Category Archives: Startup & Venture Capital

2010 Post Highlights

I’ve written a bunch of posts on this blog in 2010.   Not all are my favorites but below, I’ve highlighted the ones that are.  You can find a list of all-time favorite posts here ranging back to 2006.

Organizational Behavior

Data, Marketing Technology

Twitter & Social

Investing

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Net Neutrality

Net Neutrality protest at  Google HQ - GoogleR...
Image by Steve Rhodes via Flickr

Jon Borthwick (@borthwick) penned a piece for TechCrunch this morning called Neutrality or Bust.   This followed a piece by friend and fellow investor Brad Burnham (@bradUSV) entitled Internet Access Should Be Application Agnostic.

While Net Neutrality has been talked about for years, it’s now getting a lot of attention by the industry because action is about to be taken.  It’s serious and has far reaching implications for the entire ecosystem of advertising, technology, telecommunications, and media.

While I’m not going to write a long essay on what I believe is right, I will point you to the two articles linked above and state my thoughts quite simply:  The Internet has grown at the pace it has because all access has been equal.  I believe it should remain that way.  I do realize however that infrastructure costs  change a bit in a mobile/wireless world and we have enough smart people in this country to figure out a mutually beneficial infrastructure.  Keep the web neutral.

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Why These Frothy Times for Angel Investing are Actually Good

I’m going to play contrarian for a post.  There is so much talk right now of the angel investment scene going bananas from venture capitalists, angel investors, entrepreneurs, journalists, academics, and even lolcats.  I agree that it’s going bananas, but where I don’t agree with many people (and many people who I respect) is that it’s a terrible thing.

I believe it’s actually a good thing.

I’m an occasional angel investor.  Back in ’00-’01, I lost a lot of money in early stage investments.  Too much money.  I vowed never to do early stage financing again.  But I’ve had enough toes in the water over the past 7 years here in New York to understand where we were and where we are now.

If you are an entrepreneur, this is a great time to raise capital.  There is a ton of capital for many different reasons and access to it has never been easier.  It used to be that you had to have a top lawyer who knew people, or was asked to pitch at an angel group.  The web has fundamentally changed this.  I receive 3-4 deals a day on AngelList of companies I’ve never heard of but have demonstrable traction and already have hundreds of thousands committed.

Since there is a capital supply glut, simple economics say that it’s in favor of the entrepreneur.  Valuations are higher than a few years ago which is not in favor of the investor.  You need to put more money to work from an investment standpoint to have the same ownership percentages than just 365 days ago.

So as an entrepreneur, times are great.  If you are on the fence about raising capital, go and do it.  Cost of capital is cheap so take advantage of the opportunity.

As for angel investors, it sucks to be us.  But then again, it’s great to be us.

I spent a few hours in a board meeting today with angel investor and friend Jerry Neumann and he mentioned that the best part of being an angel means that you don’t have to do deals that you don’t want to do.  So lets use some simple logic:  if the deal terms are atrocious right now yet money is getting poured into early stage investments, then who is being ridiculous?  Us, – the angels!  No one is forcing us to put money to work in angel investing.  If the deal terms are so ridiculous, shouldn’t we be looking at other investment vehicles to generate wealth?

So why isn’t the well running dry in the angel investing ecosystem?

These frothy times will weed out the morons, or more importantly, the people who deserve to be weeded out.  Maybe the term moron is way too harsh, but it’ll weed out angels who are either a) way too green, b) investing on ego (I see quite a bit of this), c) people with no sense of simple math.  Is that a bad thing for the angel ecosystem?  Not if you ask me.

So, in 365 days from now, hopefully the froth has died down, angels who have no business being angels run out of capital earmarked for angel investments (but hopefully they saved for their children’s 529s), and more entrepreneurs than ever have startups and are dominating the world.

Video Search: A Big Opportunity

Excite
Image via Wikipedia

Here’s a startup idea that I think is ripe.  Time is now.

Lets try and learn from the past and apply it to the future. Alta Vista, Excite, Yahoo!, Overture, Dogpile, InfoSpace, Metacrawler, Gopher, Ask Jeeves, Webcrawler, Bing, Google (and many others) all evolved the way that we search for information.  Gone are the ways of card catalogs (I actually learned how to use one in grade school) and in are digital search boxes.

These search engines in varying degrees have been helpful to us when looking up textual based content and in some capacities, are helping us pull social, graphic, and video content.

As digital becomes less of a standalone channel and more of a backbone, I’d have to think that Video Search is going to be a huge business in the mid-future.  I don’t know the exact statistic, but X out of 10 televisions are being sold with either direct-to-Internet capabilities or STB’s that plug into a wireless routers which enables your big shiny new television as a portal to all the content on the web.  That “X” number will increase over time.

Since I find it hard to think I’m going to use my 70″ LCD TV to write Powerpoint documents from my bed, I’d have to think that the primary use will still be to view video content.

If Fred is correct, which I certainly believe, we should get together to build some beautiful video search apps for Android that will be positioned to deliver video search capabilities with potential for social interactions.

I’d have to imagine that the current big (and small) search engines were not created with video search capabilities as the technical infrastructure is fairly robust so either they will eventually come knocking.

My Tuesday morning thoughts.

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Early Stage Areas/Companies I'm Watching

I have really enjoyed watching all of the innovation over the past few years and wanted to highlight a few areas that I think are really interesting for 2010/2011.  In some cases, I may use company names as examples;  unless otherwise noted, I am not an investor in any of these companies and this is not a sponsored post (cmp.ly disclosure).

Video
I think 2010-2020 is going to be the decade of digital video.  Analog video will become digital and it will become indexable, optimizable, and interactive.  For many reasons outlined in this previous post, I don’t think it’s going to happen overnight, but I do think that video is going to grow significantly.  Many of my clients in the agency are asking for video (either to complement their digital plan or to substitute for their traditional TV efforts) for 2011.

One of the companies that I’m watching today is Milabra (Crunchbase Profile).  The reason why Milabra is interesting to me is because they help us index what is in the actual video content.  This is extremely important when we want to target, customize and index content.

Social Networking
CollegeOnlyIt’s 2004 all over again.  I wrote back in the day that social networks are like hot clubs – while they are all the rage now, there will be another hot one in the next year or two.  Facebook has obviously dominated but there becomes a point where Fb will not have 100% marketshare.

One of the companies I’m watching is CollegeOnly (Crunchbase Profile). What I like about them is that their value proposition is easily understood and their media kit does a great job describing who and what they do… and I believe it.

Automated Advice
If we all had access to a lot of data, we can have it tell us things based on certain criteria we tell it to look for.   In an age of large amounts of data, companies are going to emerge that weed out the middleman of giving advice/consultations for the opportunity to automate actionable decisions.

PlantlyI’m specifically tracking two companies in this area:  Plant.ly (Crunchbase Profile) and Profitably (Crunchbase Profile).  There is no coincidence that they both start with “P” and end in “ly.”  Plant.ly has access to a huge database of investment risk and returns over a few decades.  Based on your risk tolerance and expected return, they can recommend the right fund/etf/etc for you.  No need to pay a middleman to set that up for you.

Profitably is another startup that is innovating in the automated advice area.  You give it access to your Quickbooks business information and it helps you decide where you can either trim costs or grow profits for our business.  For someone who isn’t numbers adept, this could be very valuable.

Because both of these companies use technology to disintermediate humans, the can significantly reduce the transaction cost and still make boku dollars based off of scale.

Content Consumption
This is an area that I’m currently very active in.  I’m a formal advisor to Fast Society which is launching in a couple of weeks, and I’m about to launch a project called Tomzy (currently the sole investor) that helps the world visualize vast amounts of information.  I’m on a content consumption kick because in it’s current form, it’s broken.  I have a whole post coming out on this upon the launch of Tomzy but essentially we cannot manage our current content stream and we’ve not even digitized the majority of our content yet… so how can we expect to keep up with it in the future?

While Tomzy is all about processing and filtering content based on its relevance to YOU, Fast Society creates a bbm (blackberry messenger) like service across any platform for a small group of people for a defined period of time.  I can’t give too much away about Fast Society but it’s different than GroupMe (Crunchbase Profile).

Based on what you have read here, if there are companies who you think should be on my radar screen, I’m certainly willing to engage.  Please contact me thru this form, comment below, or tweet me @dherman76.

Talent Needs: Job Opportunities

One of the most amazing things about starting a business is being able to provide career opportunities for people at all stages of their life.  I’ve listed a few opportunities below and if  you or someone you know is interested in one of these, please do not hesitate to reach out.  The company is Varick Media Management which is the demand side platform and infrastructure for MDC Partners agencies and brands directly.  The team is located at 160 Varick Street in New York City.  I will refer all qualified candidates to the HR coordinator and the respective designee at VMM.

Investment Manager (Top Line Revenue Growth Driver):  Looking for someone with 1-3 years of experience to evangelize and drive top line growth of VMM to agencies and brands.  We are looking for someone who has experience in making the complex very simple; someone who is extremely personable; and who can present themselves well to a group.  Compensation is based off of a package of competitive base salary + performance + benefits.  If you are interested, please contact me.

Chief Marketing Officer (Strategic Sales):  We are looking for someone with 10-25 years in the business who has sold into strategic accounts ($10MM+/yr) for the past 5+ years.  Will be responsible for driving the direction of the Strategic Accounts as well, as, overall company marketing and identity.  Candidate may have an immediate open-to-hire for junior marketing coordinator to help with internal and external marketing efforts.  Responsibilities will be to drive top line revenue growth for the direct to brand channel and will have a new client goal quota.  Re-iterating that this person will be responsible for targeting specific clients (directly) and signing a specific number each year. Compensation is based off of a package of competitive base salary + performance + benefits.  If you are interested, please contact me.  Looking for someone who has played a similar role at former ad agencies, research firms, ad networks, and top tier publishers.

Infographer: We are looking for someone who is a master of data manipulation and visualization.  We’d like to bring someone on board who can tell stories once given a data set.  The ideal candidate will be able to recognize patterns within data, illustrate complex scenarios in simplistic forms, and create visuals that are easy to comprehend.  Visuals will be used both internally and also sent to clients to illustrate a particular problem or solution.  This role with support marketing, account, trading, and investment management.  Compensation is based off of a package of competitive base salary + performance + benefits.  If you are interested, please contact me.   Ideal background would be a mathematician + design.

VP Client Services (title to be figured out): We are looking for someone who wants to run the Client Services team and work closely with Investment Management.  Should have 10+ years experience within market research firms, agency brand planning or account management, or account management at complex advertising technology solution houses (ad networks, exchanges, etc).  Must be unbelievably personable, academic curiosity, a born leader, and detail oriented. If you are interested, please contact me.

Brand Capital & The Consiglieri

These guys get it and are for real.  I’ve known Mike Duda (@mikeduda) for a few years now and he’s onto something.  Let me explain why I think they have an opportunity to help create a new type of investor class that adds real strategic value.

The Front Man

Who doesn’t want to take a phone call from a player who has been a 2X NBA league MVP and 7x NBA All-Star?  Think you can get a meeting with someone?  I’m going to bet that Steve Nash can open more doors than the above average biz/corp dev person.  If you are one of his portfolio companies, Nash should be able to open the door anywhere.   For the sheer fun of it, I’d take a meeting with Mr. Nash and let him tell me about any of his portfolio companies.  Recently, WFAN 660AM took me out to breakfast with Boomer Esiason… a future hall of fame NFL QB.  That was awesome though the conversation wasn’t.  While the reporters loved Nash’s internship at Deutsch, I promise you that he’s not going to be sitting in the office working on campaign slogans… that’s the ad-mans turf.

The Ad Man

For those of you who are not familiar with Deutsch, it’s one of the top integrated shops left on Madison Avenue.  My agency, kbs+p is often compared to it and even Mike worked there back in the 90s.  Buddy Mike was one of the youngest partners ever at Deutsch and was directly responsible for some of their largest business including running the Anheuser-Busch InBev and Under Armour acccounts.  Duda also launched some businesses for Deutsch to much success and is highly regarded as one of the industries top ad-men operators.

Why Take Their Money?

In these frothy capital-rich (crazy to say that in a recession) days where it seems everyone is opening a seed/venture fund, the actual money to invest is just the table stakes.  What separates early stage investors from one another is the network that they keep and the value that they can add from a strategic and tactical planning perspective.  Many major early stage investors have been technical guys who were either product managers or startup CEOs that made it big… but I rarely, if there is even anyone out there, see people coming at it from a marketing angle.  Steve Nash has built his own brand which is world renown and Mike has built up multibillion dollar brands.  Startups need to understand how important their own brand is when talking to the world as it affects every conversation that they are having with consumers, investors, acquisitors, and potentials.

If you look at all the companies who get hyped on TechCrunch, TechMeme, GigaOM, AlleyInsider, and others, more times than not, their brand stands out.  Goodwill counts.

A Serious Bet

While GigaOM posted about another celebrity moving into tech with weak results, I see this celebrity having an awesome sidekick in Duda.  The area that I’d love to see them fill out is on the investing front end and they will have a nicely well rounded team.  Lets revisit this post in 365 days from now and see where they are… but want to send the boys’ Duda and Nash my most sincerest regards and best wishes!

Note:  I’m not an investor in their fund or currently working with them in any capacity.  I’m just excited to see some innovation in the space I love:  Marketing and Investments

Data Driven Platforms: Search & Display

Using data to make better business decisions is nothing new but since 2008, it’s been a very hot topic.  It’s been covered in almost every issue of Advertising Age, a whole new web destination now exists: AdExchanger, and agencies spun up new trading desks that are essentially high powered SWAT teams that combine rich data-sets with media for exceptional results.

Google has built a $154 billion company based on the use of lots of data to make the right decisions for it’s advertisers.  The data sets that Google are using are based off of search queries, which one can argue is one of the most powerful data sets that exist as it’s pure “hand raising.”  Over the past ten years, the big search engines have integrated with search engine marketing platforms such as Marin and Kenshoo to provide access to that marketers and agencies can use these tools to make better decisions which should improve performance and create workflow efficiencies (amongst many other reasons).

The trend we are going to see in 2H2010 and certainly in FY2011 is the emergence of these tools within the display, video, and mobile world and combining SEM with them.  While I can’t speak for any one tool directly due to confidentiality reasons, we are going to see many of these once SEM-only players move upstream to capture additional ad dollars and to use all-data (search+display+video+mobile, etc) to make better decisions.

As illustrated below, agencies such as Efficient Frontier are moving into this space as well, as well as, tools/platforms are integrating into biddable display sources.  These are not the only companies moving into the space but are illustrative of the trend.

What does this mean for the standalone display side platforms?  For the standalone SEM platforms?

An operational hurdle that will have to be addressed within the media agency world is that search and display is generally bought from two separate groups so either a) these groups will need to be combined or b) we need to provide clear roles and rules for each group.  I think option (a) is a much better choice as I’m all for integration.

SEM Platforms

The Conflict Free Ad Exchange

Picture 9Today’s ad exchange landscape is fairly complex but most people know who the big players are:  Google’s AdX, Yahoo!’s RMX, Pubmatic, Adnexus, Admeld’s MeldX, Adsdaq, Adbrite, and maybe, Microsoft AdECN.

With the majority of the above players including the big two (AdX, RMX), there is a major conflict.  They also sell media.

It’s like the Nasdaq also selling/providing liquidity for their shareholders.  Isn’t this a conflict of interest?

I know it’s early days within this space and most people are gravitating to where the money is.  For good reason.   Keeping the lights on and making a market today is better than being out of business in 12 months with only a dream.

When will we see a truly independent ad exchange emerge that can generate enough revenue to actually make it an attractive business for some group to start?  Behind closed doors, we talk about this all the time but everyone would rather be Goldman Sachs than the actual plumbing/exchange itself.  … and potentially for good reason.

I’d like to see a conflict free exchange emerge.  I’m sure many others would to.

Tangentially related posts:

This post was written by Darren Herman (@dherman76) who is the Chief Digital Media Officer of kbs+p/The Media Kitchen and the founder of Varick Media Management.  This post represents personal opinions and views, not necessarily reflected of his employer.