Jeff Clavier's Software Only

RSS Fund ? $100M ? No blog ? Hmmmm

Update: Dave Winer clarifies that RSS Investors have just announced a $100M, and "only" raised $20M:

John Palfrey, executive director at Berkman Center (where I used to work), announces a new venture capital fund that focuses on investments in "tagging, RSS, OPML, search, social software, and related next-gen standards." According to Jim Moore, another former colleague of mine and JP's partner, they have raised $20 million from Ritchie Capital, and plan to raise another $80 million.

I first saw the news on Bill Flitter Pheedo's blog and then saw this piece from Tom Forenski:   We're off to the races...the first RSS focused VC fund is announced--$100m. I had heard about the formation of this fund, but was not too sure as to its stage of advancement. Well, they closed on $100M $20M from Ritchie Capital Management LLC as lead investor (any other notable LP names ?) (with a one-page web-site), and plan to raise another $80M.

Focus:

Supporting and nurturing the technologies and leaders who are championing RSS-related technologies, including news aggregation, blogs and new classes of search engines. In addition to examining technologies that utilize RSS for news aggregation, RSS Investors will strongly pursue RSS applications that aggregate data, particularly in the financial and medical industries.

Mission:

For the first time in history, people who share points of view can communicate around the world in real-time to exchange and build ideas. Recognizing the economic opportunities growing from the next generation of Internet tools, the mission of RSS Investors is to support the growth of these borderless communities built on collective thoughts and goals.

VentureWire (sub req'd):

The fund will focus on early stage companies already generating revenue, Palfrey said, and will typically invest $3 million to $5 million in Series A rounds, with money reserved for follow-on investments.
RSS Investors will focus on four or five companies within the coming year, in areas including infrastructure - including security for RSS platforms; search technology; content processing and distribution technologies. RSS Investors will likely take board seats at portfolio companies. "We want to be active partners with our portfolio companies," Palfrey said.

As Tom says, this reminds me of the KP Java Fund, or the Intel IA64 Fund - from the bubble days. It will be interesting to see if they will only invest in RSS infrastructure plays, or if any company having RSS in their exec summary will do (which would pretty much mean any consumer and many software plays these days).
Since having an investment focus that is too narrow leads to a lack of diversification and increases the risk profile of a fund, I hope that they will have some flexbility in their charter. And that they have the collective experience to help figuring out business models for these early stage RSS companies - the most common issue in my modest experience.

One thing is a strange though: the web site is under construction, and I could not find a blog anywhere. John Palfrey, one of the two Berkman Center principals involved in the fund, sort of announced it yesterday. Nothing (yet) from Jim Moore.

This should be good news for RSS startups, and it might be a fantastic opportunity for citizen journalism projects to get their necessary funding, etc. But I have this uneasy feeling that we're getting one step closer to a bubble with this kind of announcement. Not to give in to the "Way too much VC money, way too many VCs" litany, but...

So best of luck to RSS Investors LP.

And may I suggest an alternate strategy ?  Don't raise more too much money. With a smaller fund, you can actually afford working on seeding some new initiatives and provide the initial $100K to $250K that "RSS entrepreneurs" may need. And then work with VCs to scale the companies that have real legs. Otherwise you are going to have exactly the same funding strategy as other VCs, and will end up competing on the same deals. And having RSS in the name of the fund won't be enough of a differentiator.

More:

• Press release
• Paul Kedrosky is not too enthusiastic either
• Matt Marshall has talked to Jim Moore, and reports on additional information
• Additional coverage: Red Herring, PaidContent (1,2),
• Dan Primark in PE Week Wire says:

A couple of folks in Cambridge, Mass. are looking to raise $100 million for the first-ever early-stage VC fund dedicated exclusively to Real Simple Syndication (RSS). Bloggers have, understandably, expressed great cynicism, given that the effort seems far too narrow and that RSS is a technology that can improve/help create other products, but not a product in itself (remember how poorly those Java-focused funds did in the late 1990s?). One of the group’s principals gives a stirring defense to SiliconBeat.com, but it’s not yet enough to convince me. But I’m not an accredited inv*stor, so it will be interesting to see LP reaction. My advice? Pitch this thing all over the West Coast, but avoid Europe. RSS just doesn’t yet seem to have caught the fancy of those across the pond.

The era of the disposable startup ?

Joe Kraus has a thoughtful post:  It’s a great time to be an entrepreneur, in which he rightly points out that the startup costs of a software startup have dramatically dropped. He cites the example of JotSpot vs. Excite in terms of investment required to move from the idea to the initial product: $100K vs. $3M, a 30X difference.

Why ?

• Hardware is 100X cheaper: Cheap Intel boxes vs. Sun gear
• Infrastructure software is free: LAMP vs. Solaris and super expensive development tools (was that $5,000 or $14,000 a pop for the Sun compiler ? can't remember)
• Access to Global Labor markets: elance.com rules
• SEM changes everything: you can economically launch multiple campaigns and adapt them almost in real-time - and engage with your audience through blogs and forums.

My own, focusing more on consumer Internet startups (eh, that's what I do after all):

• Advertising dollars are shifting online: search is booming (check out the coverage of Vertical Leap).
• Eyeball/usage monetization works: create a valuable service for a niche community that is of value to advertisers/sponsors, and get them to use it - a lot - and dollars will follow.
• Bandwidth is cheap: unless you are dealing with hypersized multimedia downloads (like Doug's 380 GB last Tuesday - the iTunes 4.9 effect).
• Web services integration: lots of web services out there that can be integrated very quickly (Maps, Payment, Printing, E-Commerce Carts,...).

We had the same discussion on the Investing panel at VL (which I have yet to blog about) and I actually quoted $50K as the initial cost to bootstrap a service (and no, people don't get paid US salaries in that model - they work for equity) to a point of being able to launch, or lure angel investors - or even VCs - to invest a few hundreds of $K in their venture. Think how much del.icio.us must have cost to bootstrap (and yes it might be an extreme - one server with a database and a bit of code - and the tagging meme got started), or the award-winning Dogster.

So is it the era of the "disposable startup" ? A company that develops niche functionality of value to a community that will monetize through advertising, and will ramp quickly to being cash-flow positive and recoup the modest investment it took to start ? And then run for a while, and either grow enough to be acquired by one of the "big boys" or actually create a real opportunity that VCs will fund and help grow to $50M to $100M in revenues ? And if it does not work, well it was "just" $50 to $100K - trash and move to the next ?

Hmmm, don't think so. First, it is not because it is cheap that it is easy. Second, not everyone will be bought be Yahoo or Google for top dollars (some might get a few million dollar acquisitions, and have an interesting job building their product with the means of a larger company - nothing wrong with that - but noone makes money on these). Third, you still need to build some level of defensibility and differentiation - and not shoot for the path of least resistance (distribution was cited often as a key factor for search engines). Fourth (anyone) ?

We had between 15 and 20 vertical search startups at VL, stealth or having just launched a beta site, and they were busy pitching - and being pitched to. This is both encouraging, and concerning.

Amusing anecdotes ? One startup founder asked a question during the VC panel starting by "Hi, we're a couple of Stanford students and we are just launching a (vertical) search engine" - yes, they were duly noticed. Also, I was shown a one- from an angel investor who was seeking investment opportunities, and who left his coordinates for startups to get in touch on tables and chairs in the break area. Clever (?).

What do you think ?

Vertical Leap: David Hills' Keynote

Dave Hills is the CEO of LookSmart, and prior to that he ran About.com and 24x7 RealMedia. He sees Vertical Search as the next logical step, everyone agrees about it - but there is no clear definition of what it actually is.

His thesis is that it does not matter per se as to whether you are big or small, and the community of users you are targetting - and the advertisers you will be working with. LookSmart is in transition, moving from a generic search position into the vertical space.

Definition: Vertical search is about "Providing essential (versus exhaustive) search content and related tools for people who have a passion, need or repetitive task". Bringing together the two types of search:

• Broad search – need-based without knowledge or opinion of where to find information, products or services; consumer needs to cast a wide net
• Vertical search - still need-based, but the consumer has knowledge and needs greater concentration in one form of results

Vertical search is not new, and has been around for a number of years starting with travel and real estate. The explosion of services recently is due to the ever growing amount of advertising dollars shifting to search marketing, and the lower cost of development for new entrants. The space will be segment by content or by audience, and will leverage partially on technology and partially on  human editors. These vertical search sites will also provide a valuable service for one aspect of life.

Audience will embrace these new offerings because they save time, focus on essential results and allow you to leverage communities of like-minded people (especially when some social networking features are involved).
Advertisers and agencies will embrace these verticals because of the higher precision of the results, and the resulting higher degree of targeting (by page, keyword or behavioral). As with TV, advertisers, agencies will become adept at buying deeper, and over time share of dollars will equal share of viewing

This new market is still early in its infancy, but is ripe for a large development. First innovation generally comes from new entrants into a market, and it is expected from new players (like these attending or participating to the conference). More than enough advertising money will be available to go around, and venture capitalists are definitely looking at funding opportunities.

Summarizing the position of the three constituents in the market:

Consumers

• Will have both broad and vertical needs
• Can assimilate and utilize many brands into their lives
• Will want to save time and increase productivity
• Will want additional tools

Advertisers

• Want to have multiple choices in key media, like search
• Will support alternatives
• Will want increased opportunities to reach consumers
• Will adapt to buying deeper into the medium if it’s easy and productive

Participants/Innovators 

• Will create robust services and tools with laser focus
• Will be both big and small companies
• Will work in conjunction with, and separate from, other companies
• Will find smart people and money to drive and fund the business

Tag: verticalleap

Check out the coverage of the conference there.

Playing with Odeo

Following the post of my buddy Rodrigo, and the rather acid comment I left there, I thought that I should spend some more time trying out Odeo. My initial 5 minutes on the product two days ago led me to think that it was a lot of hype and not much functionality - especially given that the podcast production bit is not available yet (more power to Eric Rice and audioblog.com).

I decided to try Odeo on my Tablet PC, which is running Windows XP and Windows Media Player 10. Because of the automatic synchronization of WM10 playlists with my "scoblephone", the SMT5600, Odeo performs similarly to other iPodder implementations - except for the tagging aspect.
The social networking functionality (i.e the ability to connect to friends and see what their subscriptions are) is definitely not straightforward to use, since I had to guess the usernames that my usual contacts (Ross, David,...) had used when registering.
Update: I then figured that if you search for someone's name, their profile will appear alongside the podcasts their name is linked to. Not super intuitive but better than guessing.

The biggest issue I see is that there is quite a backlog in the archive of shows made available by Odeo: For immediate Release is missing the last 4 shows, The Chris Pirillo show the last 2, etc. Which means that the convenience of not having to deal with RSS enclosures (which is done by hand with NewsGator - glad to see that FeedStation is now available) implies a delay in the shows I have in my watchlist.
I'm sure that this will be fixed shortly though.

I know that this is a beta version, and fully appreciate the implications, but it feels sort to too early/limited for a product that had built a lot of expectations by launching "en fanfare".

Am I being unfair here ? Also, has anyone found how to invite friends ?

Vertical LEAP: Preparing the Investing panel

The first panel of the SDForum Vertical Search conference will see four Tier 1 VC firms express their views on the space.
Because we'll have less than one hour for this panel, I thought that I would provide some background on my panelists on this blog. It is therefore my privilege to introduce:

• Theresia Ranzetta, Accel Partners
  Theresia has been with Accel Partners since 1999. She focuses primarily on software investments with specific interest in security, technology-enabled series and consumer oriented technologies. She currently serves on the Board of Directors of Aceva Technologie, Andale, CRS Retail Systems, ForeScout, Interlace Systems, Imperva, Jasper Design Automation. She also led Accel's investments in  LetsTalk and PeopleSupport (PSPT) and was part of the team responsible for investing in Walmart.com  (WMT).
  Theresia has worked in the computer and communications industries since the late-1980's as an entrepreneur, consultant and venture investor. Prior to joining Accel Partners, she was founding Vice President of Business Development & Sales at Release Software, a venture-backed company which developed products to enable encryption and payment technologies for the software industry. Theresia was a key member of the senior management team and was instrumental in growing the company from $0 to $15M in revenue. Before that, Theresia worked as a management consultant at Bain & Company and a product manager at Silicon Graphics.
  Theresia holds an Sc.B. in Engineering from Brown University, magna cum laude and an M.B.A. from Stanford University.


• Andreas Stravropoulos, Draper Fisher Jurvetson
  Andreas Stavropoulos is a Managing Director at Draper Fisher Jurvetson, where he serves on the Boards of Akimbo, AppStream, everdream, H5 Technologies, MeetUp, Mobile 365, Pronto Networks, SilverPop, Technorati and Wavemarket. In addition, he led the firm's investments in Centerpost, ePocrates, 4info, Mimeo and Polaris Wireless. Andreas focuses primarily on software investments (enterprise infrastructure and consumer/internet), wireless networking, and technology-enabled services. Prior to joining DFJ, Mr. Stavropoulos was with McKinsey Company's San Francisco office, where he worked with senior management teams of corporate clients with an emphasis on information technology. Prior to McKinsey, he was a Senior Analyst at Cornerstone Research, a financial and economic consulting firm that helps resolve complex issues arising in high-profile business litigation. Mr. Stavropoulos is a summa cum laude and Phi Beta Kappa graduate of Harvard College in computer science. He also holds an MS degree in computer science from Harvard University and an MBA from Harvard Business School, where he was a Baker Scholar and graduated first in his class.


• Chris Moore, Redpoint Ventures
  Chris Moore is a Principal of Redpoint Ventures focusing on consumer Internet, online marketing and business services opportunities. Prior to joining Redpoint, Chris evaluated Internet opportunities for IVP, a firm he joined in 1999.  He is actively involved in Redpoint's investments in Efficient Frontier, MySpace, Right Media and a few seed stage projects.
  Prior to joining IVP, Chris led business development efforts for wine.com, the online wine retailer, and held various product management positions with Peapod, the pioneering online grocery shopping service provider. Previously, Chris evaluated and executed Internet and media investments for Ameritech. He began his career as a financial analyst in the mergers and acquisitions and leveraged buyout groups of Wasserstein Perella & Co.
  Chris holds a B.A. in Mathematics and Economics from Dartmouth College and an M.B.A. from the Stanford Graduate School of Business.


• Mark Kvamme, Sequoia Capital
  Mark Kvamme focuses on services and software investments. He is currently a Director of Cast Iron Systems, AdBrite, EMN8, Mark Logic, MotoSport.com, LinkedIn, and StrongMail Systems. Previously, he had been a Director of Corvigo (acquired by Tumbleweed Communications) and Allocity (acquired by EMC Corporation).
  Prior to joining Sequoia Capital in 1999, Mark was Chairman of USWeb/CKS and Chairman and CEO of CKS Group prior to the merger with USWeb. Earlier in his career Mark was a Director of International Marketing for Wyse Technology, the President and CEO of International Solutions, and was a founding member of Apple France. Mark has a B.A. in French Economics and Literature from the University of California at Berkeley.

These firms also have made a number of investments in Vertical Search companies, which proves their interest in the space, namely: 4Info (DFJ - mobile search), EVDB (DFJ - events), FatLens (Redpoint - shopping), Kayak.com (Sequoia - travel),  Oodle.com (Redpoint - classifieds), Technorati (DFJ - blogs). Not to mention community and social network plays that also include elements of search: Brightcove (Accel - SN + long tail video distribution), LinkedIn (Sequoia - SN + job listings), MySpace (Redpoint - SN + music), The Facebook (Accel - SN + schoolbook).

I have suggested to my panelists that we focus on the questions and issues of entrepreneurs developing or planning a vertical search play. And whilst I am aware of these, since I meet a number of these teams/individuals, I want to engage with the audience as much and quickly as possible. And by audience, I mean conference attendees and others, through the following means:

• On the day of the conference, you can join us on the IRC chart using your favorite chat program: irc://irc.freenode.net/#vertical.
• You can also leave a question in the comments of this post, or in the questions forum. Or you can send me an email at jeff [dot] clavier [at] gmail [dot] com.

I look forward to a great discussion this Tuesday, and hope that some of you will get involved.

Tag: verticalleap

Stunning returns for Google VCs

In one of his landmark posts, Bill Burnham dissected SEC filings and other publicly available information to tell us Just How Much Did VCs Pocket On Google?

I recommend the reading to anyone interested in understanding VC exits, and to some extent, how profits are split in VC partnerships - unequally so.

As a reminder, Kleiner Perkins Caufield & Byers and Sequoia Capital invested $12.5M each in Google in 1999, for about 24M shares. Both funds have distributed a majority of these shares to their own investors, otherwise their investment would be worth $7.1B (at today's closing price).

Because of the distributions of shares at "lower prices", Bill estimated the value of KP's investment at $4.3B, i.e a multiple of 344x in 6 years. This is the number that will be used to calculate the performance of their $500M fund IX (?), which was returned multiple times with just that investment.

Sequoia Capital invested out of their $250M fund VII, and got similar returns (Bill could not track down the exact timing of distributions to Limited Partners).

In both cases, General Partners - whose carried interest is reportedly 30% - made at least $1B.

Not bad for backing something that started as "BackRub".

Vertical LEAP: D-4 - Looking for a few bloggers

Just a few days before we all gather in Santa Clara (CA), at the Networking Center for the SDForum Vertical Search conference. We expect between 150 and 200 participants, even though many people seem to register at the very last minute and we might well exceed that number. So please help spread the word, mention the conference to people interested in the Vertical Search market, and help us build a solid foundation for a Search SIG.

Quick update regarding the program:

• We are delighted to announce that our keynote speaker will be David Hills, the CEO of LookSmart. LookSmart has made a strategic move to enter the vertical search market recently, and it will be interesting to hear David's comments on the industry.
• We have had a few changes in the line-up, but we have a fantastic roster of 35 speakers and moderators. We need to thank everyone for their flexibility in dealing with last minute changes.
• We only have a few contributions on the Wiki regarding your questions or topics of interests. Tell us about what our moderators should cover in their respective panels.
• If you plan to blog the conference, do add your blog to this list.

Talking about bloggers: We have lined up a few great ones to help us cover the event, but we could do with a handful more. So if you are interested in liveblogging or covering the sessions, and get a blogger pass, please leave a comment or send me an email at jeff [dot] clavier [at] gmail [dot] com.

Tag: verticalleap

French software maker Meiosys picked up by IBM

I have often mentioned Meiosys in my talks on European Venture Capital as a model of European technology company that had developed a strong IP and product suite "over there" in Toulouse, France - financed by French and German capital, and then "flipped" to become a Delaware company,  and hired a US CEO.

The exit is also "by the book" for a European company: the company has been acquired by IBM this morning for an undisclosed amount. Employees in the Palo Alto office will be moving to Menlo Park with their newly distributed IBM laptops, in a remarkably speedy integration.

Meiosys had raised a total of $16M from Partech, Siparex, Cisco Systems, Credit Lyonnais Private Equity , Alven, Baytech Venture Capital and Wellington Partners. The last round was a $7.5M series D that closed last September. They had developed a very interesting Linux clustering technology that enables the pooling and virtualization of servers, enabling increased resource optimization, application performance and fault tolerance.

The Register had the following quote from IBM:

"The state-of-the-art application-relocation capabilities and fault-tolerant technology from Meiosys complement IBM's current systems software offerings," said Rod Adkins, a VP at IBM. "This acquisition gives IBM the ability to provide even more innovative capabilities for Unix and Linux, and will help advance our information on demand strategy and virtualization capabilities for clients."

Philippe Collombel from Partech was on my VC panel at Innovate!Europe (which I have yet to blog), and hinted that they had an exit in the works (but would not tell me which). One of the remarks he shared with the audience was "Thank you Corporate America for providing us with exit opportunities". One more example - by the book.

Congratulations for a great exit to Marc Rougier, the Founder of the company, and to my friend Nicolas El Baze, who represented Partech on the BOD of the company.

TypePad adds ads - Why Pro ?

Just got an email from Six Apart announcing that as a TypePad user, I now had the option of displaying ads on my blog in a custom typelist. It is actually not a surprise since the deal was sealed and announced last November.

Bloggers have been using Google or Yahoo ads on their blog for the longest time, and the most heavily read have been making some money. So what I am missing here is why would I need to upgrade to the Pro version of TypePad in order to use that functionality which is otherwise available to me "for free" ?

The ad revenue is credited against the monthly cost of the TypePad Pro subscription ($15). Which means basically that one needs to have roughly 20,000 page views (at a 50c CPM) in order to make up the difference between a Plus and a Pro subscription, or 30,000 page views between a Basic and a Pro.

It'll be interested to read the reports from Pro users trying the service, in comparison to the usual Google/Yahoo service - in terms of ad relevance, CTR, and management.

Update: I briefly chatted with a Six Apart executive tonight, and suggested that they might want to offer this service to all TypePad users, but stick to the concept of using the first $5 of monthly revenues as a credit towards an upgrade to the next service up. And it would be great to have a free trial period of this new add-on just to be able to test the functionality.

SuperNova 2005: Attention!

The Attention panel was moderated by Steve Gillmor (ZDNet, Gillmor Gang and Gillmor Daily) and involved Glenn Reid (FiveAcross); Doree Duncan Seligmann (Avaya); David Sifry (Technorati) and Linda Stone (Ex-Microsoft and Apple). The stated subject is:

Attention is one immutably scarce quantity in a world of increasing abundance. As everything becomes connected, and connectivity becomes increasingly widespread, the challenge in no longer getting more information, but getting less. We need tools, systems, and practices to help us cope with information overload. Fortunately, advances in this area are coming from several directions, ranging from communications systems to search-based technologies for managing and organizing information.

Linda Stone kicked-off the panel by a quick introduction. She cornered about ten years ago the term "Continuous Partial Attention" - which means that we stretch our attention to cope with a primary interest (discussion, conference, this panel) whilst browsing around for secondary interest - just to make sure we do not miss anything (crackberry, cell phone,...). Communication tools and gadgets have enslaved us to a point that they compromise productivity, creativity and decision making. This has led companies to declare "Email-free Fridays", "Attention policies for meetings", etc.  "Being connected is what makes us feel alive", and CPA is a derived consequence of it. Detailed notes of Linda's introduction are here.

The rest of these notes are a verbatim transcription of some comments expressed by the panelists.

Glen Reid: Started at Adobe for 20 years, and then moved to Apple, building desktop publishing software and iPhoto/iMovie. Asserts that humans are the best filters, and therefore using people as referrers of interesting topics and recommendations is the most relevant.

Doris Duncan Seligmann: How to inject some humanity in computer-based interaction systems. Built the first multimedia interactive video-conferencing system that would include artefacts/avatars showing that human are involved in the conversation.

David Sifry: Time is a scarce resource, that needs to be "spent" wisely and efficiently. Analogy to stock markets analysis to asses time allocation. Using computers to track what we do, read, click on, without changing human's behavior is a way to collect data that will eventually be aggregated and used to direct our attention - based on what we do, and our friends/colleagues do. How can we leverage the time people spend (reading blogs) to our advantage.

Linda Stone: Leisure time is what makes us human, and she is concerned to overemphasis on time efficiency. Example: we looked at maximizing children's playtime, activities, etc. whereas now we actually limit children's exposure to craziness and heavy schedule.

Steve Gillmor: The point is to optimize the time we spend on non-leisure activities, so that we have more time to "play".

Glenn Reid: There is no such thing as an event-driven world, in which you are working and are getting interrupted. You are actually working in a flow of information, doing a number of things at the same time, and essentially dealing with interruptions as normal inputs.

(Got distracted by an email, left a comment on Buzznet, and responded to an IM message)

David Sifry: We all own our attention data (clicks, reads,...) and whilst it is OK for service providers to host them, fundamentally it is ours (the users). This attention data needs to be expressed in a way that makes it easy to aggregate it across streams and providers. This is what attention.xml is about: a simple file format expressing what I have been spending time on.

Glenn Reid: Contends that such data is not being recorded. And gets ran over by the rest of the panel that mentions all the tracking made by Yahoo, Google, MSN, eBay, Amazon,...

Doree Duncan Seligmann: Avaya has developed Personal Workspaces that manages workers availability, interruptability,... and manage flows of phone calls according to these parameters.

Steve Gillmor polls the audience about the use of an RSS aggregators. Just a few hands are raised by people not using one. A large proportion is using a client aggregator, which is interesting since my stats say clearly otherwise. And there is strong interest in synchronizing all read marks across systems, devices and programs.

Note that this feature will be available from NewsGator in their forthcoming release (across web, outlook and mobile). But that is one from vendor only at this point, and attention.xml should hopefully allow us to get this same functionality across the industry.

One aspect not addressed by the panel is how attention.xml will be implemented, and when we'll start seeing it included in commercial products, besides Yahoo's efforts.

Update: Check out John Hagel's note on The Aphrodisiac of Attention.

Tag: supernova2005