TED 2008

I used to attend a lot of conferences (e.g. Comdex, Network World, DEMO, Morgan Stanley Technology Showcase, NVCA, TechCrunch). Mostly I'd avoid the long, mind-numbing sessions, choosing instead to prowl the hallways and expo floors to serendipitously encounter familiar people and unfamiliar technologies. I found these events to be highly efficient venues for collecting and synthesizing information, for sharing ideas and taking a pulse on new markets.


But physical conferences simply can't keep up with the pace, volume and quality of content that is now available through online discovery and collaboration, which don't levy a heavy tax on our time for travel to and from Vegas (Who Has TIme For This?).

Having said that, there is still one conference I try to never miss. TED was founded in 1984 by Richard Saul Wurman as a dinner party among intellectuals (Marvin Minsky, Benoit Mandelbroit, Nicholas Negroponte...) to explore the convergence of technology, entertainment and design. It has since blossomed into a multi-location summit engaging 1,100 attendees around presentations by many of the most interesting and respected people in the world from science (Steve Pinker, Daniel Dennett, Richard Dawkins, Jane Goodall, Murray Gell-Mann), entertainment (JJ Abrams, Julia Sweeney), technology (Craig Venter, Jeff Hawkins, JImmy Wales, Sergey/Larry), art, literature (Dave Eggers), journalism (Saul Hansen), music (Peter Gabriel, Thomas Dolby), business (Richard Branson, Jeff Bezos), and government (Clinton, Gore, Queen Noor). The sessions now cover topics far broader than the original agenda, confronting the biggest challenges facing our species--global warming, terrorism, genocide, disease, education, human rights. The presentations range from 3 to 18 minutes, punctuated by chances to mingle with the speakers.

But TED is more than a conference. TED now hosts a series of events around the world in Africa, India, Europe... TED operates a rich web site that features the lectures delivered in the events. Every year TED awards a $100,000 prize to three recipients who leverage the TED community to pursue a specific proposal on improving the world. For example, Bill Clinton is using his prize to bring basic healthcare services to Rwanda, and E.O. Wilson has used his prize to launch the Encyclopedia of Life, an online repository of information about the species on Earth.

Perhaps the best and most lasting benefit of TED is the chance to meet new friends among a community of everyday people with a common characteristic: an active ongoing interest in improving one's intellect and one's planet--people like my friend Erik Gordon, who overcame much personal adversity to launch an investment firm with the mission of funding commercial space exploration.

Last year I blogged a bit about TED but this year I plan to share more details in the coming days with these objectives: share some interesting ideas, identify which presentations you may wish to watch on the web, and help you assess TED as an event you might wish to attend.

UPDATE: Here are links to my 6 reports on TED 2008:

TED Wednesday: Literally, A Stroke of Luck

Highlights: Dr Jill Taylor-- Brain scientists decvonstructs her own stroke; Stephen Hawking

TED Thursday Morning: Life Origami

Highlights: Craig Venter and Paul Rothemund on developing CAD tools for synthesizing complex life forms.

TED Thursday Afternoon: Helpful Tips to Survive a Nuclear Explosion

Highlight: Author Dave Eggers

TED Friday Morning: Music, Shrooms and Crows

Highlight: Josh Klein on how smart crows really are. Definitely worth watching.

TED Friday Afternoon: Shining Eyes

Highlight of the Week: Ben Zander leads TED in German choral singing

TED Saturday: Thank You For Being Here

Highlight: Al Gore with more inconvenient slides.

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A Very Bad Book and a Very Good Book

Are you poor? Sick? Old? Fat? Lonely? Well if you ever feel that life is imperfect, remember there’s only one explanation for such unfairness in the world: Someone out there is deliberately screwing with you--some lazy, greedy, immoral bastard who somehow caused your misery for personal benefit.

This atavistic wisdom now drives sales of Kevin Trudeau’s latest masterpiece The Weight Loss Cure THEY Don’t Want You To Know About. Even after the FTC censured Trudeau multiple times for deceptive advertising--most recently for his conspiratorial expose on Natural Cures (which I generously reviewed)--Trudeau has triumphantly returned to the NY Times bestseller list with the good news that it’s not your fault you’re fat. Government and Big Business are actually to blame for hoarding the secret of how to eat all the yummy foods you like and still look like Jessica Simpson. Trudeau's infomercial hails his regimen as the "easiest [weight loss] method known on planet Earth" (even though the book prescribes daily injections of drugs not approved for weight loss by the fat-loving FDA).

Now party-pooping scientists would tell us that it takes exercise and dietary restraint to lose weight. But these same Chicken Littles see the whole universe succumbing to a relentless entropy that will eventually break down everything from my plasma TV to the sun in Heaven. They would say that we must continually expend our energy to sustain our health, not to mention our friendships, marriages, families, jobs and intellects. Well, those buzz-killing nerds are welcome to follow the Second Law of Thermodynamics if they wish to, but that’s one law I never voted for (and I’m pretty sure it ain’t a Commandment).

And that’s why Trudeau’s book is selling like matzoh on Passover. Americans have faith in the fair, just and wonderful design of our Creator (aka God, Jesus, Allah, Yehovah, Flying Spaghetti Monster, Zeus, Vishnu, Lou Dobbs…). Patient prayer will always prevail. And although He is the source of the very genetic variation that dictates much of our lot in life, the All-Teflon Holiness gets credit only for the good stuff (“Thank God that shark didn’t eat my other arm, too!”). The bad stuff must be the fault of some sinner defiant of the Lord’s benevolent plan.

To protect us from these heretics, Trudeau is already hard at work on these guaranteed bestsellers that will expose conspiracies at the highest levels:

• The Secret to EASY PARENTING 'They' Don’t Want You To Know

• The IMMORTALITY PILL Funeral Parlors Don’t Want You To Take

• Why Rich People Never Pay Taxes, And You Don’t Have To Either!!

• Perpetual Motion Machines the Arabs Don’t Want You To See

• How the French Are Secretly Making You Ugly

• Global Warming—The Alien Plot to Colonize Earth

Yes, Trudeau continues to enrich himself by playing on the suspicions that people harbor toward governments, big business, and rich people. Why do these suspicions so pervade our society?

You can find the answer to this and similar questions in a new bestseller by Michael Shermer titled Mind of the Market: Compassionate Apes, Competitive Humans and Other Tales From Evolutionary Economics (you can read the Prologue here). Shermer, the Scientific American columnist and Skeptic Magazine editor, is the world’s expert on Why People Believe Weird Things. During his illustrious career, Shermer has exposed cognitive frailties that characterize the brains our species evolved in times when simple pattern matching—not complex analysis—contributed to our reproductive success. Selective recall, false memories, wishful thinking, and an ignorance of the scientific method lead to all kinds of pseudo-scientific conclusions, such as UFO abductions, holocaust denial, medical quackery, and 9/11 conspiracy theories (brief video). Shermer’s latest book focuses on the mistakes we make around money, and how human irrationality confounds the classical economist.

Trudeau’s books exploit just one of the cognitive artifacts of our evolutionary past: Prior to the relatively recent rise of civilization, variations in wealth stemmed from force, not industry and innovation, and so, as Shermer explains, we naturally developed a healthy distrust and fear of anyone with substantially more resources:

"Because humans evolved in small groups of a few dozen to a few hundred individuals in hunter-gatherer communities, in which everyone was either genetically related or knew one another intimately, most resources were shared, wealth accumulation was almost unheard of, and excessive greed and avarice were punished. Thus we naturally respond to a free market system in which conspicuous wealth is paraded as a sign of success with envy and anger…

Market solutions are generally received with skepticism. Businessmen are distrusted, corporations looked at askance. There is also a well-known resentment against those who have most benefited from markets… Folk economics leads us to disdain excessive wealth, label usury a sin, and mistrust the invisible hand of the market. What we do not understand we often fear, and what we fear we often loathe…"

The non-classical notion that human beings do not behave as perfectly rational agents in a market economy is young but not new. The new generation of economists (led in large part by my college roommate) embraces behavioral studies as a necessary step toward building micro- and therefore macro-economic models. Shermer doesn’t pose as an economist himself, but he does bring his unique expertise to bear on the more fundamental question of how these cognitive anomalies developed, basing his research in part on the findings of neurologists who study brain scans that expose how we make decisions.

But Shermer’s book is not just for behavioral economists. It’s a warning for us all not to react instinctively like warring tribesmen, but to recognize the modern reality of a single tribe sharing the planet.

And for anyone who does ever feel poor, sick, old, fat, or lonely, Mind of the Market reminds us that we are but products of nature. There’s no point wiling away our lives waiting for an Omnipotent School Principal to make everything fair in the end (Who Has Time For This?). We make the most of our brief, glorious existence, and then we die.

Perhaps my favorite aspect of living in Silicon Valley (even more than the weather) is the prevailing sense that individual contributions can in fact re-shape the world around us. Indeed, this drive to organize small teams of people into highly effective agents of the free market is what defines an Entrepreneur. Or should I say “Entropy-Nerd”?

Now if you, too, live in Silicon Valley, before you order Shermer’s book online consider buying it instead from Kepler’s Bookstore in Menlo Park (directions) this Tuesday evening at 7:30pm, because Michael Shermer will be there himself (for the second time) to inscribe it for you. (Otherwise catch Shermer elsewhere on his US speaking tour, or request an autographed copy when you buy the book here.)

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Bessemer Tops the Midas List

Since 2000, Forbes has taken an admirable crack each year at recognizing the most successful dealmakers in high-tech venture capital. Its Midas List attracts some controversy (and whines from VCs) since Forbes must craft its list based on incomplete and somewhat self-reported information. Clearly some folks get too much credit (e.g. I've been ranked as high as number 6, although this year I lost ground) and some star performers are neglected, such as Chris Gabrieli (Sirtris IPO), Gus Tai (sold Photobucket to FIM), and Kevin Harvey (sold MySQL, TellMe, Ingenio), who should have fared better than number 86.




With that disclosure, I wish now to point out that five Bessemer investors (including Bob Goodman, Rob Stavis, Rob Chandra and Felda Hardymon) made this year's list, once again making Bessemer the #1 represented firm.

OK, I'm done gloating. Back to work now--must move back up the list in '09...

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Hospital Corners

As the chill of the winter solstice creeps into our homes, am I the only one who likes to gather up the blanket around my body for warmth? We all shift positions at night, and I know that as my limbs wander, I need my down-feathered companion to effortlessly move with me. So who, then, was the demented Nazi that invented hospital corners?

Surely the evil goddess Insomnia herself cursed us mortals with those tightly tucked in corners that pin us down for the count, relentlessly pressing down upon our toes. And just as clearly, she has charged her minions in Hotel Housekeeping to prosecute the nightly terror. Euphemistically deemed a “turn-down service”, their mission is to (i) maximize tension in the sheets just prior to bedtime; (ii) heap layers of heavy bedcovers upon the real estate designated for our feet—defying us to handle the germy, never-been-washed bedspread ourselves; and (iii) deposit tasty (but caffeinated!) chocolate on our nightstands to pharmaceutically reinforce wakefulness.

What else is there to do but squeeze into bed and try to kick the quilted bed-weight off with our feet, racing to find some mobility in there before the maids’ handiwork crushes our lungs? And then the hardest part: wedging my whole body down as far as I can go for maximum leverage so I can execute the leg press of my life to separate the top sheet from those damned hospital corners. It’s actually a good workout, though I often fear that my femurs will snap in the process. “Did you break your leg skiing?” they will ask, and I will answer, No, I was subdued by linen.

Can technology save us? I have developed an extensive road map around this investment hypothesis but I have yet to encounter any new technology powerful enough to overcome the hospital corner. Not even a web2.0 travel site that ranks hotels for Flexible Bedding.

No, like any terrible plague, hospital corners can only be remediated through prayer. So please join me in this bedtime hymn…

“Oh merciful and all-cheesy Flying Spaghetti Monster!
Tonight, on the longest night of the year, your noodly children
beseech you to deliver us from Insomnia’s paralyzing clutches.”

Amen, and good night.

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SaaSy Security Suits SMB

In 2006, even as overall venture investing in the U.S. expanded 12% over 2005, venture investment in security startups that year plummeted more than 50% (Venture Source). It’s no secret that too many "best-of-breed" startups are chasing the ever more elusive enterprise IT security budget. And while hackers have shifted their sights to the juicier consumer segment--selling private credentials to ID thieves and renting bots to spammers--IT departments have resolved that their checklist of must-have security products is long enough. They no longer crave super-duper startup technology, turning instead to the large vendors (Symantec, McAfee, Cisco...) for integration, vendor viability, and security that's, well, good enough. A few pioneers like Arcsight and Tripwire have reached critical mass in the large enterprise market, but the majority of security startups today struggle to sustain field sales reps with less than a million dollars a month in sales. Now that the VCs have turned off the fuel tap, these babies just won't make it off the runway.

So why did my partners at Bessemer just last month let me cut the biggest check of my career ($24 million) in another business IT security company?

According to surveys conducted by the Computer Security Instiutute (CSI), employees of large corporations naturally enjoy far more extensive levels of information security than in businesses with fewer than 1,000 employees. Not only are the corporate PCs more rigorously updated with anti-spyware signatures, but IT locks them down inside a fortress of intrusion prevention systems, application firewalls, policy compliance agents, encrypted SANs, vulnerability scanners, VPNs, etc. Obviously, it takes a large IT shop to assess, integrate, deploy and manage that kind of infrastructure--the kind you don't find in a 200-person medical clinic.

And yet small and medium sized businesses (SMB's) own the majority of business PCs, inviting computer parasites that thrive in vulnerable hosts, armed with admin privileges! Doesn't it bother the SMB owners that they spoil internet hygiene for everyone?

Perhaps not, but contrary to what many believe, SMBs understand full well that they face the same risks and regulations as large corporations. In fact, the CSI survey included a surprising result: even though small businesses lack the IT resources to deploy most security technologies, they spend as much as 8 times what the Fortune 5000 spend for security per capita! I suppose it's because their product choices are limited by their VARs, and each invoice they pay represents a tiny fraction of the vendor's revenue, so SMBs enjoy no pricing leverage at all. Furthermore, the "scalable" appliances they buy (designed for 10,000 Citibank employees) don't amortize well over a law
firm's 300 PCs.

This unmet market need represents an enormous opportunity for the new generation of security companies developing on-demand solutions, or Software-as-a-Service (SaaS). Instead of deploying their own servers and infrastructure, SMBs can now subscribe to security solutions priced by the drink (so we can buy a quart of milk instead of the cow). The simpler deployment alllows SaaS vendors to replace their field reps with web and telephone sales, so now they can afford to sell smaller accounts.

Indeed, the first generation of security SaaS has fared remarkably well, and I've been fortunate to participate as an investor: Verisign's SSL business trounced Entrust, and Postini (now Google, as of yesterday) thrived in the densely crowded spam filter market. Qualys leads the market for vulnerability assessment, and Cyota quickly dominated the banking security sector (before RSA bought it). Counterpane pioneered security monitoring, but performed only moderately well because we focused on high end security instead of easy and affordable deployment. Meanwhile, several security SaaS winners I didn't fund, like Websense and Riptech, now populate my anti-portfolio of lost opportunities.

Unfortunately, I don't think we'll see too many more winners, because consolidation will come and go faster this time around. Even more than large corporations, SMBs will gravitate toward suites, rather than hire IT resources to buy subscriptions and manage portals from multiple vendors (Who Has Time For This?). They won't be easily sold on whiz-bang novelty.

That's why the vendor(s) who can integrate security services from soup to nuts will ultimately dominate the SMB security market. The winner(s) will pay once to acquire a customer but sell multiple services, pushing down sales costs as well as prices. Meanwhile, the incumbents (Symantec, Cisco...) are stuck in the licensed software world, and they can't patiently invest in building recurring revenue streams when Wall Street values them at normal software multiples (In his most recent earnings call Larry Ellison proclaimed that he can't justify investment in a SaaS business given the lower up-front margins.) So the field is open for new entrants to integrate on-demand services for SMBs who want a single portal to manage their security.

Of course, no single company can develop a winning product in every category, and so the winner(s) will have to grow through acquisition, following in Symantec's footsteps. The early favorite in this race is my latest investment, Perimeter eSecurity. Slowly and surely, Perimeter has acquired and integrated nine SaaS companies, fully integrating a portfolio of over 50 services that the Company supplies to several thousand businesses. Their portal manages AV, anti-spyware, spam filters, content filters, VPNs, firewalls, application firewalls, IDS, IPS, remote backup, email archiving, Exchange hosting with encrypted web access, vulnerability assessment, monitoring, and many other services. Nothing else out there comes close, and customers like it. Perimeter's own organic growth has financed the acquisitions--all except the last one, USA.Net, creating the opportunity for Bessemer and Goldman Sachs to invest.

Whether or not this particular bet pays off, SaaS promises a major disruption for the industry and its investors. Starting new companies to develop more and more advanced technology will never solve the security problems of our local accountants, banks and realtors. The internet remains woefully insecure--not because our technology is insufficiently advanced, but because it's insufficiently deployed.

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There Once Was A Founder Named Scott

I've been asked three times now for the text of my toast at last night's closing dinner for the Postini/Google deal. Here it is (the heroes mentioned in this ballad are founder Scott Petry, CEO Quentin Gallivan, board director Ryan Mcintyre, and lead investor John Johnston):

There once was a founder named Scott
Who invented a messaging bot
That filtered out spam--
be it virus or scam--
Now we never get spam (not a lot).

John, who led us with class,
Thought a quick IPO would be crass.
But Cowan kept cryin'
To Quentin and Ryan
Which gave John a pain in the ass.

For spam and archive retrieval
Google came, and caused upheaval!
Are we now Googlini,
Postoogle, Gostini?
All they told us is just: Don't Be Evil.

Congratulations and thanks to the Postini team for executing so well and for inviting Bessemer to be a partner in your business.

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A Carbon Footprint Reduction Plan

Today, my partners and I announced an extensive plan to:

• offset 100 percent of our firm's estimated 728 tons of carbon-dioxide equivalent emissions beginning this year;
• to purchase offsets for our young portfolio companies (the dozen or so with 15 or fewer employees, and probably 3 to 5 more startups each year); and
• to reduce our total carbon emissions 25 percent by 2013 (and continue to purchase carbon credits to offset the balance).

We follow in the tradition of our namesake, Sir Henry Bessemer, whose inventive process dramatically reduced both the carbon and the energy required to refine steel. The culture and values of a business most often take root early in its life cycle, so we will instill environmental awareness in startups at the time of inception. Our goal is to fund a new generation of companies committed to constructive carbon policies that reduce the harmful emissions which cause global warming. And our hope is that other investment firms will follow suit.

Justin Label (head of Bessemer's CleanTech practice):
 

"While we have set aggressive targets, we also recognize that energy is critical to the economy and that for the foreseeable future, most energy will have a carbon footprint. Therefore, being 'carbon neutral' is not our ultimate goal. Rather, we hope this initiative will serve as a way to stay engaged on carbon issues and add to the pool of capital available for creative solutions."

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