Silicon Valley Exec Mike Homer Died Sunday – The Lost Conversation February 2, 2009
Posted by John in Technology.Tags: Mike Homer, silicon valley
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Kara Swisher has a classy post that pays tribute to Mike Homer. Mike died in his home on Sunday of a rare, neurodegenerative “prion” disease, which in Homer’s case has occurred sporadically rather than via infection (the well-known variant that occurs in animals is called mad cow disease), CJD’s incidence is one case in a million annually, and few survive beyond a year after exhibiting symptoms.
Mike Homer was a straight talking tech executive who didn’t mix words. A few years ago before Mike was diagnosed with Creutzfeldt-Jakob disease, Bud Colligan and Mike Boich went to see Mike to record a podcast on innovation and Silicon Valley. It would be one of the last times Mike would be in his normal ‘call it like he sees it’ mood. That podcast was never posted due to a hard disk error. From the description from Bud Colligan of that podcast it was a memorable conversation. I wish that we all could have heard that podcast. I’m sure his voice will carry on in the stories that he created here in Silicon Valley.
Homer is survived by his wife, Kristina, and three young children: James, Jack and Lucy.
His funeral is at Saint Raymond’s Catholic Church in Menlo Park on Thursday.
New Venture Capital Model Is Coming? Limited Partner Investors Seeking New Avenues January 7, 2009
Posted by John in Technology.Tags: entrepreneurship, silicon valley, startups, venture capital
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Is this financial market mess going to put the nail in the venture community? Today’s Venture capital has been struggling for sometime with ony a few small hits and very handful of big returns. The problem is that entrepreneurship is stuck because of venture capital. We need to modernize the venture capital business so entrepreneurs can get busy. I am seeing more early stage creative development then in years past. The entrepreneurial process will never die but it will evolve. These are the pains that we are seeing now with startups. The capital markets are a mess and with no liquidity market today’s venture capital firms are spinning their wheels. The good news is that capital markets are efficient and will work around the bottleneck we are seeing. This NYTimes story is an early indicator that big money will find new homes.
NYTimes has a very interesting story…
Investors in venture capital and private equity funds who want out are discovering that their stakes are worth less than they paid for them.
As returns on venture capital investments sour and investors’ wealth deteriorates, some of these investors — the universities, foundations and pension funds known as limited partners — have been unloading their stakes in the funds. When they decide they can no longer supply the money they had previously committed, they sell their stakes at a discount to what is known as a secondary firm.
In the second half of 2008, as more limited partners tried to sell their stakes, the price they could get for those stakes fell to 61 cents for every dollar of face value, according to a report from Cogent Partners, an investment bank for institutions looking to sell their holdings on the secondary market. That is down from 84.7 cents on the dollar in the first half of the year and a 4 percent premium in 2007.
A stake in an early stage venture capital fund that has already been fully invested, for example, would be worth 10 to 30 cents on the dollar, Mr. Gull said. “It would have relatively young portfolio companies, some number of them will need additional capital so the fund will get diluted and there are not going to be any exits for some number of years.
A 40 percent loss is no different than investments in the public markets, Mr. Gull noted, and investors would prefer to have the cash. They think, “It’s a sure thing that I can redeploy in some other activity I think has a larger chance for return,” he said.
Mr. Gull said he could not predict when pricing would improve, but his firm is betting that it will not see any meaningful returns from private equity and venture funds until late 2010.
New Reality: Silicon Valley Wealth Machine – The Rebooting Meritocracy December 21, 2008
Posted by John in Technology.Tags: entrepreneurship, silicon valley
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Businessweek has a post about Silicon Valley wealth machine. Silicon Valley is going through another downturn. It’s the second major downturn in less than 10yrs. I’ve been on the ground for all of those years. It’s down, but not completely ‘out’.
Silicon Valley is a special place for entrepreneurship, and it continues to be. The issue is not that there is a wrench in the machine, but that the machine is broken. It’s rebooting.
One thing I love about Silicon Valley is that there are no handouts. It’s the ultimate entrepreneurial meritocracy. Change happens and it happens both from the bottom up (entrepreneurs) and the top down (capital market). The question is which force is driving the change.
Redistribution of wealth is upon us. The entrepreneurs and investors that move on this current market opportunity will capture the proverbial “chips on the table”. As an entrepreneur, I love this market. Opportunities are everywhere. Unlike the dot com bust, this tech (entrepreneurial) market never really crashed. Everywhere I look I see discounts and new opportunities. Smart money will move around, but in select places. Is the market scary? If you’re an incumbent it sure is scary.
Silicon Valley Web 2.0 is hurting, but not for the obvious reasons. A bigger force is at play here – massive redistribution of wealth is taking place. Some are scared, and some are welcoming the opportunity of possibly acquiring the wealth “on the table”. I think that Facebook and Twitter are great examples of what might be possible. Facebook will become the next Google. The only thing holding them up is that the ‘new revenue’ model that is soon to arrive at the “station”. When that “train” arrives (and it will) Facebook will say Goodbye to all the naysayers.
Research & Development Void?
The bigger picture is more long term and that’s all about research and development. Judy Estrin recently came out to talk about something really important – the innovation gap. Let me translate her thesis – we are screwed if we don’t have steady research unencumbered by short term agendas. Think how important institutions like Stanford, MIT, and SRI have been to Silicon Valley and entrepreneurship. Without these deep research institutions we would not have many innovations that created wealth – hello Ethernet; hello Apple; hello Cisco; hello Google, ..etc.
The lack of institutional research leaves a void in the Silicon Valley ecosystem. John Markoff postulates in his book “What the Dormouse Said” that the culture and research of the 60s drove the PC revolution. The question now is what revolution are we developing and where is the research? Will we miss the next important energy, medical, or tech breakthrough? Where is our modern day moonshot mandate?
How will it play out? The future is unwritten.
Update: The Wall Street Journal has a great perspective on how regulation is hurting entrepreneurship. Add the lack of research mentioned above and the opinion is complete.
Silicon Valley VCs Are Actively Investing December 2, 2008
Posted by John in Technology.Tags: Benchmark, silicon valley, venture capital
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All the talk about Silicon Valley being dead is bull. In fact many of the top VCs are actively investing like True Ventures, Norwest, Benchmark Capital, Foundation, among others. There are some top tier guys who are really hurting. I’ll post more on that later.
Here is a post from Benchmark partner Bill Gurley. I first met Bill when he was an analyst years ago before he joined Hummer Winblad then Benchmark. Bill not that technical but is very skilled at analyzing and reading the market. I think his views are right on the money (pun intended).
Bill says…
What is driving our enthusiasm to be optimistic while the general perception is that we should be “scared”? Here are four answers on a roll:
1) We make money investing, not sitting on our money. Innovation and disruption are constant and not subject to the whims of the overall economy.
2) We believe that environments like this tend to sort out the true entrepreneurs from the pretenders. When money is easy in Silicon Valley, it tends to attract short-term opportunists looking to make a fast-buck rather than build a lasting company. Only the best entrepreneurs set sail in rough seas like this.
3) We like the probability for startups (especially Series A deals) in this environment. Consider that people are easier to hire and rent is cheap. Incumbents are cutting their R&D budgets, and there will be fewer startups in each space, all of which means less competition. These are good things.
4) Graham and Dodd said it first and best, but one “… should try to be fearful when others are greedy and greedy when others are fearful.” Pretty clear what time it is.
Silicon Valley Panic – The Valley is Upside Down October 27, 2008
Posted by John in Technology.Tags: silicon valley
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I am seeing tons of panic here in Silicon Valley. Just a few weeks after the Sequoia memo (great PR for Sequoia capital – wondering what Kleiner Perkins is thinking right now), the valley is upside down.
It’s crazy and it’s changing everything around the startup process. The memo from Sequoia has thrown everything into gridlock and yet the VCs are sitting on billions of cash under management.
I think that this is the best time for a startup. In fact the gloom and doom has reached an all time high. Everyone is saying survive and fight another day or “How to Survive in Silicon Valley”. This mindset is an indictment of the state of panic.
Instead the title should be “How to Thrive” – Playing it safe never was Silicon Valley’s greatest strength. Has the Valley lost it’s way?
New Startup Model – Young Grasshoppers Out There Watch How Andy Bechtolsheim Does It October 23, 2008
Posted by John in Technology.Tags: silicon valley, startups
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UPDATE FROM SUN: see comments below; Sun PR is saying that Andy will remain at SUN as an employee part-time. The question is can Andy serve both masters? Is Andy even needed there or is he a figurehead. I see know problem with him being two places but the reality is he has to focus on one. There might be more to this story. I will talk to SUN and find out the story.
The NY Times is reporting that SUN Cofounder Andy Bechtolsheim is leaving SUN to go to his new startup Arista Networks (which has been building a product for 4 years). Who said this is a bad time to do a startup. While the web 2.0 flops are bunkering down for the winter and trying to figure out what to do, Andy is developing a real business going after a real market.
I have my take on why Arista will be successful on my Broadband Developments blog – which covers this vertical.
This post is about how to do a startup. Here I want to highlight a tidbit from the NYTimes story where Andy Bechtolsheim says…”
Lean staffing also helps Arista keep its costs down. The Menlo Park, Calif., company has fewer than 50 employees and started shipping systems a few months ago even though it had no formal chief executive.
“One mistake a lot of start-ups make with the encouragement of venture capitalists is to hire the whole management team upfront,” said Mr. Bechtolsheim. “You have a lot of people twiddling their thumbs and spending money.”
He is right on the money. Ramping up the management team to early can be dangerous. Founding CEO of a early or zero stage startup doesn’t have to be “Mr Big” with pedigree. It has to be “Mr Entrepreneur” who can assemble the right ingredients for the startup – core team, product and product roadmap, key customer activity or early market development, and entry to that market. Note; Even tech titans moonlight on their day job before quitting.
To all the young startup “Grasshoopers” out there learn from Andy and his approach. Build a product for a real market that will pay you money for that value – Now that’s a business model worth investing.
Zuckerberg Opportunity Part II – Silicon Valley Legacy at Risk? May 31, 2008
Posted by John in Technology.Tags: entrepreneurship, facebook, Innovation, silicon valley, VC
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The NY Times is doing a followup piece to my post called The Zuckerberg Opporunity. They are following up on my first post and story called The Zuckerberg Opportunity. The Zuckerberg Opportunity was a followup on the story on the big story that I have been tracking on Microsoft buying Facebook. The NY Times goes deeper into the deal side dynamics of the Zuckerberg Opportunity. (Note: I’m glad to see the NY TImes run with my original piece – it needs deeper analysis and more detailed reporting – thanks Steven)
NY Times DealBook has a great followup post to my post Zuckerberg Opportunity. The professor Steven Davidoff pens a detailed post around some of the tactical challenges around the Zuckerberg Opportunity.
What’s interesting here is how Silicon Valley and the VC community will respond to this. Silicon Valley has been an environment where the VCs have always maintained a balance between the ‘greed’ part of their job with the ‘unwritten’ rule of maintaining the legacy of Silicon Valley.
Lately, we have been seeing an environment lately where VCs really don’t care about screwing entrepreneurs over for a quick buck or shutting ventures down over political internal VC partnership fighting. If this trend of not building great sustainable companies continues then the legacy of Silicon Valley will be at risk.
I love Silicon Valley for what it has been famous for – innovation and the celebration of entrepreneurship. An enviroinment that rewards innovation, entrepreneurs, and entrepreneurship will create great companies and yield great profits for investors.
If Silicon Valley becomes known as a place not friendly to entrepreneurs and quick rich VC plans, then the legacy of Silicon Valley is at risk.
Silicon Valley Rumblings – Will HP Buy Seagate? May 30, 2008
Posted by John in Technology.Tags: Buyout, HP, seagate, silicon valley
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HP has been on the move lately. Expanding on the services business by buying EDS. What should HP do next? Buy Seagate?
Seagate (NYSE: STX) would give HP access to a major cloud position with storage in the cloud. Seagate known for their OEM drive business and enterprise storage recently launched a consumer business over 1 year ago. Why this might be interesting for HP and Seagate – HP has been a big customer for years of Seagate but HP could gain a foothold in the ‘cloud computing’ sector with Seagate. Seagate’s consumer line would certainly get a ‘shot in the arm’ from HP’s massive consumer presence.
Although this isn’t a full fledged rumor, it certainly is a conversation around Silicon Valley according to sources. I will dig into this more but I would buy the consumer brand and cloud services from Seagate and leave the OEM business alone. Seagate’s market cap is currently $10 billion as of today.
Why Startups Fail? Entrepreneurs Perspective – Keep the Founder Around May 23, 2008
Posted by John in Technology.Tags: entrepreneurship, silicon valley, startups, venture capital, why startups fail
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Why do startups fail? There are many reasons. Here is a post from a VC in Silicon Valley called VCDave – David Feinleib is a partner at MDV – Mohr Davidow Ventures – He invests in Internet-enabled companies.
This is a great post from VCDave, but I would add that the faster the market moves the more the founder needs to be in charge. Finding a founder with vision, product skill, and deal making ability is ideal. Venture capitalists need to let the founder run the ship. If VCs run interference with the founder then the entire venture slows down. Building a startup from nothing is difficult and navigating the market landscape with imperfect information is key. Entrepreneurs are good at dealing with ambiguities.
Once a venture enters the market the venture plan has to be in a constant state of reinvention to ‘hit’ the tipping point for the preferred business model for the proverbial ‘big opportunity’. One thing often over looked is the important objective of getting the new venture in a position in the market to seize the growth opportunity contemplated by the entrepreneur and the investor.
Entrepreneurs and VCs need to deal with change as a positive not a negative. If the ventures position in a growing market is good then the change is a normal characteristic. To me it’s about letting the founder stay in control until the venture hits calmer waters. Founders know best in the early stages. Creative, product, sales, and deal making skills matters the most. VCs shouldn’t just replace founders because a few waves crash on the ship.
If investors want a return remember that the founders know best. Don’t replace the founder to early.
http://www.usatoday.com/money/companies/management/2007-08-21-founder-ceos_N.htm
Update: Donna who tracks the NYC startup scene at StartupAlpha has a post on this. Here is 37Signals Jason Fried’s take at Signal vs Noise on this topic.
Two important points Donna and Jason make: 1) build a good sustainable venture and 2) if the market is slowly developing then there is no market.
Here is a good section from end of Jason’s post “If the entrepreneur finds themselves in a situation they can’t control it’s almost certainly because they put themselves in that position — either by borrowing too much, spending too much, rushing too fast, creating a false sense of urgency, hiring the wrong people, attacking a market that doesn’t exist, or not focusing on generating revenue early enough. Natural disasters are out of our control, bad business decisions are in your control.”
My advice to entrepreneurs: try to maintain control for as long as you can (control > 50%) at all costs. Only go over 50% dilution if you need to scale and never run out of money.
Victory for Silicon Valley; The Silicon Valley Poison Pill Worked – As Predicted May 4, 2008
Posted by John in Technology.Tags: microsoft, silicon valley, war, yahoo
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Today’s Microsoft retreat is a victory for Silicon Valley and all the startups. Now that the troops are pulling out of Silicon Valley everyone is jumping up and down eager to get down to business – except the bloggers who are all trying to figure out what happened (not including Kara Swisher she was on top of this story from day one).
This outcome was clear to me from day 1 – Yahoo would fight to the death rather than roll over and take it up the butt from Microsoft. As this chapter of history comes to a close the story is bigger than what the stock number was or one particular issue. It was bigger than all of that. As I wrote in February it was the Silicon Valley Poison Pill in action. The culture in Silicon Valley is deep in tradition and this trophy in Yahoo was not going to Redmond. Hey I’m a big fan of Microsoft and Dan’l Lewin here in Silicon Valley (except that blogger idiot Mark Ashton), but the culture of Silicon Valley just won out. This is going to make one great John Markoff story for the NY Times. – go ahead John run with it.
Another story line here is the big win for all those starving Web 2.0 companies looking for a partner – Yes Yahoo will remain free to be a real force in the Web 2.0 community again. Now with open social (yes reported here first) and with upcoming announcements of Yahoo opening up. Yahoo is born again. As we the kids cheer in baseball Yahoo employees are cheering – “2 out rally….2 out rally….2 out rally…2 out rally”. If this doesn’t wake up the dead at Yahoo nothing will.
This is a win for Web 2.0 and startups around the world but mostly a big win for Silicon Valley. Yahoooo
Don’t forget how Google is loving this.
Tech Entrepreneurship Recession – Microsoft Yahoo – Tea Leaves; April 10, 2008
Posted by John in Technology.Tags: entrepreneurship, google, microsoft, silicon valley, startups, yahoo
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War! What is it good for! Absolutely nothing! – Say it again!
Are wars really good for business? Is tech entrepreneurship in recession heading toward depression? The battle between Microsoft and Yahoo is reaching it’s climax (if not already). However, there are some very interesting and unique perspectives come from two blog posts that jumped out at me – Kara Swisher and Fred Wilson. Kara has the funniest headline saying “Jesus is coming” with the storyline about the inside scoop on the ‘dance’ between the two. What strikes me with Kara’s post is that Yahoo might already be defeated in the ‘braindrain’ that they have been experiencing. Even if Yahoo survives is it already dead on the vine?
Fred Wilson only draws a reference to the battle in his post about liquidity – saying that with no IPO market we are in trouble and worse the tech giants are playing with assets like toys. I think that Fred is on to something with no liquidity (other than M&A by big firms). Is this really a robust market for innovation where the big guys are doing all the acquiring? Is this the ecosystem that produces good entrepreneurship?
What ties both these posts together is the trend that acquisitions might not be the best for innovation – Kara bluntly states that AOL’s acquisitions aren’t doing well. While Fred says it’s great to get the cash but Yahoo hasn’t done well with their acquisitions. Meanwhile the capital markets are a mess.
As an entrepreneur with four kids I’m concerned about the prospects for all entrepreneurs in this current environment. Maybe I’m just not feeling good today. Startups should have some friction, but not outright frustration. I’ve been doing early stage startups for 10+ years and never seen this much frustration since 2002-03. We are in a tech recession or at least a grinding halt.
I’m one of the most optimistic guys (all entrepreneurs are), but my mood on this startup market: Bear
Are Web 2.0 Entrepreneur’s Love Affair with Venture Capital Over March 18, 2008
Posted by John in Technology.Tags: entrepreneurs, silicon valley, startups, venture capital
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Cnet has a story headline “Is venture capital’s love affair with Web 2.0 over?”- Ironic??
According to this massive trend 2007 deals are down an amazing amount – total deal numbers down an amazing 5. “Web 2.0 deals in the Bay Area actually dropped from 74 deals in 2006 to 69 last year” -Wow.
Entrepreneurs are starting companies that require less capital and no venture capital at all. Maybe entrepreneur’s love affair with venture capital is over. It’s clear to me that entrepreneurs that I talk to are bootstrapping longer and financing ventures themselves.
I hardly think that a reduction of 5 deals validates a venture capitalist trend. Most VCs are not that savvy on Web 2.0 and are generally skeptical on web deals. The ones that do get it are doing many deals. Jeff Clavier has already pounded out 16+ deals in his new fund.
Entrepreneurs Beware. Yahoo Buyout Could Kill Technology Startups? Advice: Be an Arms Dealer. February 2, 2008
Posted by John in Technology.Tags: entrepreneurs, entrepreneurship, fred wilson, microsoft, silicon valley, startups, venture capital, yahoo
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Entrepreneurs beware Microsoft buying Yahoo could shut down the tech startup scene. It could send the startup climate back to 2001 levels – nuclear winter shut down. I lived through 2001-2004. It was ugly.
Brad Burnham has hit on a narrow topic about the downside of the Yahoo buyout for Silicon Valley. Brad’s story is very relevant with ‘macro’ implications to the tech world not just Silicon Valley. This deal could cripple startup activity.
Efficiency for Microsoft means leverage with suppliers. Translation: Startups are suppliers and Microsoft just became Walmart. This could have a chilling effect on the VC and tech investment community. This new industry structure puts even more of an emphasis on ‘hits’ or category specific deals. If the Venture Capitalists are confused today can you imaging what they will do going forward. This could get ugly.
Advice for Technology Startups and VCs: Understand where your company is in the pecking order in this war. If you’re not an arms dealer then you might want to rethink your strategy.
Update: others are thinking the same…. A VC -Fred Wilson; Opportunity for another big player to bid: News Corp.
