Jeff Clavier's Software Only

Welcome Stephanie Palmeri, the gal I meant to dissuade taking a job in venture... and ended up hiring

We’re super excited to announce that Stephanie (“Steph”) Palmeri has joined SoftTech VC as Senior Associate, a brand new position in our firm which has grown 400% since January 1^st. Steph is awesome: smart, workhorse, funny, New-Yorker, swear-proof, determined, Columbia MBA – in no particular order. And we can truly say that serendipity is responsible for that lucky find for us.

If you follow me on Twitter/Google+, you might recall a post I wrote a couple of months ago (which generated a lot of great comments):

A very smart MBA (who just graduated) wrote me asking if there was a job opportunity at SoftTech VC. She really wants a job in venture apparently, which I can respect, but I really think that venture (aka "the dark side") is a gig you do after accumulating operating experience. Here is what I wrote her:

"In any case, I don't think that we are going to be able to help: we are building the firm with Partner level investment professionals who have 12+ years of operating experience. We may at some point bring in a principal as well, but once again, we'd look at bringing in someone who has had at least 8 years of relevant operating experience. Why? Because you can't really advise or provide perspective to a young CEO/founding team if you have not been exposed to "real life" yourself.

So what am I saying? That you should take that offer from <redacted> – they seem to see a rockstar in the making in you, and it is a great, promising company. And ask <redacted> to give you some exposure to the different facets of the business, and try to take on different challenges over the next few years.

If you really want to go for a venture role now, only sign up for a top firm. And after two years, cut yourself loose and join the most exciting portfolio company of theirs (or others) you have seen. You can't really have a career in venture, you have to move in and out.

Sorry if it is not what you wanted to hear, but I'd hate you end up in venture too early – when it is not the most fun and rewarding."

Yes, that gal I was referring to was Steph. Read on.

I figured in the first five minutes of our discussion that I was wasting my time (and hers) trying to dissuade her from joining a VC firm. Despite having opportunities in the New York scene, she had packed her stuff and was crashing with friends in the Valley determined to find a VC gig here. With almost 10 years in operating experience in Marketing and consulting roles (something Steph almost neglected to “sell” in her email intro to me), and a real passion for the investment side, I thought that she’d have a very decent shot despite the “local” competition.

Mind you, the venture world desperately needs more women – especially for those of us investing in Consumer Internet where a majority of the traffic and revenues is generated by… yes, women and investment decisions are mostly made by a bunch of dudes. And it had always been my intention to fix that flaw upon finding the right person/fit for us.

We had originally built SoftTech as a “Partner-only” firm, where each investment professional would have seen “enough” of the entrepreneur/executive side that they could use their better judgment and personal screw-ups to support portfolio company challenges and opportunities. There are limitations to that model, ones that Charles and I were definitely feeling (with 200 to 300 opportunities hitting our inbox a month). When a model shows its limits, you change it – and that’s we did by offering Steph to join us for an “experiment” (the VC equivalent of basic training).

We told Steph that she would have about 10 weeks to demonstrate to us that we needed someone to come in and help us working on our inbound dealflow, getting involved in due diligence checks and models, doing more proactive research on areas of potential interest, etc. And I think that it is fair to say that we kept Steph really busy – asking her to cover a wide array of things so she could get an acute feel of what her job would be, and we could see how she was doing. A reciprocal "try before you buy" of sort that she accepted without blinking.

Long story short: after 5 weeks, a ton of work and a number of very positive reference checks, Charles and I caucused one last time, and agreed to terminate the “experiment” to offer Steph a full time role of Senior Associate. And obviously we are super stoked that she instantly accepted!

Steph will work with us on opportunity reviews, due diligence, market analysis and dealflow management - to start with. Not bad for someone who I wanted to dissuade joining the venture world, uh?

You can follow Steph on Twitter at @stephpalmeri or on 280 in her red Mini. And join Charles, Ashley and I in welcoming her to the dark side!

Loic le Meur does it again - videoblogging with the French Interior Minister

My good friend Loic (GM Europe for Six Apart and MC of Les Blogs) has scored yet another coup: this time he has managed to chat for half an hour with Nicolas Sarkozy, France's Interior Minister (who oversees all Law Enforcement agencies) and reportedly a future presidential candidate. The interview is in French, but the gist of the talk can be found on Loic's english blog or in this BusinessWeek piece.

Loic has been a relentless advocate of blogging in France and in Europe over three years, and has since gone into podcasting and videoblogging. So, Jacques Chirac next :-) ? Joking aside, this might actually have start an alternate communication channel for the forthcoming French presidential campaign.

Chapeau en tout cas (“Hats off, indeed”).

Tags: france

MSN Messenger and Yahoo IM interoperability - at last

The widely anticipated announcement is now out: MICROSOFT AND YAHOO! ANNOUNCE LANDMARK INTEROPERABILITY AGREEMENT TO CONNECT CONSUMER INSTANT MESSAGING COMMUNITIES GLOBALLY. One of the longest standing Internet “Berlin walls” is about to collapse, as these two giants are working together on connecting their back-ends and create a virtual community of 275M users. This is slated for release sometime in Q2 2006 (why so late ?):

[…] In addition to exchanging instant messages, consumers from both communities will be able to see their friends’ online presence, share select emoticons, and easily add new contacts from either service to their friends’ list, all as part of their free IM service.

The next three questions that come to mind are:

1. OK, how about AIM and Skype ?
   AIM is still the largest IM network, and from what we heard in the “Web 2.0 Teens Panel” it has a strong foothold in the younger generation of Internet users. Will AOL be able to maintain its virtual segregation now that its largest two competitors have agreed to do this or will they use the usual “respect for the security and privacy of our users” excuse ? Or is Rafer right in thinking that AOL is about to do a deal with Microsoft ?
   What about Skype’s IM ?
2. What if the integration backplane was XMPP/Jabber ?
   This would create a level playing field for other IM networks - consumer and professional ones – to connect, deliver presence information and text communication. Client Userplane would be able to offer federated access to the 10,000 communities they power with such an approach.
3. What is being connected: text messaging and presence at a minimum, but what about voice and video ?
   The press release does not mention voice and video, which is not surprising. Even if most voice-enabled networks provide a SIP interface one way or another, implementing voice integration might be a step that these companies want to consider taking a bit later. Om thinks that voice bridging is actually part of the interoperability ?

Google offers a nice birthday present to Om Malik: free Wifi in SF

Essentially confirming a story Om had been writing about for a long time: the GoogleNet. According to his latest piece, Google has responded to an RFP to Wifi-enable the city:

Google officials say San Francisco residents (and visitors) will enjoy a free 300 kilobits per second, always on connection anywhere in the city. As part of its proposal, the company says it will be offering wholesale access to other service providers, who will offer higher throughput connections to their customers. Google says it plans to use its own authentication services. The company is going to use San Diego-based WFI, a cellular network builder company to build out the WiFi network.

As a prospective user of the service, I find this news interesting – and so are the implications: free phone calls, ubiquitous access to the Net from my Tablet PC, no need to print maps in advance,… Has someone figured out a hand-off mechanism across access points yet ?

Happy Birthday Om!

The SF Chronicle has published a detailed write-up on the RFP sponsored by SF Mayor Gavin Newsom.  Amusingly, I bookmarked yesterday a post from Chris Sacca, the Googler in charge of the project, who wrote about the best way for companies to engage with him/Google.

Skype + eBay = Deal! $1.3B cash + $1.3 stock + $1.5 earn-out = $4.1B!

Reuters’ Eric Auchard has just reported that eBay has made a run after Skype after all, and has put a consideration that would total $4.1B if earn-out conditions are met.

This is a massive deal: eBay is spending about half of its cash reserve to acquire the VoIP company, at a stratospheric multiple (based on Skype’s rumored revenue levels).

The story is obviously going to develop during the day, but dam’n, I just did not see it happening – especially at that price. According to Rob Hof, eBay will host an analyst call in a couple of hours.

This is an awesome payday for Skype’s investors: Draper Fisher Jurvetson, Mandrove, Index Ventures, Bessemer and others. We know that the company raised a maximum of $21M (?) but what is yet to be disclosed – and that we should know because this is not a non material acquisition – is Skype’s cap table and who is going to make big $$$$$$.

Congratulations to Tim Draper, Danny Rimer and other VCs involved. That is a hell of a deal, and I suppose, a monstrous IRR. And remember that DFJ already had a great exit a few weeks ago on Baidu.

And even bigger congratulations to Skype employees, who in 2.5 years have disrupted an established market, and are getting an handsome payout. Scoble’s former boss, Lenn Pryor, must be happy to have relocated to Tallinn.

Update: here is the official press release. A few notable data points regarding the terms and the rationale of the acquisition:

• Improved communication: “Online shopping depends on a number of factors to function well. Communications, like payments and shipping, is a critical part of this process. Skype will streamline and improve communications between buyers and sellers as it is integrated into the eBay marketplace. Buyers will gain an easy way to talk to sellers quickly and get the information they need to buy, and sellers can more easily build relationships with customers and close sales. As a result, Skype can increase the velocity of trade on eBay, especially in categories that require more involved communications such as used cars, business and industrial equipment, and high-end collectibles.“
• New seller capabilities like Pay per Call: “The acquisition also enables eBay and Skype to pursue entirely new lines of business. For example, in addition to eBay’s current transaction-based fees, ecommerce communications could be monetized on a pay-per-call basis through Skype. Pay-per-call communications opens up new categories of ecommerce, especially for those sectors that depend on a lead-generation model such as personal and business services, travel, new cars, and real estate. eBay’s other shopping websites — Shopping.com, Rent.com, Marktplaats.nl and Kijiji – can also benefit from the integration of Skype.”

• On the earn-out: “The maximum amount potentially payable under the performance-based earn-out is approximately €1.2 billion, or approximately $1.5 billion, and would be payable in cash or eBay stock, at eBay’s discretion, with an expected payment date in 2008 or 2009. Skype shareholders were offered the choice between several consideration options for their shares. Shareholders representing approximately 40% of the Skype shares chose to receive a single payment in cash and eBay stock at the close of the transaction. Shareholders representing the remaining 60% of the Skype shares chose to receive a reduced up-front payment in cash and eBay stock at the close plus potential future earn-out payments which are based on performance-based goals for active users, gross profit and revenue. “

• On revenues and multiples: “ Skype generated approximately $7 million in revenues in 2004, and the company anticipates that it will generate an estimated $60 million in revenues in 2005 and more than $200 million in 2006. For Q4-05, eBay expects the acquisition to be dilutive to pro forma and GAAP earnings per share by $0.01 and $0.04 respectively. For the full year 2006, eBayexpects the transaction to be dilutive to pro forma and GAAP earnings per share by $0.04 and $0.12 respectively, with breakeven on a pro forma basis expected in the fourth quarter of 2006. On a long-term basis, eBay expects Skype operating margins could be in the range of 20% to 25%.” So the forward revenue multiple is 40X (!!!), and the price paid per client is $45 (against $20 per MySpace users paid by NewsCorp).

I am sure that we’ll learn more in the coming days, but I don’t (yet) see why eBay needed to buy Skype at such a price to get the product/distribution leverage that is mentioned in the release. Skype is a great service, but it is not the only one available offering a VoIP conduit or a potential Pay per Call solution. And I thought that previous attempts to get buyers and sellers to communicate “in realtime” had failed because sellers don’t want to get stuck being a buyer “support desk”. I welcome contrarian views, especially as I have seen my eBay stocks losing 30% over the past few months.

The information about the earn-out is interesting as well: some investors have decided to cash-out and run, others to hang in there, and potentially profit from Skype’s  future performance. Can’t wait to see the SEC disclosure.

A key learning: after this one, no deal is impossible or unthinkable.

More:

• Pierre Chappaz, the Founder of Kelkoo (sold to Yahoo! for over $500M), writes (in French) that Yahoo on the case but was not ready to pay the price that eBay agreed to ultimately. He sees the reasons I mentioned: adding a communication mechanism to eBay’s marketplace, expansion of Paypal beyond eBay to be used as “the” payment infrastructure for Skype, and maybe – leveraging eBay’s resources to become a much bigger player in telecommunications.
  Sort of bringing together markets AND conversations.
• Rich Therani comments on his VoIP blog:

Right now, Skype gets just over a dollar per active user. I am sure eBay thinks – and they are likely right , that Skype will grow its active user base and also grow its revenue per user. So in another 18 months or less we can expect Skype to have 100 million active users and perhaps each will pay an average of $3. This gets us to $300 million.
Of course Skype has its potential problems to deal with. Port blocking in some countries and the declaration that Skype is illegal and a fining offense are obviously not too good for your business model. Still, this is exactly what happened last week in China. Will China become a model for the rest of the world or an isolated incident?”

• Rob Hof posted a long analysis of the deal and its business fundamentals. Interviews of small merchants has led to what I hinted regarding their relative lack of interest on interactive communication feautures.  I’ll also point to his conclusion:

The big question remains whether eBay has overpaid for a business that’s unprofitable, beset by lots of competition, and unrelated to its core business. Whitman noted in the conference call that “our overarching goal is to grow faster than e-commerce” overall. Investors will have to decide in coming months and years whether she overreached in the pursuit of growth.

• Paul Kedrosky is “seeing the glass half-full”, i.e he is midly positive on the deal. I would actually have expected Paul on the “half-empty” side as I am still for the moment. See Skype Dices! It Minces! It Chops!.
• Staci from PaidContent does a thorough job summarizing the investor pitch (here is the presentation and the press pack) and some key numbers and providing PC’s analysis on the deal.
• David Cowan discloses (in the comments) that Bessemer made about 150X on their Series A investment. Not too shaby (far from it), though the actual amount is not mentioned ($1–2M ?).
• Steve Jurvetson, in his usual self, just posted a picture and a “congrats” comment. DFJ is going to make several hundred millions on this deal (if not in the $B if Draper Luxembourg is an affiliate of DFJ as opposed to a private investment vehicle of Tim Draper), so we could have understood a bit more exhuberance.
• Ross Mayfield reports from Skype Estonia that it is business as usual. Yeah right, they’ll keep on wearing T-Shirts in the office – from now on, they’ll just be Lacoste originals.
• Chris Carfi sees 3 fundamentals in the acquisition: an opportunity to extend eBay communities to the desktop, a highly strategic move into emerging markets, and an integration of PayPal into the Skype interface.
  "One" and "three" make sense, and are sort of two different angles of the same always on presence. "Two" is much more challenging IMHO, owning the conversation conduit is not enough to generate the market.

Open IM ? Me too says Skype!

Funny that the very day Google launched their Jabber/XMPP-based Instant Messenger (the now famous Google Talk), Skype retaliated by releasing their own IM APIs, allowing web site developers to incorporate presence data, and 3rd party to develop their own Skype client. It is worth nothing though that these APIs only cover the (otherwise excellent) IM part of Skype, not the most popular service – voice calls.

CNet reports in this article:

Skype believes it can be a significant threat to instant messaging giants Yahoo, MSN and America Online. With 51 million registered usernames, Skype IM is potentially twice the size of Yahoo's instant messaging community, and six times that of America Online, according to figures provided by Skype.

Skype Journal does a great job at providing more details on the annoucement:

SkypeWeb: Creating a web of availability
Skype will launch a web presence server solution under the name SkypeWeb. This will be supported in a new client release (we don't know when) which will broadcast your presence data via preferences in the client. Apparently a new bit of code in the P2P network will ping status updates every five second to a presence server. Presence information will be availabie in the form of an ATOM feed which will enable presence updates and also enable contact lists. All list detail is said to be controlled by the user. Thus the Atom feed will push presence data direct from the Skype client enabling contact lists for a circle of friends. The general idea space is good. Details? Client? We don't know yet.

SkypeNet: Stripped down client extends Developer opportunities
Skype will open up presence and IM functionality to the whole world under the name SkypeNet. It's unknown whether this will include file sharing. SkypeNet is made up of SkypeLite clients --- a headless Skype client, without user interface, that can be integrated into any application. This should let you build Skype servers and web services. It should help Skype become enabled in programs like Trillian, make Skype more interesting for online game publishers, and create opportunities for business applications that need to scale. This is a huge gap in their architecture and, depending on execution, SkypeNet may fill it.

Make sure to read Stuart’s take on Skype’s challenges.

Client plug: I can’t help but mentioning that web and online community developers interested in adding powerful communication tools can take advantage of Userplane’s zero download instant-on products: chat room, instant messaging, web recording, etc. Over 3,000 web sites use these tools today (including MySpace, Friendster, eHarmony,…) aggregating millions of unique users monthly. Don’t hesitate to ask if you have any question. The price ? Free to begin with.

Tag: googletalk, skype, userplane

Just tested Google Talk: neat, still a bit basic, more open and as clear as Skype...

which is not surprising since they are reportedly using the same technology from Global IP Sound.

As you can see, the Windows client is pretty basic, but functional. It is necessary to have a gmail account to sign up for the service – by invitation it sounds like. I just tried a voice call with my friend Dave, and was quite impressed by the sound quality. And since it picks up default devices, it is very easy to connect. The online help concerning the service is here, quite comprehensive for something that has just been released.

The client also acts as a Gmail notifier, which displays rather large popup messages when a new email arrives. This can be turned off by users who like me, pop their email out of Gmail.

As pointed out by Om and Niall, it is possible to connect other IM clients to the service through a Jabber/XMPP interface. This is the list of compatible clients, which can also be found here:

The fact that they are using XMPP is notable since the non-interoperability of IM services has historically been a big pain in the b..t. I wonder if they will get into offering access to “the others” through back-end plugins, or if Trillian will be the stop-gap solution (which is a great stop-gap, even for the $25). And the reported interoperability "under way" with SIP signaling and the Gizmo Project is also worth noting.

As rumors that Skype’s growth is stalling develop, Google jumping in with both feet with a solution that looks more standard is not without consequence. Update: Skype just released a suite of IM APIs, so Google can only claim more standard, not more open - for now.

Competition is always good… even for making free phone calls. And thanks to my friend Adam, the co-founder of Truveo, for being the first one to send me an invite.

Tag: googletalk

More:

• SiliconBeat just published a long piece, including interviews from Googlers.
• Russ tells us more about Jabber and XMPP
• TechCrunch's Mike Arrington points us to the Wikipedia entry of Google Talk
• Dave McClure calls Skype "Dead Meat"
• SkypeJournal provides a detailed account of the functionality: available and missing ones
• Off topic, but the NYTimes has a "Google Baaaddd" article that is worth a read - from darlings to borgs - in one year

 

Skype's non-service model

Ross is telling us about Vonage service problems he has been facing, and we've all been there: it sucks when it happens.

I spent two hours on my cell phone talking to Vonage support. Escalated from one guy that couldn't speak any language from what I could tell, to another who said they weren't allowed to help with the problem, to another who ran me ragged with power cycling. The basic issue is their records think I have two ATA boxes. Fourth tier is management and they still don't know how to fix it. They promised to ship a new ATA box by Friday, who knows if it will show up Tuesday. They don't do truck rolls. The saga continues.

Why will Skype destroy Vonage?  The service model.

Whilst I am very sympathetic to the Vonage angst, and being a Vonage customer myself, I have had similar problems, I don't agree with the reference to Skype's service model.

Why ? Because IMHO there is none, or at best, I'd call it self service. When it works, it is really awesome and I am delighted to use it. As I am about to spend the bulk of July in Europe, I am actually loading up on SkypeOut credits from here and wondering as to whether I should take a SkypeIn phone number. And I am doing it from the USA, just to make sure that I will be able to use my credit cards.

But when Skype does not work, if you have the slightest problem with your credit card payment, SkypeIn number, voicemail or you want to know why you are being disconnected every 30 seconds when making a call to London, tough luck. My idea of service is not to log a complaint in a support forum.

I use and appreciate Skype very much to communicate with family, friends and colleagues who I know will accept the lack of reliability of the service. For other professional contacts (and a fax line), I am using Vonage. They aren't great at helping out either, but at least you have a phone number to call and complain.

The question is how much would Skype need to charge to offer a minimum level of service, and wipe out Vonage. Because at $200 to $400  of customer acquisition cost, I can't say that Vonage sounds that sustainable long term.

Any contrary views out there ?

Backskyping = Backchannel with Skype

Backskyping = Backchannel with Skype
Posted by: softtechvc on Buzznet

There is no backchannel at Innovate Europe. No big deal. Here is the backskypnel with Loic, Rodrigo and Julio... and more joining.

It actually did the job very nicely. It is not as practical to setup as a proper IRC chat, or a Userplane chat room (Disclosure: client plug), since you have to invite people manually to join the conversation. But there won't that many bloggers in the audience anyway.

The buzz of the day: Skyping 36 000 feet over Greenland

Loic has created a bit of a frenzie with his first post and moblog at 36 000 feet over Greenland. He was flying SAS (and paid $29 to access the plane's Wifi network) en route to Seattle for MSN Search Champs II.

Like Rodrigo and Pascal, and many others, I rushed on Skype to IM him (I bet Loic has not done much besides spending a lot of his 12-hour flight IM'ing with a bunch of his readers). Unfortunately I was not there when he replied to my message.

I just checked: Air France is offering a new cabine design and new uniforms (Flying Blue they call it), but no Wifi on board. So no cool Skyping for me on my way to Les Blogs next Saturday. Damn!

Update: Phil Wolff over at the excellent Skype Journal points out that students in the Amateur Radio on the International Space Station are set to skype today with one of the astronauts on the ISS.