Category Archives: Startup & Venture Capital

Why I'm Excited About This Batch of Internet Driven IPOs

NEW YORK - APRIL 02: Changyou CEO Tao Wang pre...
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Let’s assume the Internet started mainstream adoption in 1990 when Prodigy had approximately 465,000 subscribers and CompuServe had 600,000 (fact check here).  While those numbers in themselves aren’t mainstream to a country of 300MM+ people, they do signify a large group of people who were early adopters and started to spread the love about this thing we called/call the World Wide Web.

Throughout the decade of 1990s and within the technology sector, there were quite a few companies who attained liquidity thru going public (IPO).   Others raised quite a bit of private equity and venture capital and some are still around today, others are not.

IPOs of significance to this post:  Lycos (1996), Yahoo! (1996), eBay (1998), Akamai (1999), Razorfish (1999)

During the 90s, there was lots of hype and hoopla surrounding many of the IPOs which led them to appear much larger and significant than they really were.  The major reason for this was the promise of the Internet and implied valuations and multiples for what the Internet “will be” in years to come.  These multiples made up for the revenue traction (or non-traction) that the companies had.  The companies who had revenue traction then are more likely to be around today as they had solid foundations.

Fast forward to today.  There is starting to be some talk on the various mainstream and niche news sites about the forthcoming IPO marketplace for Internet related companies such as Facebook, Groupon, LinkedIn, Twitter, amongst many others.  In talking with many investors, journalists, and entrepreneurs, they are a bit hesitant of this IPO landscape which is the opposite of my thinking.  Maybe I’m the contrarian here.

I’m excited for some of the forthcoming IPOs.  Let me explain why but before I do, lets remove any external factors outside of this blog post about the US economy, worldwide economies, etc.   Let this solely be around the Internet.

  • Internet Adoption:  In it’s most simplest sense, there are more people using the Internet today than there were in the 1990s; here in the US and in the world.  By more people using the web, there is inherently more demand for innovation.  Instead of introducing home PCs to people, we’re now introducing tablets and smartphones.  Access to the web isn’t “if” or even “when” now, it’s more about “how much” access thru multiple devices.
  • Internet Understanding:  It’s 20 years post 1990 or 11 years (an entire decade+) since 2000 and the mainstream public now knows how to use a computer and browse/surf/dabble across the web.  500 million people have logged onto Facebook and created a profile.  This was not the case 10 years ago.  Fundamental understanding and most important, comfort, with the Internet is here and more people are discovering, transacting, communicating, and planning each day online.
  • Advertising Dollars:  For the past 20 years, dollars have been allocated to the digital channel.  Search, display, rich media, video, mobile, etc all have helped grow the digital advertising pot. Currently as it stands according to eMarketer, online ad spending is roughly 15.3% (2010) of total ad spending resulting in approximately $25.8B.  This number is going to grow and help bolster digital tv, radio, print, and OOH (all of those channels will have digital backbones eventually).

So why I’m particularly excited about the idea of the Internet IPO resurgence is because there is a strong foundation for these companies to grow on top of in terms of Internet users, comfort level, and ad & product spending online.  The previous companies had very little to build atop which is very different now.  The landscape is a bit more mature which should allow for companies to go big and have a higher rate of success.

(note, I’m not bullish on all of the companies listed in this post -just using them as examples)

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My First Ohours Day Competed

For those note familiar with Ohours, it’s my friend Nate‘s new experiment with helping to connect people looking to network and connect with other interesting people.  He also coded it from start to finish as his working education to learning programming.  I thought I’d try it.

I held my first Ohours day on Friday, January 7.  I made an hour of my time available in 20 minute increments and met with three different people.  I had absolutely no idea what to expect going in and was very curious to see who would pick me.

I will leave out the names of the people I met with due to confidentiality purposes but will give some insight into the content of the meetings and my overall opinions:

  • Probably no shock, all three meetings had to do with entrepreneurship and for me to give quick feedback on certain aspects of their business (fundraising, business development, hiring)
  • The meetings underscore to me that the New York tech scene has a lack of development talent which has been written about quite a bit lately or people just do not know where to look (which seems to be less of an issue now)

Here is some advice if you are using Ohours (and feedback for the product in general):

  • 20 minute meetings are tough.  By the time you are done with intro’s, then you have 10 minutes to talk.  Not a ton of time.  I’d say minimum meeting times should be 30 minutes (an extra 10 mins means a lot)
  • Ohours should send an email with brief bio’s of each person you are meeting with.  I actually had only met one of the three people I had met with before and wasn’t able to research their backgrounds before meeting individually with them.  If Ohours could pull from the various sources online (like LinkedIn) with bio information, it would be helpful.
  • A private feedback mechanism would be helpful to see how the participants in the meeting felt about it.  It could be less about “did I like the person” but more about “did the meeting add or enrich value” (or something along those lines)

The next 2 weeks are grueling for me and laden with travel so I’ll have another Ohours in February.  It’s not posted yet on the site but will tweet it out when it eventually is posted.

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Optimizing My Content Consumption

Image representing Summify as depicted in Crun...
Image via CrunchBase

It’s very rare that I have time to web surf and pop onto random websites and consume whatever is there.  24 hours just is not enough for me at this point in my life and so I need the best possible filtering agents to help me consume/optimize my time online.

What I expect from a filtering solution today:

  1. Takes inputs from me and understands what I want from them
  2. Look-a-like model against my input list and expand it
  3. Understand what my social graph is consuming

What I expect from a filtering solution tomorrow:

All of the above, but with use cases built in:

  1. Business needs (be able to filter results based on what I need for business – maybe understanding this by time of day and day of week consumption habits?)
  2. Personal needs (be able to filter results per above)

Currently, I’m using Summify and Knowabout.it.  Both are early in their existence and are making good strides but would love to understand what else is out there?

What I like about Summify:

  • Simple email is sent to me at a specific time (usually in the early AM) with up to 6 items that should be relevant to me based on my RSS + social graph.  I like the simplicity of this.

What I like about Knowabout.it

  • I like the web interface to expand my collection into what other people similar to me are consuming/creating

Media optimization is a big space that I’m tracking for 2011 and expect to make an investment or two.  If you are in the space and want to reach out, I’d welcome it.

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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.