Blogged with Flock
Thursday 30 November 2006
Sunday 26 November 2006
Bubble Memory
100% actual conversation (except the name is changed) from late 1998, when investment banks--like other go-go firms in the dot-com ecosystem--were starved for talent:
CHRISTINE (my assistant): I have Gilligan Weiner from Robertson Stephens on the line. Are you available?
[I don't know this Weiner but these days a call from Robertson is usually good news. Maybe he's representing an acquiror?]
ME: Okay, I'll take it.... Hello, this is David.
GILLIGAN: Hi, this is Gilligan Weiner from Robertson Stephens, and I'm calling you because you're on the board of Flycast.
ME: Yes?
GILLIGAN: I need to know the company's revenues, and the valuation of the last round.
[is his voice cracking? has he even reached puberty yet?]
ME: I see. Flycast is a private company, and so we don't publish financial information. Why are you asking?
GILLIGAN: I'm doing research and I really need the revenues and valuation for Flycast.
[compelling!]
ME: Well, Flycast is a private company, and so we don't disclose that information.
GILLIGAN: Oh... [awkward silence]
ME: You know, I'd be happy to send you all the financials for Flycast if you would just fax me your tax returns first.
GILLIGAN: Umm, what's your fax number?
[I really swear to--well, whomever atheists swear to--that this is true.]
ME: 650-853-7001.
GILLIGAN: Do you want my tax returns or the firm's?
ME: I really need both.
GILLIGAN: Um, okay, I'll get back to you.
ME: Great, look forward to it.
GILLIGAN: Thank you, Bye.
ME: Bye.
I'd have loved to hear the conversation that ensued, as Gilligan asked the Skipper for a copy of the firm's tax returns to send me.
CHRISTINE (my assistant): I have Gilligan Weiner from Robertson Stephens on the line. Are you available?
[I don't know this Weiner but these days a call from Robertson is usually good news. Maybe he's representing an acquiror?]
ME: Okay, I'll take it.... Hello, this is David.
GILLIGAN: Hi, this is Gilligan Weiner from Robertson Stephens, and I'm calling you because you're on the board of Flycast.
ME: Yes?
GILLIGAN: I need to know the company's revenues, and the valuation of the last round.
[is his voice cracking? has he even reached puberty yet?]
ME: I see. Flycast is a private company, and so we don't publish financial information. Why are you asking?
GILLIGAN: I'm doing research and I really need the revenues and valuation for Flycast.
[compelling!]
ME: Well, Flycast is a private company, and so we don't disclose that information.
GILLIGAN: Oh... [awkward silence]
ME: You know, I'd be happy to send you all the financials for Flycast if you would just fax me your tax returns first.
GILLIGAN: Umm, what's your fax number?
[I really swear to--well, whomever atheists swear to--that this is true.]
ME: 650-853-7001.
GILLIGAN: Do you want my tax returns or the firm's?
ME: I really need both.
GILLIGAN: Um, okay, I'll get back to you.
ME: Great, look forward to it.
GILLIGAN: Thank you, Bye.
ME: Bye.
I'd have loved to hear the conversation that ensued, as Gilligan asked the Skipper for a copy of the firm's tax returns to send me.
Saturday 18 November 2006
Preventing Identity Theft
19th century cryptographer Auguste Kerckhoffs first observed the weakness of security through obscurity, prompting Bruce Schneier to routinely demand that security systems "recover gracefully" from compromised secrets (e.g. passwords can be changed). Unfortunately, the fundamental authentication system underlying our economy hinges on the confidentiality of immutable credentials like social security number, birth date and mother's maiden name. The danger of such "brittle secrets" is that the entire system breaks under pressure. Indeed, under pressure from mostly online identity thieves, the integrity of personal identity in our economy is badly broken.According to last month's Harris Interactive study, about 50 million Americans have been informed--mostly by their banks or government--that their personal credentials have been somehow compromised. In addition, nearly 10 million Americans are aware of specific instances in which they were victims of identity theft. As staggering as these numbers are, the actual numbers are necessarily higher than what's reported. It would be quite a stretch for you to imagine that somehow your data remain safely stored among all the vendors, doctors, banks, web sites, and government agenices whom you've engaged in your lifetime. More likely, your personal credentials are all for sale in black market exchanges like this one.
In other words, the horses are out of the barn. There's little point trying to re-tool or regulate the world's IT infrastructure to contain consumer data. Even if your concern is future generations whose identities are still safe from thieves, there are so many ways for data to leak that it's futile to expect brittle secrets like our social security numbers to be both useful and sustainably confidential. So rather than fund "extrusion detection" startups, as so many other VC's have done, I have instead looked for technology that can protect our identities in a way that does not presume the secrecy of our credentials.
Cyota, for example, protects our bank accounts after phishers have stolen our credentials; but Cyota, which secures the banks' assets, doesn't address the most common form of identity theft -- application credit fraud perpetrated against individuals. By applying for credit in our names, thieves get cars, phones, credit cards and even mortgages, leaving us to deal with the nightmare of bills, debts, liens and bad credit. For 6 years running, this is the fastest growing crime in the US (and the financial cost per episode is growing). The problem has reached such epidemic proportions that consumers, prompted in part by the data-breach-disclosure letters they receive, will pay for solutions -- even pathetically ineffective ones like credit report monitoring services.But I did learn from Cyota that if you can't keep a secret from phishers and laptop thieves, and if you can't trust spyware-infected computers, you can still protect your assets through multi-channel authorization of risky transactions. That is, thieves can't get to your assets if you are consulted prior to withdrawals and account changes over a medium separate from that in which the transaction originated.
That's why Bessemer set out to find a company focused on putting consumers in charge of their own finances, through mechanisms that require their out-of-band authorization for any extension of credit. There are many possible mechanisms, including opt-out lists, credit fraud alerts (courtesy of the 2003 FACTA Act), and credit freezes (courtesy of California's Consumer Credit Reporting Agencies Act). We assessed many startups in the field, but the best among them is Lifelock.
Todd Davis, the CEO of Lifelock, got our attention when he disclosed his social security number on TV, proving his personal confidence in the Lifelock service. By focussing on easy enrollment, Lifelock has built by far the largest subscriber base in the industry, with stellar customer satisfaction rates that yield annual churn rates below 5%.
Having subscribed my entire family to Lifelock (the kids are vulnerable, too), our finances and credit are now protected from identity thieves. Lifelock backs up its service with a guarantee that it will handle any resolution of ID theft, with a $1,000,000 warranty.Obviously I'm excited about this investment (like the Men's Hair Club President, I'm also a customer!). Bessemer's anti-fraud practice has been consistently successful to date with Verisign, Cyota (RSA), SiteAdvisor (McAfee) and Coral Systems (Lightbridge). And this was one of those easy investment decisions where several road maps (Consumer Internet, Multi-Channel Authorization, Get Big Cheap) converged.
Technorati Tags: ID+theft identity+theft lifelock bessemer ssn kerckhoffs schneier fraud+alert phishing credit+freeze cyota
Blogged with Flock
Sunday 12 November 2006
Get Big Cheap
Two weeks ago I presented at Babson College, home of the nation's top ranked Blank Center for Entrepreneurship. (It's a beautiful campus, especially during the New England autumn.) Students asked for my slides, which I forgot to share, but the New York Times story on Wednesday on how cheaply one can launch a web startup reminded me to post a related segment of my talk here. (Be gentle--this was edited for a student audience far from Silicon Valley.)
...Conventional VC wisdom shied away from consumer ventures because consumers are unpredictable, branding is so expensive, and it takes a prohibitively long time to build a competitive distribution channel. So what changed? What’s now so attractive about consumer technology that makes 2006 such a better time to launch new services? Well, there are 7 new factors today that didn’t exist in the 90’s.
1. A psychographic shift in population led to fast adoption of new technologies. It’s just much harder to find someone complaining that the VCR blinks 12:00—in fact it’s hard to find a VCR at all, now that we have Tivo.
2. The blogosphere and social network sites have also accelerated the rate of adoption for new technologies, disseminating relatively objective and credible information on new products, levelling the playing field for startups.
3. Thanks to deregulation, an enormous middle class is emerging from the economic growth engines in Asia.
4. Internet entrepreneurs in Europe and elsewhere can better identify markets and reduce risk by modelling their startups on successful US online businesses like eBay, Paypal, Google, Yahoo and eTrade.
5. Nearly a billion new mobile phones enter the market each year—mostly in the hands of consumers who aren’t already equipped with a PC, TV and camera.
6. Google has enabled direct marketing for nearly every business in the world. An entire ecosystem now grows around it, including such categories as ad optimization, search engine optimization, lead generation, vertical search, local search, and meta-search.
7. XML has enabled the rapid development of integrated web services like MySpace, Facebook, YouTube, LowerMyBills, and Yelp. For the first time developers can whip together a complex community site that mashes up data and features from across the web. This last point is critical, because it enables consumer-oriented entrepreneurs to do something new and exciting: test a business plan without capital.
This dramatically changes the venture capital model. Consumer ventures used to burn so much time and money that most high tech entrepreneurs focused on carriers and large enterprises. In order to assess demand for their wares, they would need to first develop the technology and a sales force to sell it, a 3 year proposition. If the entrepreneur had a track record of success, we venture investors would take our chances on the market and fund those first three years of operation.
During the internet rush of the 90’s, intoxicated by the Internet, we tried to apply the same model to consumer investing—that is, we funded “proven teams” who had a plan to develop and brand a new consumer service. Seduced by the proposition that more capital up front would buy branding and accelerate distribution, many venture investors bought into Neil Weintraut's motto GET BIG FAST.
We all know how that turned out. No matter how proven a team may be, they still can’t predict consumer behavior, and so we spent about $30 billion acquiring eyeballs for web sites of dubious value, and when the capital dried up, so did the businesses.
But today, entrepreneurs have the opportunity to launch web sites so rapidly into a market that adopts technology so quickly, that with some iterative tweaking and feedback from users they can test their ideas in months, and on a shoestring budget. Without the need for capital, they needn’t sport a proven track record of success, and so many many more ideas can be tested, and the winners can come out of nowhere, from anywhere on earth. With the right user experience, the best innovations can attract 50 million users in their first year of general availability, as proven by Skype, Firefox, Wikipedia, YouTube and MySpace.
And so the winning recipe today for aspiring entrepreneurs is GET BIG CHEAP. Don’t waste expensive development on untested ideas, and don’t let a fat marketing budget mask a weak value proposition. If instead you tinker your way to scalable organic growth, you’ll have a valuable business on your hands. Don’t worry about how long it takes—just make sure your burn rate is low enough to accommodate several cycles of iteration.
There's never been a better time to start a company. Find a community underserved by technology – be they disenfranchised American teenagers, bored commuters in Asia, or small business advertisers in Europe – and repeatedly craft a better user experience for them until you GET BIG CHEAP.
[Pictured right: The Free Press House, a Mumbai office building housing firms with more capital under management--including Bessemer Venture Partners--than any other in India. Notice the materials used by the develoepr to erect the building!]
...Conventional VC wisdom shied away from consumer ventures because consumers are unpredictable, branding is so expensive, and it takes a prohibitively long time to build a competitive distribution channel. So what changed? What’s now so attractive about consumer technology that makes 2006 such a better time to launch new services? Well, there are 7 new factors today that didn’t exist in the 90’s.
1. A psychographic shift in population led to fast adoption of new technologies. It’s just much harder to find someone complaining that the VCR blinks 12:00—in fact it’s hard to find a VCR at all, now that we have Tivo.2. The blogosphere and social network sites have also accelerated the rate of adoption for new technologies, disseminating relatively objective and credible information on new products, levelling the playing field for startups.
3. Thanks to deregulation, an enormous middle class is emerging from the economic growth engines in Asia.
4. Internet entrepreneurs in Europe and elsewhere can better identify markets and reduce risk by modelling their startups on successful US online businesses like eBay, Paypal, Google, Yahoo and eTrade.
5. Nearly a billion new mobile phones enter the market each year—mostly in the hands of consumers who aren’t already equipped with a PC, TV and camera.
6. Google has enabled direct marketing for nearly every business in the world. An entire ecosystem now grows around it, including such categories as ad optimization, search engine optimization, lead generation, vertical search, local search, and meta-search.
7. XML has enabled the rapid development of integrated web services like MySpace, Facebook, YouTube, LowerMyBills, and Yelp. For the first time developers can whip together a complex community site that mashes up data and features from across the web. This last point is critical, because it enables consumer-oriented entrepreneurs to do something new and exciting: test a business plan without capital.
This dramatically changes the venture capital model. Consumer ventures used to burn so much time and money that most high tech entrepreneurs focused on carriers and large enterprises. In order to assess demand for their wares, they would need to first develop the technology and a sales force to sell it, a 3 year proposition. If the entrepreneur had a track record of success, we venture investors would take our chances on the market and fund those first three years of operation.
During the internet rush of the 90’s, intoxicated by the Internet, we tried to apply the same model to consumer investing—that is, we funded “proven teams” who had a plan to develop and brand a new consumer service. Seduced by the proposition that more capital up front would buy branding and accelerate distribution, many venture investors bought into Neil Weintraut's motto GET BIG FAST.
We all know how that turned out. No matter how proven a team may be, they still can’t predict consumer behavior, and so we spent about $30 billion acquiring eyeballs for web sites of dubious value, and when the capital dried up, so did the businesses.
But today, entrepreneurs have the opportunity to launch web sites so rapidly into a market that adopts technology so quickly, that with some iterative tweaking and feedback from users they can test their ideas in months, and on a shoestring budget. Without the need for capital, they needn’t sport a proven track record of success, and so many many more ideas can be tested, and the winners can come out of nowhere, from anywhere on earth. With the right user experience, the best innovations can attract 50 million users in their first year of general availability, as proven by Skype, Firefox, Wikipedia, YouTube and MySpace.
And so the winning recipe today for aspiring entrepreneurs is GET BIG CHEAP. Don’t waste expensive development on untested ideas, and don’t let a fat marketing budget mask a weak value proposition. If instead you tinker your way to scalable organic growth, you’ll have a valuable business on your hands. Don’t worry about how long it takes—just make sure your burn rate is low enough to accommodate several cycles of iteration.There's never been a better time to start a company. Find a community underserved by technology – be they disenfranchised American teenagers, bored commuters in Asia, or small business advertisers in Europe – and repeatedly craft a better user experience for them until you GET BIG CHEAP.[Pictured right: The Free Press House, a Mumbai office building housing firms with more capital under management--including Bessemer Venture Partners--than any other in India. Notice the materials used by the develoepr to erect the building!]
Technorati Tags: babson blank+center entrepreneurship startup get+big+cheap get+big+fast India China
Blogged with Flock
Tuesday 7 November 2006
Silicon Valley Loves Richard Dawkins
As promised, the great evolutionary scientist and Oxford professor of zoology Richard Dawkins made his appearance at Kepler's Bookstore last week. It was unlike any previous book signing -- several hundred fans mobbed the store, with standing-room-only out the door. Clark sold out of every Richard Dawkins book, new and old. (The publisher of The God Delusion is sold out, too. Until the next printing, you can read the first chapter here.)
The crowd was highly engaged, alternating between applause and laughter. In case you missed the show, I am pleased to offer you the re-run, as well as my own introductory remarks, the text of which the professor posted here on his new web site. (Disclosure: my comments are not for the faint of mind, nor endorsed by Bessemer Venture Partners!)
AudioReproduction: 54 meg MP3 file--click to stream or right click and Save the 54 meg MP3 file (via Father Dan)
Video Reproduction. Incidentally, if you hear someone heckling me during the intro, that's Bill Atkinson, co-inventor of the Mac, touting the security of Apple computers.
After the event, the professor was kind enough to dine at my home with some local Valley personalities who support the Dawkins cause. Jurvetson was there (he posted photos), as well as Geoff Ralston, Dan Farmer, and 56k modem inventor Brent Townshend (good thing, too, because when I couldn't start my outdoor gas heater, the inventor fixed it by patching it up with duct tape). Pictured to the right are Bill Atkinson (far left) and Jeff Hawkins (right) entertaining the guest of honor. (They were tickled to learn that Dawkins is a big user of both the Mac and the Palm Treo!)
The success of Dawkins' publication coincides with Michael Shermer's rebuke of Intelligent Design and Sam Harris' Letter to a Christian Nation. Together, these books seem to be making a dent, as their message echoes in popular media like The Colbert Report, South Park, Wired, Newsweek, and even TIME, the bastion of Christian pandering.
Related Link: Buy Dawkins' DVD documentary Root of All Evil.
The crowd was highly engaged, alternating between applause and laughter. In case you missed the show, I am pleased to offer you the re-run, as well as my own introductory remarks, the text of which the professor posted here on his new web site. (Disclosure: my comments are not for the faint of mind, nor endorsed by Bessemer Venture Partners!)
AudioReproduction: 54 meg MP3 file--click to stream or right click and Save the 54 meg MP3 file (via Father Dan)
Video Reproduction. Incidentally, if you hear someone heckling me during the intro, that's Bill Atkinson, co-inventor of the Mac, touting the security of Apple computers.
After the event, the professor was kind enough to dine at my home with some local Valley personalities who support the Dawkins cause. Jurvetson was there (he posted photos), as well as Geoff Ralston, Dan Farmer, and 56k modem inventor Brent Townshend (good thing, too, because when I couldn't start my outdoor gas heater, the inventor fixed it by patching it up with duct tape). Pictured to the right are Bill Atkinson (far left) and Jeff Hawkins (right) entertaining the guest of honor. (They were tickled to learn that Dawkins is a big user of both the Mac and the Palm Treo!)
The success of Dawkins' publication coincides with Michael Shermer's rebuke of Intelligent Design and Sam Harris' Letter to a Christian Nation. Together, these books seem to be making a dent, as their message echoes in popular media like The Colbert Report, South Park, Wired, Newsweek, and even TIME, the bastion of Christian pandering.Related Link: Buy Dawkins' DVD documentary Root of All Evil.
Technorati tags: richard+dawkins dawkins atheism atheist god+delusion keplers
Blogged with Flock
Thursday 2 November 2006
British Telecom Dials Up Da Vinci Code
Congratulations to Counterpane, which announced last week that it has been acquired by British Telecomm as part of the global carrier's campaign to deliver best-of-class security services to multi-national enterprises.
The company's founder, Bruce Schneier (whom Economist calls "the security guru") pitched me on his vision in 1999, but it was his book Secrets and Lies that compelled me to invest, along with Accel. (You can see many ideas from that book plagiarized in my blog posts.)
In fact, Bruce's position as CTO of the company seems to have captured Europe's attention--but not for his scholarly works, his media contributions, his cryptographic inventions, his widely read (125,000) newsletter Cryptogram and blog Schneier on Security, or his invention of the Security Monitoring Services industry.
No, Britain is all atwitter because a fictional character in a novel once mentioned Bruce's name! That's the big story here, according to the Financial Times, the Daily Telegraph, the Times, and of course the Sun (pictured here).
Oddly they are also reporting a price on the company which is significantly under-stated (I don't know why). Anyway, it wasn't a home run for the investors, but it was a nice outcome.
Regardless, the company's success reflects heroic execution by CEO Paul Stich, VP Ops Doug Howard, VP Sales Kevin Senator, CFO Criss Harms and many others. Launched at the height of the bubble, the team scraped through the downturn years and emerged as the dominant independent company in the high end market for security monitoring services.
The company's founder, Bruce Schneier (whom Economist calls "the security guru") pitched me on his vision in 1999, but it was his book Secrets and Lies that compelled me to invest, along with Accel. (You can see many ideas from that book plagiarized in my blog posts.)
In fact, Bruce's position as CTO of the company seems to have captured Europe's attention--but not for his scholarly works, his media contributions, his cryptographic inventions, his widely read (125,000) newsletter Cryptogram and blog Schneier on Security, or his invention of the Security Monitoring Services industry.
No, Britain is all atwitter because a fictional character in a novel once mentioned Bruce's name! That's the big story here, according to the Financial Times, the Daily Telegraph, the Times, and of course the Sun (pictured here).Oddly they are also reporting a price on the company which is significantly under-stated (I don't know why). Anyway, it wasn't a home run for the investors, but it was a nice outcome.
Regardless, the company's success reflects heroic execution by CEO Paul Stich, VP Ops Doug Howard, VP Sales Kevin Senator, CFO Criss Harms and many others. Launched at the height of the bubble, the team scraped through the downturn years and emerged as the dominant independent company in the high end market for security monitoring services.
Technorati Tags: counterpane bruce+schneier schneier british+telecomm security+monitoring da+vinci+code
Blogged with Flock
Subscribe to:
Posts (Atom)