's an interesting idea that we'll consider.
CMV: Do you have any technologies applicable to the emerging Smart Energy arena?
DK: The technology behind Inrix is focused on "machine learning" and has been applied in areas ranging from anti-spam to traffic (Inrix) where there are repetitive and predictable outcomes. It's entirely possible that the same technology could be applied into Smart Energy. In addition, a Utility could use a technology that we call "Zone Zoom" that would allow a utility to drill down on problem areas on the grid. We have also done work in battery cell technologies.
Tuesday, May 17, 2005
Monday, May 16, 2005
Sunday, May 15, 2005
Friday, May 13, 2005
Ed Sim makes a good point about the opportunity cost of time spent fundraising. He echoes what I’ve heard Mark Leslie (ex Veritas Chairman/CEO) say that when there’s a positive outcome with an exit (IPO, merger, etc.) no one complains about their percentage of the company and conversely when there is a bad outcome it doesn’t matter whether you had 2% or 20% of the company.
Wednesday, May 11, 2005
If you look beneath the surface of some successful companies, you'll see they employ strategies espoused in James Surowiecki's book. A great example is a company run by my friend Ian Morris -- the CEO of HouseValues. There's much more than meets the eye that drives their success.
Update: CNET has an article on Blogs, social networks and wikis that are other great examples of the "wisdom of crowds".
Tuesday, May 10, 2005
Monday, May 09, 2005
There's been a lot written about Google being the next Netscape but I think it's closer to being another Microsoft though still a long ways from having MSFT's scale and breadth. I saw MSFT transition from early adolescence to adulthood (I was there from the early 90's until a couple years ago). I'd consider Google to be in early adolescence. Thinking back on that stage of MS' development, there are striking parallels with what made MS a success or were attributes of the company. Some of these bode well for Google while others are ones that Google would be well-advised to learn from Microsoft's missteps. Here's a (growing -- thanks to all the input I've received) list of some of the similarities ranging from small coincidences to core cultural issues...
- Both were lionized in the press during "adolescence" -- go back and read Business Week, Forbes, etc. and similar gushing articles being written about Microsoft/Bill in the late 80's/early 90's. These are being re-written for Google.
- They both thought they were going to build business one way and hit it big with another. Google was going to search corporate sites while MSFT was started as a programming language company.
- Both businesses were profitable relatively early in their existence for a tech business.
- Both had two geeky founders who attended the same top schools and decided to start a company together.
- Big partner(s) make Microsoft/Google when they were tiny and their large company partner decides they rather partner to get a piece of technology rather than build what they perceived to be "non-strategic" technology that turns out to be strategic after all. They regret it later when they have to go compete with the company they enabled. In Microsoft's case it was IBM. In Google's case, it was Yahoo and AOL that "made" them. Read here for an interesting critique of Yahoo's competition with Google. [My POV is that Yahoo will have more long-term success against Microsoft as they have both the technology acumen AND they fully understand marketing, the media business and the value of relationship selling.]
- Google and Microsoft learned the value of ‘efficient distribution’ early. Google got to critical mass partly w/ the AOL deal, but partly by doing revenue shares on ads on partner sites that put 50% to 100% of revenue in the pockets of the affiliates. With ads as a secondary revenue stream, Google knew that they could acquire traffic cost-effectively in this way (low-cost distribution), which would in turn boost queries, which would in turn grow their top revenue stream – keyword sales. By contrast, Microsoft used the OEM channel – with very favorable deals granted to folks like IBM –to distribute efficiently. [Thanks to Microsoft veteran Craig Bartholomew for this one]
- Being product/tech centric is sufficient for success in early adolescence but not enough later. This is just starting to play out with Google whereas Microsoft has been gradually learning this lesson. I wrote about this in my Ballmer finally gets it post. Founders at both companies apparently had/have little grasp of the value/impact of relationship selling during their adolescence years.
- Both Microsoft and Google put out incomplete products with intent to rapidly evolve until they get it right.
- Perceived arrogance starts to chip away at their media darling status.
- Both play by their own rules to redefine their industry.
- Both are effective at thinking long-term.
- Both operated as mysterious "closed societies" into their adolescence with lots of conspiracy theories being cooked up about what they were/are up to. [See comment at the end of this post highlighting how MSFT is no longer a "closed society"]
- Both have bold, audacious goals -- Microsoft wanted to have a computer on every desktop which sounded ludicrous in the mid-70's while Google's goal of organizing the world's information sounds similarly ludicrous when you consider their scope. Both will probably achieve their stated goal.
- Neither organization thinks of themselves as "evil" but increasingly perceived as such as they move into adolescence. A recent example is the hullabaloo about Google's Autolink feature. First, Steve Rubel started a stir when he said that Google is doing something similar to Microsoft SmartTags. I also saw Dave Winer talked several times about this issue in the past few days. Robert Scoble also did a nice job of recapping the issue, history and response from Google here.
- At similar stages, they were/are hot places to work with individual autonomy pulling many graduates from the world's top universities. Both place a premium on talent and have gained reputations for their grueling hiring processes.
- Both are accused of "master plan" when individual projects are much less coordinated than people thought/think.
Time will tell whether Google is more or less like Microsoft which will make for interesting punditry. Here's a few articles looking at this issue.
- This guy thinks Google isn't the next MSFT
- This article has fun with Google's desire to not be "evil" with the insinuation that MSFT is "evil".
- What Google has learned from Netscape about competing against Microsoft.
- Fred Wilson of Flatiron Partners comments on Google being like Starbucks
- John Battelle comments on Is Google a leader contrasting with Microsoft
The only thing that matters to my clients is ways they can reduce collateral damage or better yet, be like one of those birds that feeds off the hippo. Understanding how Google is likely to progress given their mindset and studying history is what I advise my clients. It will be interesting to see if/when Google can no longer roll out stuff in a stealth mode. Microsoft is so scrutinized that they no longer can do that -- every move is reported. Rich Tong (a founding partner at Ignition Partners -- a VC firm) who was at Microsoft in a similar timeframe to me commented on Google rate of product rollout and ability to operate under the radar which MSFT could do at one time.
After writing the previous comments, a firestorm of sorts hit Microsoft around whether it would/wouldn't support legislation in the state of Washington related to gay rights. What's relevant to this post is how Microsoft was once a "closed society" much like Google is today. They thought it was "none of your business" to know the inner workings of the company. It was late to realize that increased transparency would be an asset rather than a liability -- certainly Robert Scoble is a great example of that. Google has already fallen into the same "none of your business" trap Microsoft fell into earlier in its history. I can't imagine Google having employees embrace the transparency in the way Microsoft has as evidenced by this latest firestorm. Check out these links for an example of corporate transparency -- it's a bit like finally getting inside a sausage factory. Though it's not pretty, it's the reality.
- The Scobleizer has several posts and dozens of comments at his blog.
- Robert Scoble's boss also has some related comments.
- You know transparency is working when you have a Sun employee finally realizing Microsoft isn't much different than other tech companies in terms of its people and policies. It just has had the fortunate/unfortunate experience of being in an extremely strong position which further opens you to criticism particularly when past practices have raised people's ire.
- In Oregon, a far left and far right legislator team up on biofuels legislation.
- The Economist reports in their "Rethinking the Axis of Oil" article about the growing alliance between defense hawks with enviro greens to completely rethink America’s energy strategy which will force the White House to play catch-up.
- "Set America Free" group combines noted liberals & conservatives with their recently published "blueprint" for Energy Security.
- Senators Larry Craig (R-ID) and Maria Cantwell (D-WA) are teaming up to get loan guarantees for the world’s first commercial scale cellulose ethanol (this process uses farm waste such as wheat straw) plant to be built in Idaho.
The nonprofit network is designed to be an outlet for anyone who creates audiovisual works, be it an independent filmmaker, a public-television station or a hobbyist with a camera or a microphone. The effort tries to tap the growth in noncommercial and grass-roots media epitomized by Web logs, the personal Web sites frequently updated with fresh reporting, commentary and creativity.It's a clever approach that would have the benefit of increasing demand for tools such as those that come from Kontiki where he's the CEO. [Full disclosure, Kontiki is part of Altus Alliance's client portfolio]
Friday, May 06, 2005
Thursday, May 05, 2005
Google, Yahoo, MSN, and AOL are the places you need to concentrate your efforts. At every instant throughout every day each bid can be only too high, too low or just right. There are many PPC budgets; (1) pure direct marketer, search budget is "carte blanche"; (2) fixed budget marketer, (3) cross media or hybrid marketing budget. The first mistake made by marketers when doing SEM is forgetting to think like their prospects. Second mistake is using the wrong success metric; think about immediate orders, lagged orders, and so on. Make sure to do your keyword research, go deep. Make sure to fine tune your creative, do it constantly. Do not send ALL your traffic to your homepage. Then make sure to test your landing pages. There is a major issue with setting daily budget caps, in that it randomly picks keywords not to show up, but in reality you want your best keywords to come up first. You must measure and manage granularly. Do not simply measure on average, break it out and look at specifics to improve your overall average. Do not neglect localized opportunities. Do not only use broad match in Google, be specific. Bidding emotionally is a bad idea, do not outbid out of spite. By avoiding those mistakes, you will realize great success.
It seems to be sport these days to compare Google with some other successful company. Here are a few examples: