Jeff Clavier's Software Only

Bill Burnham on "Deal Flow Is Dead"

Bill has a great post on  Deal Flow Is Dead, Long Live Thesis Driven Investing, in which he points out that the secular VC approach of attracting the best possible dealflow, and invest in a small subset of these opportunities, is becoming difficult for all but the best or most established firms.

The sheer size of the investment community, in terms of firms, professionals and capital, has become such that VCs have to compete on good/great deals unless they can develop a proprietary dealflow. The best firms will be able to limit the inflationary effect of this trend on valuations, with statements like "Working with us increases dramatically your chance of success and major exit", and with a handful of them - it is statistically true.

One way of developing a proprietary dealflow is to develop extremely close relationships with leading universities and laboratories, and make sure that the first call, the first show, is to firms sponsoring work or studies. One of many local examples is DFJ's sponsorship of Stanford's ETL Program.

Another is to hire entrepreneurs "in house" and get them to work on a very specific portion of the dealflow, and at the same time start developing the fundamentals of a new venture. The implementation of an EIR (Executive In Residence) program is specific to each fund, but the concept is the same: hire a talented entrepreneur in a space of interest, give him/her access to the resources of the fund (partners, contacts, portfolio,...) in order to offer the best possible environment to  the new breed, provide the seed capital, attract additional talents, and eventually launch the company. Depending on the arrangement, EIRs and the firm may or may not have a commitment of working together after the incubation phase.
Examples of EIR'ed companies are SpikeSource (Kleiner Perkins) and Scalix (Mayfield). Kleiner Perkins is actually an example of a Tier 1 firm that mentioned they had something like three or four such projects going on.

Executive recruiters have been very busy hunting for EIRs over the past few months, in noticeable  numbers. However this mode of developing is not a panacea, since it involves a market risk, and a team/product risk, risks that VCs try to mitigate by looking at multiple opportunities in a space they are interested in.

Also check out Paul's comments on this post.

Ten million indexed blogs = ??% of the blogosphere ?

Steve Rubel points to a BlogHerald piece by Duncan Riley hinting at the overall size (60 million) of the blogosphere by aggregating individual countries and services' numbers. To contrast Perseus recently published their own number: 31.6M.

Duncan's country/services numbers seem to make sense, except maybe Korea's with a 15 million (i.e one in every 3 habitants, but the number is reportedly substantiated in the comments), and Europe's which is at least off by 1M (France alone has an estimated 2.5M blogs, of which Skyblogs represent 2.1M). However I think that associating services like LJ, TP, MSN Spaces or Blogger to the Anglosphere (accounting for 60% of the total) might be  introducing an double-counting in  the calculations, since  Blogger and Spaces are also used by an international, non-english, audience.
Unless Duncan is saying that Korean and Chinese bloggers are using local services for an additional 24M. I also wonder how many of these could be construed as spamblogs, fake link blogs, etc. and how many are inactive (like my 10 test blogs).

The second question relates to the percentage of blogs actually indexed by services like Feedster, Technorati, BlogPulse and PubSub. These last three have recently hit the 10M mark (which is a notable milestone). I remember a conversation with Dave Sifry about the size of the blogosphere, and he thought that the Technorati index was a pretty good proxy for the number of "real" blogs (i.e they reportedly work hard to remove spam blogs from their index - like all other services). The issue is that figuring out that a blog is pure spam can sometimes be challenging in English, but in Chinese or Korean ?

Since all services used ping services like Weglogs.com, Ping-o-Matic or FeedMesh and link crawling to discover new blogs & feeds, I am wondering how the 16% ratio can be rationalized. Obviously a blog that is not linked and does not update can not be discovered, and there might be a lot out there, but what else ? Spam blogs and inactive blogs, like I said ? Completely disconnected islands of blogs that don't link or ping ?

Also, there is a difference between the number of blogs, and the number of feeds out there. For example this blog has 6 feeds: 2 RSS, 2 Atom, and 2 FeedBurner-managed (1 for blog content, 1 for blog content+Buzznet pics+del.icio.us links). The doubling of (TypePad) RSS/Atom feeds comes from the fact that I have moved my url from softtechvc.blogs.com to blog.softtechvc.com, and did not ask you all to switch to the managed feed.

Having said this: Dave referred to 10M blogs for Technorati, and Bob to 10M feeds for PubSub. Feedster is indexing feeds, and BlogPulse is referring to blogs.

Apples vs. Oranges ? And what is the size of the bag ?

It will be interesting to read what Bob Wyman, Dave Sifry or Scott Rafer's take is on this (or the editor of the BlogPulse blog, who I don't have the pleasure to know).

Update: Natalie Glance from BlogPulse points (in the comments) to a WSJ article on the subject. After discussing what is a blog and what is not, the writer mentions a few interesting bits of statistics:

• 2/3 of blogs indexed by Technorati are non-English
• BlogPulse projects that 50% of MSN Spaces are "empty" (i.e they contain lists, pictures, etc.) but no posts
• Technorati sees 800 to 900K posts a day, vs. 350 to 450K monitored by BlogPulse
• BlogPulse estimates that there are 3.5M active blogs (i.e that have been updated less than 30 days ago).

I will also mention to Pierre Bellanger, the CEO of Skyrock that they might want to start notifying ping servers (actually, I know that the PR team will pick this up).

At the French Technology Showcase

Spent the day at the French Technology Showcase, an event sponsored by French trade  and development organizations, and a number of French companies.

The concept is to help improving the image of France as an innovation hot-bed, and attract US capital to finance French companies. Part of the conference is therefore a mini-Demo, with 40 French hi-tech startups presenting their products/technology to VCs and potential partners. The rest of the agenda is made up of panel discussions centered around entrepreneurship, VC financing, exits,... The usual suspects of the French community are presenting or are in the audience. There is also a reasonable show of local VCs.

I was invited at the last minute to participate to the VC panel on "Investing in French Start-ups", alongside Alain Azan, the Managing Director at Sofinnova Ventures, and Marc Fournier, from Societe Generale Asset Management. Since we only had 25 minutes, we only talked about a few specific points, like the right time to seek US venture capital, whether "flipping" the company is necessary (creating a US entity, and have the French structure become a subsidiary of it), and how to approach the US market in general as a French company. The answer: (in true VC panel fashion) *it depends*. So Alain and I gave a couple of examples of companies that have recently implemented a US strategy: In-fusio (US raise, and acquisition of a US company), Meiosys (US raise, flip and appointment of a US CEO),...

The over lunch we had the Honorable Pierre-Marc Johnson, the former Premier of Canada Quebec talking to us about the differences between French and US social approach to business. Some of his examples were quite funny, and to the point, such as the fact that US executives would only enter a meeting if they knew what to expect in terms of results and accountability, whereas the French would happily argue for quite some time to build consensus. US businessmen are efficient with their time, French are social and building long term relationships.

And the final cliche, what do they drink over lunch: US - Ice Tea, France - Wine.

And yes, we had both red and white wine for lunch. It might actually have been the first time for me in five years attending a conference in the US.

Update: a reporter from CNet covered the beginning of the conference, during which like Claire Gaymard, the President  of Invest In France, tried to refute some of France's principal cliches : public servants' endless strikes, the 35 hour week, lack of employment flexibility (hire/fire), etc. From my vantage point, it does seem as though the startup environment has improved thanks to new tax breaks, changes to the 35 hour week law, etc. The issue though is still the fact that the ecosystem is not deep enough: repeat entrepreneurs who can mentor new teams, VCs and services firms experienced in building global businesses,... but we'll get there eventually.

Building an innovation ecosystem at the European level will actually be the main topic of Innovate Europe, a conference produced by Chris Shipley, which will take place on June 13-15 in the beautiful city of Zaragoza, Spain.

Layoffs at Friendster, Sassa out, no movie ?

BusinessWeek TheBeat confirms the Layoffs at Friendster, scooped yesterday by Niall Kennedy (who announced massive layoffs initially, and then referred to a handful of people). What I had not heard (and was scooped by Jeremy) is that Scott Sassa, the Hollywood-originated CEO, will be leaving a a few weeks, and will be replaced by Taek Kwon, currently executive VP of product and technology at Citysearch.com.

Not surprising indeed, since Friendster has been for a long time in search of a way to monetize its (then) large audience (including a movie), and is facing strong competition from MySpace and others.
The other rumor is that the company is about to get additional financing, probably from current investors (Kleiner Perkins Caufield & Byers, Battery Ventures, Benchmark Capital). Difficult to see an upround coming through here, given that the last was at a post-money valuation of $53M.

No the real question: what is going to happen to the Friendster movie :-) ?

The first generation of social networking sites (Friendster, Tribe, ZeroDegrees, Orkut, ...) have all gone through ups and downs (more downs) as they were pioneering in this new space - and not really figuring out a business model for themselves, besides advertising. Social networking is now an integral part of the fabric of Internet applications, but offers limited value in its own right - with a very quick decay of one's interest.

Until Y!360 gets integrated in My Yahoo, or vice-versa, I will not feel compelled to visit it that often. Whilst it is a neat implementation, and useful integration of certain (still marginal) services, I don't have any reason to come back to it again, and again - as I do with My Yahoo. But I remember the morning it was released: we were all super excited, until we had  received our invitation, connected with our usual friends on that SN, had discovered the main  features and posted about them. Kids with new toys, sort of.

At the end of the day, only LinkedIn still gets my "eyeballs", and generates value for me.

Reuters: Future looking brighter ?

This one is close to my heart, since I have spent 15+ years of my professional life in the Reuters world, successively as a business partner, a senior executive and a venture capitalist.

Rafat points to a great piece from TheDeal.com: Dispatch from Reuters, which goes in quite a bit of detail into the history of M&A deals that have shaped the past 12 years of Reuters.

The piece obviously forgets to mention the 1993 acquisition of Effix (the startup that yours truly was involved in), which was bought for the Unix applications we had developed, and that were competing furiously with Teknekron Software Systems, bought by Reuters in 1994. I'll always remember our first dinner at Il Fornaio after the acquisition, the two teams meeting for the first time and trying to figure out how we'd turn from external enemies into internal allies. But that's another story... and now they are very good friends.

As I was joking with Eric Lint (the Head of Corporate Development of Reuters) over IM, the acquisition of Effix must not have been that bad, since it is one of the only acquired entities that is still alive and kicking in the Reuters Group, developing the Reuters Desktop and the Risk Management product line, amongst many things.

This paragraph summarizes the Reuters situation:

[Started 3+ years ago] A program of divestitures and restructuring, dubbed "Fast Forward," has stabilized and rationalized Reuters, a company that used to have 1,400 products and now has about 50. A couple of well-integrated acquisitions have brought in new talent and helped position the company to better compete with archrival Bloomberg LP. Sometime this year, Reuters expects that revenue from its core financial services businesses will finally stop shrinking and start growing again. And soon — but not yet — CEO Tom Glocer plans to unveil a new corporate strategy. "It's a growth-oriented strategy," is all Glocer will say until July. "And although we're open to a lot of interesting new markets, the good news is that our existing markets, as we've redefined them, have the ability to support decent growth."

As the revenue of financial products finally stabilizes, it sounds as though Reuters is also going to establish a larger footprint directly with consumers, fueled by recent hires such as Janet Scardino, the former VP of International Marketing at AOL. Rafat's audio interview of Chris Ahearn, the President of Reuters NewMedia (and former head of LabMorgan) also clarifies this position.

I still have many many friends in the Group, and wish them all a great success.

Disclosure: I am still a Reuters shareholder.

Rant of the day: Going around the "bloc"...

We French have a knack for doing things differently: we drink quite a  bit of wine because it is healthy (the French paradox), we have suits and  shirts of unique colors (at least I do - the French fashion statement), etc. And that is totally fine with me.

One thing that I am not cool with though, is our inept, sometimes retarded, narrow mindedness when it comes to the French language and the sacred mission that certain institutions have entrusted themselves with in defending it - at all cost, including bringing total ridicule upon us when inventing new french words that "don't mean no nothing - nottthhhinn'!" to avoid using a well established, commonly used, English term.

The latest victim of the "Commission générale de terminologie et de néologie", aka the Neologism General Commission (check out the second meaning of neologism on this link)? Blogs!
They now have to be called "bloc notes" or "blocs". A "bloc note" is a notepad, so we are sort of missing the online nature of the phenomenon - but that is just a detail.

So now what ? Skyblog (the French equivalent of LiveJournal, with over 2M blogs blocs) is going to be renamed Skybloc ? And bloggueur/bloggueuse (the french adaptation of blogger) becomes bloqueur/bloqueuse (he/she who blocks something) ? Oooh, trackback carries a lot of potential (suivi arriere ?). And blogroll, bloc-rouleau ?

All this agitation come from the 1994 enactment of the Loi Toubon (literally translates as Allgood Law) that had a purpose of removing English words and expressions from the press and corporate vocabulary. And of course, there were (in theory) fines involved in case of non compliance - at least at that time. This led to the introduction of famous terms like marketique (marketing), courriel (email), etc.

Why am I making a fuss here ?

A) because this makes us look downright silly, which is OK in certain cases - but not here.
B) because it shows that we just don't accept that we have lost to English the position of "language of business". And as I am about to attend this week the French Technology Showcase (a great initiative that will see 40 French tech startups present to potential Silicon Valley investors and partners ), I am too often reminded that we were not equipped with the proper English training at school: too little, too late (I started learning English when I was 13, as a second language, because way back when you had to learn German as a first foreign language to have the best teachers - go figure).

Even though I understand that things have changed, and that sometimes kids can learn English in earlier grades, it is critical to grok that we *need* the new generations to be bilingual in order to give them a chance to be competitive in the global marketplace. You don't want your kids to attend all English conferences/meetings or meet interesting non-French speaking people, and completely space out on important concepts because they can't absorb the flow of English. Or can't express themselves.

Even though it feels bizarre, I am glad that my kids tell me that my English accent is funny and that (sometimes) my pronunciation really sucks. At least they won't have that problem.

Oh, yeah. And we are making a point of getting them to learn French as well. Because it is a wonderful language for literature, poetry, etc. And it is part of a cultural heritage we are proud of - just in case you were wondering.

</rant>

Coverage: Loic, BoingBoing, CNET.

Joi on Becoming boring - the Blues of an A-lister ?

Joi Ito wrote a note in which he is wondering whether his blog is becoming boring, because he seems much more conscious of the feedback he will receive on certain posts/topics:

[...] I realized that there are a great number of things that I would have posted to my blog a year ago, but I won't now. I have argued a number of times that this is my blog and if you don't like it don't read it. However, as I read criticisms in the comments and on other blogs about what I write, I have become increasingly sensitive about what I say here. The criticism is often valid. "Check your facts before you post." "Read before you write." "Don't be so self-obsessed." "That was stupid." "The tone of your post was offensive to me." "So this guy posts every time he's 'off' to somewhere new. Is he boasting about his travel?" I know it shouldn't, but these voices yap at me in my head and cause a kind of chilling effect. I fear that my jokes will be misinterpreted and the irony lost. I fear that someone will take offense. I fear that a post will sound boastful. [...]

Mary echoes Joi's theme in her post "Baby bloggers are much more fun":

They have no constraints.. they are less known.. and they don't have as many relationships usually.. so when they see something or hear it, they blog it and it's fun.

Blogging for a while, and working in tech, I won't blog anyone who's paid me money, unless I was an employee.. so Technorati is okay, but I'm just not comfortable blogging clients. And then there's all the secrets people tell you, and well.. those are offlimits as well.

So I'm telling you, I'm officially boring. Mainly because of these constraints.. it's just hard sometimes to say what I really think, but maybe for other reasons as well. Geez. [...]

This reminds me a post from danah boyd a while back, in which she concluded:

[...] I almost stopped blogging a few months back because i was tired of the expectations.  Seriously, if i could give any feedback to readers, it would be lay off, chill the fuck out and don't expect/demand things from the writers you're reading. For me (and many of my friends), blogging is an exercise of love, not an effort to meet an audience's needs. Having to face expectations every time i go to my blog makes me feel absolutely disgusting, like i've become some sort of blogging whore. [...]

At the end of the day, it's your blog, so post about anything you want. And if you feel boring, stop blogging for a while, or blog less and only about a few topics of interest.

I personally find that blogs become boring when they feed you with posts that are "forced", i.e they relate to topics that have been much talked about already, or not enough research has gone into preparing/fact checking them. They are just there to fulfill the daily posting quota. That is when you get called out - and lose some hard-earned reputation if this happens too often.

Besides that, blog about what, and however often, you feel like. Worst that can happen is that people unsubscribe from your feed and go read other blogs. The good news is that there is enough echo in the blogosphere that anything important you talk about will find its way in the aggregator of your "non-readers" through one or two hops.

Last suggestion: ask our mutual buddy Loic how he manages to keep on blogging with all the crap he is getting on his French blog on quite a large range of topics... He might have useful insights.

AdSense For Feeds: Creepy - in some Sense.

Tim Bray has published a piece AdSense For Feeds, Say What? that summarizes my own experience.

Upon learning about the availability of AdSense for Feeds ("AFF"), I was keen to try it out. So I went to the registration page, and started reading the Terms and Conditions (yes, I try and read these things).

Whilst I was happy to give a shot to estimate the number of subscribers of my RSS feeds, the "T&C" language related to  "Responsibility for Feed Users" felt downright creepy:

[...] You agree you will be responsible and liable for any and all use of the AFF Ads by any feed user and will indemnify Google for any lawsuit or proceeding (a) relating to or arising from any feed user's use of AFF; (b) relating to or arising from Your failure to ensure any feed user’s compliance with the terms of the amended Agreement; and/or (c) brought by a feed user against Google that arises from or is related to Your provision of AFF Ads to such feed user. [...]

Duh ? I don't control my readers, and especially, I don't control these sites that republish my content (like Topix.net, foundnews, etc.) and have no clue what they'd do with ads. So... I'll stay put for now, and will wait to see what other's experience is with the service.

I heard in the Gillmor Daily that Om's application was rejected, maybe because his blog is running on WordPress and that according to Matt, only MT/TP and Blogger users are accepted ?

Any other feedback yet ?

Jeff Jarvis Moving On

Jeff "BuzzMachine" Jarvis has just announced in his post "Onward" that he had left his job at Advance.net to do *a lot* of new things, "all related to changing news and to citizens' media".

So what will Jeff (who I know from his board involvement at Moreover Technologies) do in his new incarnation, as Buzzmachine LLC ? Check this out:

• Work on content development About.com, working with Martin Nisenholtz at The New York Times Company
• Act as editor in chief of a new (stealth) news start-up
• Work with the new City University of New York Graduate School of Journalism as the school launches
• Hanging out my consulting shingle to take on a few good projects
• Write a book
• And of course, blog, blog, blog, and blog.

Most of these tasks would be close to full time for most of us, but the man is not like... most of us. So best of luck Jeff, and see you around.

Update: Heather Green over at BusinessWeek BlogSpotting has posted an interview of Jeff Jarvis.

Trends in Venture Financing - Q105 Data

The law firm Fenwick & West compiles every quarter the financing terms received by Bay Area technology companies. I just found out that this report I used to receive by email from Bill Schreiber (a corporate partner I have been working with for a few years) was available on the web.
This is a very useful indicator as to the evolution of typical terms recently offered by VCs. Key terms of a venture financing are: average round size, pre-money, type of liquidation preference (seniority, multiple, participating,...), dividends, provisions, etc. For a clear definition of all these terms, I recommend checking Brad Feld's excellent series on financing terms, or the short version from Fenwick. Whilst the report does not give absolute terms (what is the typical pre-money for a Series A), it tells you about price evolutions over the past few quarters.

What were the key trends in Q1'05 ?

• The quarter showed an increase in the number of uprounds (new financing done at a higher valuation than the previous one) vs. downrounds, and an increase in valuations.
• The investment activity continued to trended towards series A and B, i.e earlier stages of innovation, which is good news.
• Non valuation terms continued to improve (e.g. preferred shares received by VCs have a 1X liquidation participation with capped participation).
• At the same time, the IPO market for new offering has all but dried up, making M&As the only real exit route - with an notable increase in number of transactions and amounts.
• VCs invested in less companies, and a lesser aggregated amount than in Q4'04, which I would analyze as a sustained activity that is not getting in "overdrive" mode.

Obviously, this is an aggregated view across all sectors (semi-conductors, software, services, enterprise and consumer, etc.), and finer grain information will often be required. But it is an interesting (free) aggregate.

You can register for next quarter's report here (for the Silicon Valley version, or the Israeli one).

A good complement of this report is the MoneyTree Survey.

Feel free to post questions/clarifications through comments.