Ross Mayfield's Weblog

Making Do With Less Stays With You

One finding of the quarterly MoneyTree Survey on venture capital that shows that startup dollars are lasting longer (it also shows thatSoftware is the leading sector):

The average amount of time between venture capital rounds increased from 11.9 months to 15.7 months for late-stage companies, according to the quarterly MoneyTree Survey. For expansion stage companies -- where the majority of venture capital dollars flowed in the first quarter -- the average time between rounds increased by more than three months to 15.5 months.

Techdirt comments:

Of course, recently, the VCs started opening up the vaults (which are still quite full), so it's likely that we may see some more crazy fundings - and this is likely to be followed up with crazy spending. For all the lessons learned about not squandering cash, many will disappear when cash is actually present.

Respectfully disagree (although Mike is usually right, he also clarifies in the below comments). If you have run a business during the last few years you have gained the Depression Era Mindset. Much like how my grandfather had to make toys out of cardboard during the depression, the experience of taught much about frugality for him and his children.

In times of scarcity, companies are pressed to invent, discover new niches and survive in darwinian fashion through a Cambrian Explosion.

The question of how so many immense changes occurred in such a short time is one that stirs scientists. Why did many fundamentally different body plans evolve so early and in such profusion? Some point to the increase in oxygen that began around 700 million years ago, providing fuel for movement and the evolution of more complex body structures. Others propose that an extinction of life just before the Cambrian opened up ecological roles, or "adaptive space," that the new forms exploited. External, ecological factors like these were undoubtedly important in creating the opportunity for the Cambrian explosion to occur.

I'm witth the latter camp. Extinction has opened up adaptive space.

But more to the point, the best companies arise out of downturn (think Apple, Microsoft, etc.). Frugality, understanding risk and smart investment decisions remain embedded in decision makers and the culture of the company. The hardest lessons stay with you.

Participatory Media Paper

Steve Rubel finds a whitepaper by IBM called Media and Entertainment 2010 (PDF). He rightly points out that the declining costs of production for user generated content and its effects is already happening with weblogs.

The paper defines a business model for an open media company of the future:

• Opens the media experience: Leverages advances in technology to provide customers and consumers a more involved experience with the media firm
• Opens content reserves: Develops accessible, flexible digital content systems that can enable distribution to virtually any media context
• Opens content creation and distribution: Establishes digitized processes that monitor and incorporate input from customers and consumers to garner their attention
• Opens content packaging, bundling and sales strategies: Utilizes variable pricing models that enable partners to advertise and share profits, and enables consumers to access content through more compelling release schedules.

It does mention the role of blogs for user generated content, mentions Creative Commons and recongizes that rights management can be a barrier for consumer adoption. But it also proposes complex systems for variable pricing and contracts which may create more costs (not just paying IBM to build it) than its worth.

Our Platform

WorldChanging contrasts the Bush-Cheney campaign's Multi-level-marketing model with something entirely new:

The Green Party of Canada, conversely, is clearly trying something entirely new. The party platform -- its collection of core beliefs, policy agendas, and issue positions -- is editable by all members in a Wiki, and the process is visible to all visitors. By using a Wiki format, all Green Party Canada members have a say in the evolution of the party's approach to Canadian concerns. This will inevitably be somewhat chaotic, as even in a small, activist group, there will be diverging beliefs and ideas; nonetheless, it's the perfect tool for a movement espousing individual empowerment coupled with community collaboration.

Will be fascinating to watch how emergent policy positions unfold with such a wide level of participation. See what Clay says.

Blogiversary for Many

Hey, its Many-to-Many's one year anniversary! Its been great building this group blog over the past year, a real joy.

Today we set up a Many-to-Many Space, check it out.

Advertising, Markets and Cycles

Internet Advertising spending experienced a sharp turnaround in 2003, as reported in an IAB report, improving 21% from the previous year to $7.2B. Advertising is a leading indicator for other sectors, so even if you aren't an ad man, pay attention.

Back in October of 2002 I pointed to signs of an ad recovery, how advertising correlates with GDP and described the "multimedia cycle." Here is a linear representation of the cycle, where advertising spending drives spending in other sectors:

Ads -> Content -> Applications -> Telecom Services -> Telecom Infrastructure

One part of the theory of this cycle is that the market flocks to abundant infrastructure (Says Law). In other words, demand for bandwidth is elastic, like a vacuum. Which creates new opportunities for development. Of course, during the bust companies couldn't take advantage of new arbitrage opportunities. Enter the individual, social production systems like open source and nimble bootstraps.

Over the past year this chain has changed. Ad formats, like all markets, trend towards diversification. Search engine keywords grew from 15 to 35% and are increasingly targeted (think Google Adwords). User generated content was well on the rise, not because of advertising dollars, but social incentives. Interesting times when individuals can create content and support it through ad revenue. But be wary of those who call content communication. Open source and the LAMP stack has decreased the cost of providing applications. Telecom is undoubtedly a commodity, retail markets hamstrung by regulation games while wholesale prices are stabilizing while demand and supply grow at 60%.

The bust was a shock to the system that forced cost-cutting and optimization. Whatever ads drive, the remaining chain will be more productive.

If ad spending continues, it will drive the success of consumer internet plays. Take social networking, for example, where users spend twice as long, 2 hours a visit on Friendster, than traditional dating sites. Friendster and others are already swamped to a crawl in supplying demand.

Advertising could also flock to the abundance of supply of ad space on blogs, driving benefits to supporting applications, but we don't have our act together.

Foundership

Entrepreneurs thrive on change, but when its time for you to move on as a founder, the change is very personal. Not because it is about you, but because the passion, sweat and toil makes it so. The change is inevitable, companies need new leadership at different stages.

Matt Marshall from the Mercury News writes about Johnathan Abrams of Friendster and Sean Parker of Plaxo stepping down. He paints the picture as though a larger decision was made for both companies by mutual investors, which implies the personnel decision may be less personal. Both companies are at a point where they need to demonstrate new metrics. As Jason points out its time for strategic moves.

Not a day goes by where I don't brace myself for this change. As a CEO and Founder of an early stage company, I know new stages will come. I constantly question myself if I'm the best person for the job, because the company is more than just me. Its a source of livelihood, investor return and customer bliss -- all of which improve over time. I am really darn good at this stage of the company and have proven it in the past. I hope to test my capabilities at latter stages, but also recognize that the day may come where regardless of my ability to lead, manage and deliver -- environmental forces may call for the new.

It seems that Jonathan took this change gracefully and is settling into the classical founder role. Sean Parker, may not be, apparently leaving at conflicting terms. Its important to note that nobody knows the real story about Plaxo's transition, the interactions that matter were between a few people -- and if he departed in conflict its really Plaxo's loss. Sometimes founders have to go. A new CEO definitely has the right to form their own management team and management style is often a cause. The worst cases are the result of blind quest for control.

Founders can be the greatest asset a company can have. They set the culture, have an inherent expertise that builds over time and provide a history. They can play an ongoing role in cultural leadership, develop new businesses and technologies within the business and are the best conceivable evangelists (think Larry and Serge). I'll bet that if you compare the performance of companies that retained their founders in a healthy relationship for these advantages outperform those that don't.

I guess my views are in line with one of my investors, as Joi describes his perspective as a former entrepreneur and VC. And I completely agree that Pierre is the ideal founder prototype. Actually, I don't have to guess, I make a point to have the foundership discussion with potential investors up front. Some of the best VCs I have met actually start the conversation of working together with understanding the motives and expectations of the team they are buying into.

I have always handled founder transitions gracefully, knowing its not just in the company's interest, but my own. Like divorce with kids, very little good can come from conflict. Transition or departure affords new opportunities; possible exits, more enjoyable responsibilities and opportunities to create new things. Once I had to leave a company to make room for a new management team. Literally brought me to tears when I said goodbye at a staff meeting. But I respected the decision, understood it, retained relationships and moved on to begin a new stage.

Mac Envy

Leander Kahney has a story in today's Wired News about people turning their PCs into Macs that includes this point from Jason Shellen:

There are plenty of tools for PC-to-Mac makeovers. Jason Shellen, a Google producer who's responsible for Pryor's laptop's faux PowerBook transformation, lists a few of them on his blog. Shellen notes that some people go as far as sticking Apple logos on their Windows machines.

The link is to my photo album. Suddenly, Stewart Butterfield is the poster child for Mac envy.

Page 23

Picked up this Book Game meme from PeterMe who got it from Caterina, which was the inflection point for blogspace.

1. Grab the nearest book.
2. Open the book to page 23.
3. Find the fifth sentence.
4. Post the text of the sentence in your journal along with these instructions.

Such a world might be stable in the sense of avoiding war if one single state achieved hegemony over the others.

Yikes! Has Bush played this game?

The Rise of the Trading State, Richard Rosecrance, one of my old professors at UCLA.

Follow it on Feedster or Technorati.

Waterside Publishing Industry Event

Spoke on a panel today about The Power of Many - Technology & Politics with Christian Crumlish and Steve Rhodes at the Waterside Conference. Hadn't had a chance to meet Steve, great guy. Christian had pulled the thing together, talking about his book The Power of Many.

It was a technology publishing conference, so I talked a little about the Extreme Democracy book I'm contributing to, pointing out that the authors were neither extremists, perhaps democrats, nor was it the kind of Extreme you would spell with an X.

Argued that the publishing industry was in line for disruption by social software and pointed to the strong signals. Whereas basic communication enabled open source, blogs were disrupting political communications, group forming disrupting constituency dynamics -- wikis will most visibly disrupt the publishing industry.

IFTF: Technology and Space

Peter Banks and Paul Saffo talking technology and a Space Race, a war for the information space of Space.

China attempted three previous times to create a human space program. Has as much to do with China-Russian relations. Who would have thought that 2 months later the US president said we would go to Mars too. This is the president, so we are talking atmospherics

We will spend $60B today for star wars with one successful test flight out of eight. First time deploying without having a successful engineering test.

Gravity Pro B attempts to look at a guiding star to measure drag. Testing if Einstein was right.

China says it will go to the moon and stay there for a while. Says for cultural reasons and other cold war attributes, military dictium of owning the high ground. A launching platform or for communications. US Air Force now being organized around space. Will create a new race. Very sobering.

What we have achieved with our major investment in space thusfar:

• Introduction of geosynchronous satellite communications
• Deterrance of warfare during the cold war, they could look at us, we could look at them
• Photos of earth, to prove it was round, but other salient effects
• Remote sensing

Geo-information. Keyhole. What happens when you start loading it all into databases? All the two-story buildings in the world have been counted. This information can be overlaid with others, could impact taxation, etc.

Note the 4 impacts have applications without us leaving the ground. Less necesary for us to go there ourselves.

Weightlessness and solar cosmic rays -- a perfect place for Congress? Nah, point is we are not well adapted. Genomic impacts without lead casing.

Hubble vs. People to the Moon & Mars is a real vote coming up.

Becoming apparent that humans may not be able to live in space anyway, so the point may be moot. Very few things worth the infrastructure for life science experiments, except keeping astronauts alive in space.

Maybe we are in the early stages of shifting the evolution of consciousness to autonomous machines? Where unmanned exploration leads? You need a motivation or payback, discovery of intelligent life outside the solar system for example.

China as a motivation for going into space. Commercializing technologies not as readily available in the US. Using Russian technology and developing it may also develop capabilities for doing it better?

Russian approach was ICBM technology and keep it simple. Our approach was the shuttle, link to skylab and then the complex space station -- all delayed and leads to abandonment. Large and attractive and above all expensive. The Chinese looked at both, decided it couldn't replicate or afford the US approach and went with the Russian approach with new manufacturing and materials technologies. Simple, fast and cheap. Now this is the plan in the US, but as a re-develop from scratch and will take us longer than the Chinese.

X-prize for $1M for the first group to put together a low-earth orbit. Rutan Space Program. A couple will succeed. Not out of the science budget of the US, but private. Political implications. How can a future president of the US let the Chinese get to the moon first? Can we be second?

What's the big suprise we can count on? We could find five meters of water under the surface of Mars. Would provide scientific and useful value for establishing a base. Hubble indicates our universe is different in dimensionality and composition, parallel universes, now may be there to impact our mental outlook and overall. We may discover its a very small place and we are stuck in it. What is the universe we live in, what is it really like?