My ScienceBusiness article no 2, can be found here or below:
I had an interesting meeting with a senior executive in charge of strategy and business development at one of the major European media group last Friday.
My friend is one of the smartest and most articulate media executive. I spend one hour telling her about the interesting infrastructure and technology play I was looking at, and she spend one hour telling me that she count not care less for super-encryption technology, or smart-delivery video infrstructure, but how she was looking for low-tech, mass-market services that would drive customer attention in the key customer segments market where her group was active.
The investment thesis behind infrastructure plays is simple - and too simplistic. It is often simply that demand is racing ahead of supply - and so it pays to invest along in those segments of the value chain which make production technically and marginally more efficient. Of course, the key hidden assumption is that dominant design of the value chain (the sum of business models, the way value is created and captured) is still valid; still in sync with industry economics.
Now, this is an investment thesis that has doomed most VCs to watch a disproportionate number of their highest-geek-quotient investments continue to go sideways - while puzzling over the accelerating success of of largely anti-technological plays like flickr, delicious, Skype, Habbo Hotel and MySpace.
Fox's acquisition (Scout media, Newroo, Ksolo, WhatIfSport, MySpace) thesis is a bit more complicated - but predicated on a much deeper understanding of the new media value chain. Fox invests in domains which are hypersocial (discontinuous shifts in social connectivity) or hypercultural (discontinuous shifts in cultural specificity): sports, karaoke, music. Further, Fox invests at the edge of the new value chain: at the interface with consumers. Further, Fox invests in the three roughly distinct models which live there : markets, networks, and communities.Why? Because Fox understands the deep economics of new media. Value capture in the new media value chain is a function of market power. And market power is a function of attention. And attention is allocated most efficiently by markets, networks and communities. Consider MySpace. MySpace's success is driven by it's proprietary music and now video player - the deepest social widget in the new media world. It is what lets fans connect to bands they might love - it is what allocates their attention hyperefficiently (more efficiently than Top 40 charts, corporatized radio robo-DJs, or even next-gen corporobots, like Pitchfork Media).
Infrastructure driven investments are nearly flawlessly discovering the wrong future. It's the future where infrastructure lays the pipes for scores of generic markets, networks, and communities. Of course, this is the future that already happened, which consumers thought sucked, and so they stopped using the www
What's different about today is that visionaries like Fox (surprisingly enough) understand that what drives attention allocation is the hypersocial and hypercultural; and what drives the hypersocial and the hypercultural in, for example, music and sports, is marginally, but deeply, different.
…If recent history teaches us anything strategic, it's that the Cambrian Explosion in media is about radically redefining the economic essence of media; redefining media production and consumption for an attention and interaction economy; redefining how media shapes the social and the cultural to allocate attention, exploding value creation and value capture.
3 Companies to watch that illustrated this :
VPod.TV (who just announce a 4M€ A round last Friday)
Total Immersion raises new 4.5M€ round led by Elaia partners, with returned investors Partech and ISource. For the last 5 years the company has invested in delivering D’FUSION, an Augmented Reality solution : .
Very relevant essay from Paul Graham adapted from one of his talk at the start-up school. The section on commitment is a must-read.
1. Release Early. 2. Keep Pumping Out Features. 3. Make Users Happy. 4. Fear the Right Things. 5. Commitment Is a Self-Fulfilling Prophecy.
I now have enough experience with startups to be able to say what the most important quality is in a startup founder, and it's not what you might think. The most important quality in a startup founder is determination. Not intelligence-- determination….
…You can lose quite a lot in the brains department and it won't kill you. But lose even
bit in the commitment department, and that will kill you very rapidly.
…But if you lack commitment, chances are it will have been hurting you long before you actually quit. Everyone who deals with startups knows how important commitment is, so if they sense you're ambivalent, they won't give you much attention. If you lack commitment, you'll just find that for some mysterious reason good things happen to your competitors but not to you. If you lack commitment, it will seem to you that you're unlucky.
….Whereas if you're determined to stick around, people will pay attention to you, because odds are they'll have to deal with you later. You're a local, not just a tourist, so everyone has to come to terms with you.
….You can't fake this. The only way to convince everyone that you're ready to fight to the death is actually to be ready to.
….You have to be the right kind of determined, though. I carefully chose the word determined rather than stubborn, because stubbornness is a disastrous quality in a startup. You have to be determined, but flexible, like a running back. A successful running back doesn't just put his head down and try to run through people. He improvises: if someone appears in front of him, he runs around them; if someone tries to grab him, he spins out of their grip; he'll even run in the wrong direction briefly if that will help. The one thing he'll never do is stand still.
6. There Is Always Room. 7. Don't Get Your Hopes Up. 8. Speed, not Money
I'm putting the final touch on my panel presentation at the Telecom World Congres next Thrusday in Geneva. Let me know if you are in Geneva that day, as I will have some time after my panel.
14.50 Panel: Funding new, new telecommunications businesses
Funding innovation New business models / new service providers Technology and equipment start-ups Venture capital and Private Equity appetites Risk / return profiles Incubators and spin-off businesses Key success factors Case studies
Peter Gardner, Global Sector Head, Communications, 3i Duncan Lewis, Senior Advisor, Telco & Media, The Carlyle Group Marc Goldberg, Managing Partner, Occam Capital
I'm exited to announced the next (yes it's now released 4.0) CGS (ClavierGoldbergSepulveda) dinner, that we will hosted in Paris on April 28, same rules of engagement as before (register here by posting a comment on this post). Seating is restricted to 30. I will circulated all logistics information (where, where, name of guest speaker, etc...) in a few days...
The current increase in transaction price, and entrepreneur value expectation can be observed in today's VentureOne private equity market metrics. According to VentureOne, Valuations of venture-backed companies for 2005 reached their highest point in four years as sizable acquisitions fueled an increase in the price of later-stage companies.
The median premoney valuation of U.S. start-ups reached $15.2 million, up from $12.5 million a year ago, according to a report released today from VentureOne, a unit of Dow Jones Enterprise Media Group. In 2001 overall annual median premoney valuations hit $16 million. Later-stage information-technology company valuations rose the most, by almost $8 million over 2004, to $30.3 million.
Within IT, the median largest valuations were $42.8 million for later-stage electronics and $44 million for later-stage semiconductor companies. Among round classes, U.S.premoney valuations increased for all but first rounds, which were relatively flat at $5.4 million, down from $5.6 million a year ago.
Meanwhile, in Europe, the median premoney valuation increased to $4.1 million, the highest since $4.8 million in 2002. The median value of European IT companies increased to EUR3.9 million from EUR3.2 million a year ago.
Even if I was inclined to sign an NDA, I’d have to go through the process of reading it and deciding if it had any problems (many of them do – they are usually overreaching for the information being disclosed), dealing with my lawyer to change it, and you dealing with (and spending time with your lawyer) to accept or reject my requests. In some cases, I’d probably spend more time dealing with the NDA then with the entrepreneur and his idea. How stupid.
I’d have to keep track of all the NDA’s I signed. It’s “yet another legal document” in the pantheon of documents we have to keep track of. Hmmm – maybe we should consider funding a startup to automate the creation and tracking of NDA’s. Nah.
In 20 years of high tech (as an entrepreneur, angel investor, and VC), I’ve never been involved in a situation where an NDA in enforced except in an M&A context. It’s simply a waste of paper and time for anything but M&A
This is a question I get on a weekly basis, and yes, Occam policy is that we do not execute any NDA when we talk to a potential investment.
The only NDAs that we take seriously are the M&A ones also, as there is a point to signing one in that case. Someone said why not sign a simple one. What is the point then? A simple one page NDA leaves way too much room for interpretation and margin for errors when it really comes down to it. I symphathize with the entrepreneurs' logic that what they are working on is indeed the most important thing to them and deserves protection. But if I have to negotiate an NDA for even 1/3 of the deals that I look at, I would spend my days reviewing NDAs and have to have an attorney on staff full time. That is not practical. I have had to leave a couple of times because the company insisted on an NDA before they would even do the elevator pitch. I never found out if they were a billion dollar idea that I missed....
Better than NDA are simple but real Due Diligence on the VC, What is their reputation? Have they funded companies in similar space? How do they work with the companies?
12 :: Kinnernet 2007 Tel Aviv - Israel
March 15 to 17 in Ohalo Manor, Kibbutz Kinneret, Jordan Valley. Followed by the Marker Conference in Tel Aviv March 18/19 and Mishkenot Shaananim Symposium in Jerusalem on March 20.
11 :: DLD 2007 DLD Conference
Munich January 21-23 2007.
DLD (Digital, Life, Design) is one of Europe's freshest conferences covering digital innovation, gaming, arts and science, bringing together thought leaders from Europe, the Middle-East, America and Asia
10 :: LE WEB 3 Paris
Dec 11/12 2006
I'll participate (with 1000 others ;-)) to was should be a great European tech gathering...
I'm also hosting a Dinner on Wed Dec 13 (register on my blog if you are interested)