Why Startups Should Raise Money at the Top End of Normal

Editor’s Note: This is a guest post by Mark Suster (@msuster), a 2x entrepreneur, now VC at GRP Partners. Read more about Suster at his Startup BlogBothSidesoftheTable.

I have conversations with entrepreneurs and other VCs on a daily basis about fund raising, the prices of deals, how much companies should raise, etc. I’ve stopped talking about this as much publicly because it’s such a heated, emotional topic where the points-of-view are strictly subjective and for which the answers will only be revealed in the future.

I’ve decided to take all of my private points-of-view on the topic and make them public in a keynote speech at the Founder Showcase in San Francisco on June 15th.

I thought I’d post on one of the topics beforehand. It’s the one bit of advice I find myself giving to entrepreneurs most frequently these days, “raise money at the top end of normal.”

Huh?

Here’s what I mean. There is an inherent value that any company has. On a public stock market that is the value that investors place on future free cash flows of the business discounted to today’s date to account for the time value of money. The more mature the company and industry, the easier it is to predict its future. When investors are feeling confident about the future they tend to bid up the value of public companies due to an increased perception that the future cash generated by the company will appreciate. The price of public stocks change instantly in reaction to news that is perceived to affect the future value of that company.

Every day shareholders vote on the value of the company by buying or selling shares. There is no price movement without one person agreeing to sell the stock and another agreeing to buy it. Stocks that have a lot of people trading are said to have a lot of liquidity, which basically means it’s really easy to get into (buy) or get out of (sell) the stock.

Private markets for stocks are the opposite. They are pretty illiquid. If you invested in the first angel round of a startup company it is usually very hard to sell your stock—usually for many years if ever at all. So how exactly are prices determined?

There is no great science to it. The earlier you invest the higher the chances the company won’t work out and thus you pay a lower price than later-stage investors. As an investor you’re trying to pay the appropriate price for your perceived risks of the company succeeding and protect yourself in the event that it isn’t quite as valuable as you had hoped. As the risks below get eliminated the higher the valuation investors are prepared to pay.

Over time some “norms” have emerged in pricing based on investors risk / return profile.  The obvious thing that investors think about is making a financial return on the investment they made in your company. Early-stage investors in technology startups are only looking for growth-oriented companies that can achieve an “exit” someday—either via selling your company to a larger company or via an IPO. The former is much more likely than the latter. So investors have to have some general sense of what companies that are similar to yours ultimately sell for in the private marketplace via an M&A transaction and they have to have some sense of valuations on public stock markets to be able to back into what their potential returns on your investment might be in the event of an IPO.

For example: If you were to invest $41 million into a company (and one could assume that you owned between 33-50%) then the company is worth $82-123 million at funding. As an early stage investor you’re often planning around 10x your investment at the time you write your first check so in this case you’d be going into your investment expecting an exit of $800 – $1.2 billion. Then you can do a little bit of research and find out that very few companies ever achieve this valuation in a trade sale so you’re clearly gunning for an IPO. You’re unlikely to want to make this sort of investment with the product or the market not yet validated. The risk wouldn’t be appropriate.

Ah, but you say that for a normal-sized angel check or A round check one shouldn’t worry about the ultimate exit because he or she is getting in really early and at a cheap enough price so who cares whether one pays $5 million pre-money or $15 million pre-money—you just have to make sure you back really big companies. Well, obviously if you knew that in advance it would be big, of course that would be true. But the reality is that you’re faced with two problems: 1) the earlier the stage the riskier and thus more write-offs so you need to have enough ownership percentage in your winners to make up for the losers and 2) the earlier stage your check the more likely the company will need many more funding rounds behind you and thus you face dilution.

So rounds tend to be “range bound” where prices at the top end of the valuation spectrum often being done in boom markets (i.e. 2007, 2011) and for the hottest of companies test the top end of the range, and in bad markets for fund raising (2003, 2008) test the bottom end of the range.

There is no such thing as a uniform price. It is highly dependent upon many factors: experience of the team, type of opportunity (a big biotech or semi-conductor A round is likely to look different from an Internet A round), geography, etc. So the ranges you would expect can be highly imprecise. But to help with the explanation I’d like to put down some markers of typical Internet pre-money valuations done in major US markets (San Fran, NY, LA, etc.) while acknowledging that San Fran deals are often higher valuations due to increased competition amongst investors.

There is no value judgment in my putting up these numbers nor am I negotiating with anybody. I’m just pointing out my gut feel for approximate ranges of deals that I’ve seen with Silicon Valley having the highest valuations, NY / LA / Boston / Boulder / Seattle having valuations in a slightly lower range but comparable and sometimes significantly lower prices in markets that don’t have a healthy venture market. These are not scientific, just anecdotal and just trying to provide some transparency for entrepreneurs on what I’ve seen in the market. And of course there are always outliers.

Prices have definitely gone up in 2011 as depicted in the anecdotal chart below. Again, prices are expressed as pre-money valuations.

For me I think that investors have got to accept the new reality in pricing if they want to remain competitive in markets like we’re seeing now. As ever, prices are still determined by: quality of team, quality of product / market and competitiveness of the deal.

So when I advise entrepreneurs on fund raising I often say that it’s OK to try and shoot for the “top end of normal” for the market conditions. So in 2011 as a startup company if you can generate lots of demand you can definitely raise an A round of capital (say $3 million) at a $7 or 8 million pre-money valuation or slightly higher whereas just two years ago you would have struggled. That’s fine. That’s the deal you get when you’re raising in a good market for startup financing.

What I caution entrepreneurs from doing is raising money at significantly ABOVE market valuations. I’m a VC so I have an obvious bias. But that’s not where this is coming from. I’ve been preaching the “don’t get ahead of your inherent valuation” message for nearly 10 years. I raised my A round at a $31.5 million post-money valuation with no revenue. It was early 2000. That was market. I saw this kind of pricing when I first entered the VC market in 2007. We had companies pitching us that had almost no revenue at all and they were raising $10-15 million in capital at a $40-50 million pre-money valuation. I should also point out that while they had built their products they had limited market traction.

We passed on all of these deals and often tried to discuss the possibility of more modest amounts of capital raised and at more realistic prices. It’s hard to stop a train. One company which was raising at $40 million pre-money wrote a comment about me in a public forum saying something along the lines of “Mark worked really hard to understand our business and was very detail-oriented. But he and his firm were just too cheap on valuation.” Fair enough. But he sold within 3 years for not a huge price after having raised more than $20 million. Another firm we saw tried to raise $15 million at a $60 million pre-money with similar metrics. They did an inside round, spent a bunch of money and then went through a fire sale of the business less than 2 years later.

Here’s the problem. If you haven’t figured out product / market fit and therefore still have a highly risky business you run great risks for getting too far ahead of yourself on valuation. If you raise at a $40 million pre-money on what would in normal times have been a $15 million valuation you’re fawked if the market corrects and you need another round. To any prospective investor you look like you’ve failed even before your first pitch. Even if you have an interesting story to tell, most investors won’t want to go through the brain damage of doing a “down round,” which creates tension between them and early investors.

Finally, even if they could bring themselves to offer you a major down round, the more sophisticated investors know it’s fool’s gold. They get a cheaper price, they wipe out much founder stock value and they reissue you new options. You’ll take the money—what choice do you have? But 6 months later you’re not working past 10pm. 1 year in you stop catching early morning flights. Within 2 years your evenings & weekends are spent planning your next business. And the CEO they would hire to come in and run the business when you go would always be a mercenary.

So my advice: go ahead and ask for a valuation that 2 years ago wouldn’t have been likely. Use competition to make sure you get a fair price. Raise a slightly higher round than you would have previously but keep some amount as a strategic reserve. Make sure that when you need to raise your next round of funding that you are able to show an uptick in valuation that is important for new investor confidence and to maintain great relations with your early investors.

Increase price. But unless you’re already a well-known technology heavyweight be careful about raising above the range of prices that are normal for a bull market. If you’re hot, don’t raise above normal. Raise at the top end of normal.

Other topics I’m going to cover at the Founder Showcase on June 15th:

  • Why I believe convertible debt with no cap is wrong for your investors
  • Why convertible debt WITH a cap is wrong for you
  • How much money should you raise?
  • When should you start talking with investors?
  • Why you shouldn’t stack too many brand names into a round
  • Are we in a bubble?
  • and more.

Hope to see you there.


A TechCrunch Disrupt Proposal

Ah, true love.

Everyone was surprised — even Michael Arrington was left speechless and said he was “discombobulated” — after Julia Hu was proposed to onstage during her special product announcement at TechCrunch Disrupt in New York City.

Hu, CEO and founder of LARK, was near the end of her presentation when someone called out that she had one more slide left to go over. As she clicked on the last slide, she screamed as her boyfriend came running up onstage to place a ring on her finger. It was the first ever TechCrunch Disrupt proposal and we caught the whole thing on camera.

It was sweet, touching, and hilarious. For those of you who haven’t had the chance to watch yet, the proposal and the backstage interview are below.

A huge congratulations to Julia and Jeff!

You going to have a seat?


Yes.


So, you have been
working with a company
in China called PCH.


Oh, oh my god.


We’re going to be OK.


Someone put the slide back up.


Oh my god.


ou .


Sorry.


What ‘s happening right now, just so the audience knows.
Did you just get engaged to be married?


Yes Yeah.


You didn’t actually ask her, you just put-

I asked her on the flight Yes .


Do you guys
want to reverse that and redo it?


Let’s try that again.
All right.


Okay.
So.


Julia, will you marry me?


Oh my God, yes.
I’ve only been waiting for it.


I didn’t know that was going to happen.


Me neither.


Now we get back to business.


How did we, how did that get screwed up.
Is the slide, you guys all saw the slide.
I was like forget that, let’s move
on, we got stuff to do
in the middle of your, so That was 11 years, thank you.


Alright.
I’m ready again.


You had no idea that was going to happen?


No, Did you see me?


Yeah, it took me
a little while to figure out what
was going on but Oh my God.


Did you know that was going to happen?
Or you saw the slide.


Alright.
He it just stole my thunder, didn’t he?


You said yes, because you wanted
to get married, right, it was just
in front of everyone, I
mean, that’s a good thing, and everything?


Oh, yeah, yeah.
My PR firm told me to do
that, no, I was just kidding
Did your P.R. firm actually set this up.


Congratulations.
Jeff congratulations.


Thank you.


Hi, it’s Matt Burns with Crunch
Gear, I’m here with Julia Hu
of Lark this fantastic little
sleep aid but first before
we get to this something fantastic happened on our stage.


Oh my god it was so shocking.


you broke an alarm clock but more than that right?


that’s right.


you got engaged?


yeah.


that’s fantastic.


he totally sprung it on .


And everybody, nobody.


Not even Mike?


Not even Mike, and he loves surprises.
So that’s fantastic, well congratulations.


Thanks

Hi, it’s Matt Burns with CrunchGear.
I’m here with Julia Hu of
Lark, this fantastic little sleep aid.


Yup.


But first before we get to this, something fantastic happened on our stage.


Oh my gosh, it was so shocking.


Well, you broke an alarm clock, but more than that, right?


That’s right!
So, you got engaged?


I got engaged.
Yeah.


That’s fantastic.
And-

He totally sprung in on me.


And everybody- nobody knew.


Not even Mike.


Not even Mike and he loves surprises.
So that’s fantastic.
Well congratulations.


Thanks.


So let’s get back to the Lark.
Can you tell me a little about it?


Yeah, actually I started it because of Jeff.
He used to wake me up
every morning, and go
running and so, I
had nothing to do, I wasn’t
gonna, you know, kick him out
on the streets so I made this happened.


Well that’s fantastic that you are engaged now.
And I know.
And now he gets to live a life with Lark.


Yes, exactly.
So it goes on your wrist.
and you launched this last year
at TechCrunch, San Francisco, right?


Yeah, exactly, it was a concept
that we had thought of
through MIT, when I was a
grad student there and we
got together a bunch of engineers,
won a couple of business
plan competitions.

Right.

And then
built this up.


We went stealth after we raised
a round after TechCrunch,
and today the product’s out!


That’s fantastic.
So the-the big news here
is that you working with PC Edge International, right?


Yes, yes.


You are one of their first major
clients, so could you
tell me a little bit about that process
about how from start to
finish went Yeah.
They work with
much much larger companies, they
chose us to partner, to
become their first inaugural
project for PC Edge Accelerator,
which is sort of I thought
that would be the Y Combinator,
but for hardware start ups. So,
you know they came to us.
We had a lot of market data.
We had prototypes but we
had no idea how much
it took to get from concept to product.


Sure.


So they helped with all the product sourcing.
They helped with initial conceptual designs.
They helped with sourcing all the materials.


Yeah, because getting a gadget to market is hard.


Yeah, yeah.


And so they really took a lot the pain out of it.


Exactly.


Making a web app is relatively easy in comparison, right?


Well everything has its challenges,
so, I think we’re really
good at technology innovation, at
software development, all our
online portal and sleep science.
But they’re really good at taking
the headaches away from you
know, what Velcro do we use.

What Velcro did you use?

We actually sourced an extremely soft, breathable Velcro that’s actually like a fabric. And we went to stores all across the US trying to find this; nothing. They found it in two
weeks in China, so.


You know sleep aids have been
out for a while and we’ve
seen quite a few at
CES, but this one’s different in that it doesn’t go on your head.


Yeah well we want you
to sleep well, Right that’s the
thing, So this is hopefully very
invisible that was our
major major concern and we
want it to be something that you could use everyday.
At the fundamental core of it,
lark is a way to
wake up great and not wake anyone else up.
So hopefully it’s solving a pain.
And then f you want
to improve, like you improve
with fitness, then we can
personally coach you through all of our sleep science.


I have two kids, and I do not sleep very well.


Oh my god.


Is his is gonna help me?


Well, so we will help you
to be much more efficient in
your sleep, and also we
will tell you a couple of
tips of being able to
shift your sleep pattern so
that you can sleep and fall asleep earlier in the day perhaps.
So, when you get woken
up in the morning, it might
not be as jarring for
you, or you can put the lark on the kids.


Yeah, that’s what they need.


And see if they can be trained to sleep better.


Man, they need something.
Even Benadryl won’t work.


Oh my god.


Well thanks so much, Julian and Jeff.


Thanks you so much.


Congratulations, so much.


Thank you.
We’re so excited.


Great.


lark.com.


When does it come out.
I’m sorry.


Today.
Today.
So you can order today online
or here at the booths.
It’s one twenty-nine for Lark
and one eighty-nine for Lark Pro,
which includes the seven
day assessment and the personal sleep coach for a year.


Great.


When Facebook Captured Beluga, They May Have Harpooned It In The Head

When Facebook acquired Beluga this past March, it was an interesting deal for them. Interesting, because they previously had only done deals for talent. But this deal, they told us, was for both talent and assets. In other words, they were also interested in the technology behind Beluga. More importantly, the plan was to keep Beluga running. And they have. Sort of.

Over the past several weeks, users of Beluga have probably noticed some major reliability issues. These range from the mobile apps missing messages because they’re unable to connect to the service, to the service’s website being totally down. Last night, Beluga was totally down for a few hours. There was no indication why it was down, even after it came back. This has been happening more frequently. Not good.

It’s hard not to be reminded of FriendFeed. That service, which Facebook bought in 2009, also reminded live post-acquisition. While that was a talent deal, the core FriendFeed team said they were committed to keeping it up indefinitely. The reality has been that while it’s still up, performance issues and lack of continued development have driven away many of the core users (though, odddly, usage started spiking in Turkey after the deal). It’s a ghost town now. A shell of what it used to be.

And Beluga appears to be headed in the same direction. When Facebook acquired it, we were just heading into a full-on group messaging app showdown. To me, Beluga was the most promising of the new players. It had all the essentials I wanted/needed to replace SMS on my phone. And it was fast — really fast. My social circle started getting really into using it all the time.

We barely use it anymore. Again, it’s just too unreliable now.

I’ve reached out to the Beluga team to see what the deal is. I have yet to hear back, and I may not because Facebook tends to rule with an iron fist about such matters. Officially, the team was assigned to the groups and messaging teams within Facebook. While the new Facebook Messages is finally rolling out to all users, there hasn’t been any major new developments there in months either. There’s certainly no stand-alone Facebook Messages app that some of us had been hoping for — even though Google has quietly been working on one.

At the time of the acquisition, both Facebook and Beluga said that they would be providing details about Beluga’s ultimate future “in the coming weeks”. By my count, it has now been about 13 weeks. It’s time to let us know if Beluga will live, be officially harpooned, or if it will be left to drift at sea like FriendFeed.

I don’t have a good feeling about that answer. Too bad.


Hornik on VC’s Secondary Mania: “If It’s Just Money, We’re All Fungible” (TCTV)

August Capital was doing very late stage deals when most VCs refused to. And its early 2000 era buyout of Seagate was one of the better returns in the firm’s history. So why is it mostly sitting out this round of late-stage mega-deal mania?

In the final segment of our Ask a VC on the road with David Hornik, he explains why the answer to missing out on Facebook early isn’t dumping money in at a $75 billion price tag. The firm has done three $100 million-plus deals of late, but they’re all in companies you haven’t heard of, not the handful of names we talk about all the time.

It goes back to that belief that VCs aren’t just a checkbook; that they actually add value to the companies they back. A lot of cynical or burned entrepreneurs dispute that claim already, and Hornik argues if VCs act too much like hedge funds, they risk giving those cynics more ammo.

One of the last times we had
you on camera it was about
this whole super angel thing which
like-

Yeah, I remember that, yeah.


Funny how that sort
of fizzled and a lot of
those guys haven’t been able to
raise the full funds that they anticipated.
Since then, we’ve seen
this opposite trend of
this expansion of a lot
of the same guys even doing
secondary deals, and these big mega secondary deals.
August was a firm
that actually did late stage
mega deals when no one
else did so I mean Yeah.


has your job and the
way you invest changed at all among this.
Because it has to change
somewhat because we are living in a reality of valuation and dearness of gain.


Yeah.
Oh,yeah.
Yeah.
Well, it’s tricky as you point out.
Ten years ago, or a
little over ten years ago, my
firm was part of the buyout of Seagate.
And we put 130 million
dollars into this deal.
And at the time if you had
asked other venture investors they’d
say, wow, you’re insane like this
is a crazy idea that turned
out to make us, I don’t
know, a billion dollars or something over a short period of time.


And then it was like okay, that’s great.
Exactly.
Except, apparently, not me!
Because I’ve still haven’t pay my law loans.
May be I should get on that.
But then, we created this later
stage fund as part of
our part of the money we raised to say, “Okay.
If we see other interesting things, we’ll do those.”


And we’re doing that
but what we are doing and saying, “Okay.
Here are the early stage
deals that we didn’t do but
now, they’re big and so let’s
invest in the secondary market at a later stage or whatever.”
In particular, because, the prices
that are, the people are talking
about now, if you do the
mass, what is the return?


You know, like, look I
honestly believe that Facebook is
one of the most important companies to ever exist.
So this is in
no way meant to question the importance of Facebook.
I Desperately wish that
I had invested early in this
company because I think it is monumentally important.
Now, would I
invest at 75 billion dollar evaluation?


Well, that doesn’t feel like my job.
Its not what I do, right?


And there’s the difference then?
I think people get this confused
a lot even in the press,
there’s a difference in is Facebook
worth 75 million?
And is it worth it for
a venture investor, managing pension
fund and endowment money, to
invest at a $75 billion evaluation.


Yes.
Is that right?
Now look, it turns
out if there’s an opportunity to invest
at a particular price and then
sell at a higher price,
then I think that’s probably our job, right?
That’s fine.


Yeah.


Um.
But I think we need
to look at these companies,and say, well,
“what value do we bring to the company?
How do we think about it?
What is the risk adjusted-


Right.


-likely return, etc.”
And I just have a hard
time squinting at those things
and saying, look can I justify,
investing a big chunk of
money in these later
stage deals, even if it
turns out that a bunch of
them make money because it’s not,
it just is not on a
risk adjusted basis a good
estimate of the sorts of
thing the venture community should be doing.


I think.


Right.


So, it’ll be interesting to see what happens.
So we do.
We have this later stage fund that
actually, we even funded three
deals in the last six
months to the tune
of about a hundred million dollars
and they, one was
a chip company spin-out, one is
a 4G late stage software investment,
and one is temp workers.
I mean businesses that
make sense where we can
bring in real value, where we
understand how the economics
and how we can be
helpful, right I still think that’s the venture business.


I still would like to think
that, you know, if
it’s just money, then we’re all fungible right?
And then, you know, take someone else’s money and who cares?


Right.


But I don’t think that.
You’ve met a lot of VCs.
People can be helpful or destructive.
You know, they can bring some
value or not and I
would like to think that my
job is still to be helpful
to you as a business, and figure
out how not only can the
capital I bring give you
some leverage but also my
participation will help you build a bigger business.


And that’s the stuff I think we should be doing.


Or at least people get to go your conference.


Well that’s just a bonus.
That is a bonus.


And that’s the biggest reason that you get end deals, right?


Well if it is, then I’ll keep doing it.


Well, you and I
should get back to either hallway gossip, or the conference.
Thank you for joining us David.


Alright, thanks.


OMG/JK: iCloud, gWallet, and tPhotos

Hey!
We’re back for a new episode
of OMG/JK after a brief hiatus after TechCrunch Disrupt.
I’m Jason Kincaid.


And I’m MG Siegler.
First thing we’re gonna talk about
this week is what’s coming
up next week, which is WWDC, Apple’s big developer conference.


I know you’re very excited because there are some big developments coming up, right?


There are from the software side of things
not hardware.
That is going to be a big change.
So you don’t get to go with a new iPhone?
No, there is going to be
no new iPhone no other big hardware.
No surprises from what we’re hearing right now.
So this is a, you know?
This is a big change, but they have
three key major things that they’re going to announce from the software side.


They actually pre-announce them iCloud, right?


Yeah, so, iCloud is the brand
new thing which is, their
new cloud services presumably totally
replacing MobileMe.
And then of course they’re going
to preview further OS10 Lion
which is the new version of OS10,
and the new version of IOS which is the fifth version of it.


So, the thing that, I
think that all of these are
sort of tied together which is
why it’s kind of hard to talk
about one without talking about the others.
The thing that most intriguing to
me This is actually something
I saw described in a hacker news thread somewhere.
It wasn’t just this notion of storing your files on a cloud or whatever.


It was something where developers would
effectively get cloud storage.


Access, yeah.


And then they’d be able to sync their application data between devices.
So you could have an iPhone app that’s hooks up to your app that’s on OSX Lion.


Right.


Which would be just like a
seamless experience where you don’t
have to deal with a firewall version, it’s all there.


That’s something that’s really needed.
Apple puts out there that they want people to upgrade all the time.
Upgrade devices, once a year
they have a new iPhone, they have
a new iPad once a year,
but it’s not that great
of an experience when you do
upgrade because then you have a
game for example, you have
to start over from scratch where you were.


Well, I don’t think it’s just like upgrading.
I think it’s just moving between devices.
These days many people own
an iPhone, an iPad…

Right.


…a laptop and a desktop.


Right.


They have four.


And you want to just use whatever’s in front of you at that point.


Exactly and just having your data available there.
So, I think the question at this
point is will users have
to pay to use the
service to develop have to pay
to store the data…

Yeah, so
that’s, those are two really interesting questions.
Because right now of course a lot
of developers use Amazon’s cloud
services for IOS
apps and for web apps, obviously.
Will Apple cut a better
deal, if they say that they’re going to build just IOS apps?
Is that included in the $99
yearly developer fee that
they already paid to enter into that thing?


And then, from the consumer side, what’s the cost going to be?
There’s a lot of talk that there
will be some base level things
that are free.
And I think that’s important,
because you know,
whether or not you think it’s worth it.
It’s just, there’s way too big
a barrier to entry that
most people will not use it because…

Right.


…why would you pay $100 even if
you do have a free trial for a limited amount of time?


Speaking of which, I have an
unused MobileMe box sitting
in my apartment that I just ever got to use.


Nice.
Well, so there you go.


I can put that on Ebay.
It’s an antique they haven’t given
you enough incentive, I guess, to sign up for it.
But, if they add some of these
other things like we’re talking about now, of course, like the music service.
That’s supposedly going to be a big thing that they talk about.


So let’s talk about
what the reports are as
far as what’s gonna wash, because
it sounds like they will
have this notion of wide ring matching.
Where unlike Google and Amazon,
where you have to upload every
single file in your library…

Right this would be mirroring it.


Apple will look at the
songs you already have downloaded and say, “All right you have these.”
And then it just puts something.


And that’s what Lala did.


That’s what Lala did.
But, apparently, I can’t remember
who reported this, that it’s only going to be for songs you purchased through iTunes.


yes.
So, C-Net had that report.
So, there were two kind of
conflicting reports yesterday which are
the latest about what’s going on.
One says that it will
only be music that
you’ve downloaded through iTunes so far.
So that means, it doesn’t include,
not only obviously pirated music,
but music that you either rip
from a CD or
you get through other legal music stores like Amazon.


It sounds like it would actually be more frustrating than anything.


Yeah.


If I look in my online
library and I’ve only got
a quarter, a third of my
songs…

Right, where, oh, this song yes.
I forgot.


Are people,I mean, that sounds like a
worse experience than what Google
and Amazon are offering…

Well, so, supposedly.


because you have, you don’t haveyou know, and again,
this is all just from these reports right now.
Apple has been negotiating to try
and make it so there’s almost
like an amnesty deal where they


can, at one point, bring in all the music you have.
And then, maybe from this point forward,
it’s only the music that you
buy through iTunes, something like that.
But, supposedly those deals are
not in place right now, and they may try and launch.
And they’re probably not going to actually launch this next week.


OK.


But when they do launch they might try and just launch with iTunes music only.


I would, I mean, I, like
I said I think that would actually
be a worse experience than uploading your entire library.


Yeah, I’m pretty surprised by that.


The whole promise of this
cloud experience is that
all your music is there as
opposed to some of
it and then you’ve got to look through which albums did you buy through iTunes because if you…

Right.
I’m pretty surprised if Apple is actually going along with that.
Obviously, it’s the music labels
that want them to do that because they’re so concerned about piracy.


Right .


But, I mean, it, so,
Lala actually worked out
the deals where it would still,
if you had a song on your computer…

Right.


…regardless of how you obtained it,
it would still be up in
the cloud and the argument is
that if you already have
the song you’re not gonna go buy it.
And yes that incentivizes them going
out and downloading the songs, and
then it mirrors them and they whatever.


But.


I think the labels are just
so concerned because Apple is such a big player, they’re such a major player.
Lala was a small start up at the time.
Apple’s the huge player and
they’re or two other players that
they can kind of leverage or play
off of one another with the Google and Amazon stuff.
So, you know, it
doesn’t sound like the
greatest thing in the world if they do launch that way.


But, you know, we’ll have to see.
I had initially heard that
they were not even trying to
launch anything until the fall music
event which is where they do all the music stuff usually.
But I think that Google and
Amazon kind of force their hand a little bit.


Right.


So, so this will be out there now.


OK.
So, let’s move on to
the next topic which is we
went to an event last this week in New York.


Yep.


And it was the launch of Google Wallet.
And Google Wallet is something
that we coming for some time.
Eric Schmidt actually demoed something to this back in October.


To be clear this is the NFC stuff.


NFC stuff where right now there’s only
one phone does this just
ask where you pull out your
Android phone, you associate a
credit card with it and
then you can tap to pay at
hundreds of thousands of, whatever,
venues around the country.


Right.


And all and Google’s got
partnerships with people, and it’s increasing the people it’s working with.
Did you find it impressive?


I think that it’s
the idea is certainly impressive.
The execution remains to be
seen right now because it is very limited.
I think the main partner
was Mastercard, so it’s
only like certain cards that
you can actually enter into the system right now.


Well the way Google is getting
around that is there’s actually a
prepaid Google card that you can use any credit card you have money on.


Yeah, but that’s another, you know,
level that you have to go in to get.


I thought it was pretty, it’s a smart idea.


It’s a smart idea and I especially love the thing you wrote about the sticker idea.


Right, so it’s actually a little unclear as far as how that’s gonna work.


Right.


But, immediately after the event,
I was running up to the
people who were talking about stuff
that, because I wanted to
figure how it worked for phones that
didn’t have NFC because, obviously, the vast majority of phones don’t.


Right.


And, what I was told is
that there were already these
stickers, that can be,
have their NFC encoded with a single credit card.
You can actually go out and buy this from your credit card company.
Google is apparently going to
be allowing people to order
one these credit cards, and then
it’s going to do some stuff with
the Cloud where you slap it
on your phone and then
when you’re at a point
of sales place you show the
sticker and it routes
around and it still hooks into your phone, using cloud.


That is really interesting.


If it works, that’s awesome.


I mean there’s no way
that, obviously someone like Apple
can block you from putting
a sticker on your phone so, but there’s the app side of things.


The application, right.
And Apple can certainly block it
and actually I’d be very surprised if it
could work with the iPhone because
Android revolves around this notion
of being able to, like, kind of trigger an event, right?


Do you think though there’s a
way that they could come up with
a web app though that did
that where it, you know, kind
of routed over the cloud and then ported into the web app?
I don’t know if that would be
secure enough for that to
even to happen or if there
needs to be something on the
device itself, like a communication between them.


I think in order for it
to work with the iPhone you would
have to you already have the application open on your phone.


Okay.


Which would be sort of a pain.


Yeah.


In other words, I don’t know if
Apple allows anyway for this
sort external source to launch an app on your phone.


Right.
Yeah that’s a little bit murky at this point.


Android has intents, I
believe they’re called, that let you
do that.
that’s a discussion because Apple’s
going to eventually have their
own NFC operation in
place that may or
may coming in the
coming fall when they have
the iPod 5, or it
may be coming next year, but eventually they’re going to do something like this.


It seems like everyone is moving toward this.
And, one of the really
interesting things, I thought, maybe
the most interesting thing about this
whole thing, was how mad PayPal is at Google.


Right.


Because they basically, they took
their main executive who
was in charge of this stuff and
now he’s in charge of it for the Google Wallet team.
And they have the older executive who’s
been there for a while, Stephanie Tilenius,
who’s been there for a
long time and supposedly maybe helped recruit this guy over to Google.


Right.


But they’re really mad.
I mean, the lawsuit was announced the day of.
So, obviously people had been working on it for some time.
Whether or not it was a
coincidence, it happened the same day
as the Google Wallet launch The
really interesting stuff there is the documents.
I read over those court documents
talking about how they were negotiating
deals for Android, to get PayPal payments included.
And then right when they’re during that this guys interviewing for this job.


So, going back to the wall, lets
talk a little bit I think
the question is will users want
this right and so the promise
of the phone wallet
isn’t just that you can tap the pay.
But, that you can have multiple
credit cards on your phone
and then you can also automatically have
deals, which is actually one of Right, loyalty.


the other things that launched as part of this was offers.


Very limited trial it just launched in
Portland right now and
it’s going to come to San Francisco soon.


And the idea is that you
want to search on Google,
maybe it’s for shoes it says
hey an offer at the shoe
store down the street from
you and then you send that offer to your phone.


Right.


So, that you don’t have to
think about where you have an
offer you just go to pay
then your phone knows that you got an offer there.


nd that’s pretty cool I mean
that potentially will get
a lot of people using this you
know, it’s kind of like, well you
get one element that’s group
on, you get kind of one
element that’s sort of like what foursquares is trying do now.
And that’s, but the fact that
Google is in control of this
phone or the phone operating system,
they can really do some interesting things with that.


I think the bottom line for the wall step though is that it still.It
‘s going to be quite a
while before it’s ubiquitous enough that your going to rely on.


Right, I think they were smart to do
the partnership with MasterCard because
they have so many of those
point of sale things all ready
installed, I forget what the
number was, there’s thousands though over the United States right now.


And so that will be able to work pretty much right away.
Obviously it still reliant on
you having the Nexus S, in
particular, and having, you
know, the deals open in your
city if you want to use the deals for that.
But that’s a pretty smart
thing to be able to do it
gets around them having to ship
these point of sale units
to like every single retailer in the United States.


Which somehow that’s going
to have to happen eventually for this to really take off.


Well, I think the partnerships with the
credit cards, the credit cards
have, like, an incentive to work with Google on this.


Yeah, sure.


So.


Sure.


And the final thing we’re going to talk about now is Twitter photos.
This is pretty controversial actually
which is kind of funny that it’s
controversial but it’s yet
another hole that Twitter is filling in their product.


Right.


So when we found out
that this was launching actually like I
was at the Twitter event last year,
and they definitely talked about how this could be coming.


So I read over those statements again.
They sort of implied it, they
claimed that it could be coming,
like it’s something that we’re interested in.
we’re not 100% sure that it
will be coming Like when I
heard Twitter was filling holes
with photo, that’s a big hole.
That’s like the bigges.t


But, you know, like at
least what they’re saying, TwitPic
which is the biggest ecosystem player
actually like, for the photo’s, they’re really mad about this.


Right.


I mean, they supposedly feel like
they were blind sided, and from
what we’ve heard, Twitter did
reach out to a number of
other players, notably YFrog and
Plixi, I think was the other
one which were the two or three players.
But, they didn’t reach out to Twitpic.


I think that some of
the comments on the post on
this were that Twitpic,they
had an issue with licensing photos.
Twitter probably wasn’t such a fan of it.


That was a black eye.
Yeah, yeah, yeah.


Going back to what Twitpic
did, I think it just said,
they are allowed to license and make money off of them.


Yeah, yeah, yeah.


And Twitter made it very clear
now with their new system that
you’re in control of your pictures.
And the most interesting thing
about this to me is that they teamed up with Photobucket.
It’s not like they’re doing it by
themselves, or they are even using
Amazon cloud services or something hosted.


They teamed up with another player, which is really kind of interesting.
Why Photobucket?


I honestly can’t even give
speculation on that other than
to say that maybe they just
wanted to focus on building
out the core product and let people
who have all really handled all the.


Right.
That’s what PhotoBucket said more
or less that they’ve spent so
much time dealing with scaling of photos.


Right.


And they have so much expertise in this space.
The other thing we’ve heard is that
they may have gotten a better
deal from PhotoBucket, in terms
of having to pay for
the storage versus what they would have done with Amazon or something like that.


Because Twitters going to be, as
soon as they put the switch
on this, given the fact
that it ‘s going to be integrated in all the official clients.


Right.


They’re going to be zero to a lot of photos.


So, they’re going to, so, that’s another thing.
So, it’s live right now
for Twitter employees which doesn’t really matter that it’s 500 people.
But starting next week they’re
going to roll it out to,
beginning with all the users,
it’s going to take a few weeks to roll it out.
But it’s going to start on just twitter.com.


You ‘ll be able to click
the little button, and upload a
picture, and like you’re saying that will take over.
Eventually it will become one
of the mobile clients and that will
become the obvious defecto
of Twitterphoto integration.


So, I mean, as far as the
developer uprising, I thought
this one was fairly obvious that it was coming.
Easy for me to say in hindsight.


Right.


I have no money invested in any of these companies.


Right.


But I’m sort of
curious to, there’s a lot of
talk about how once again
Twitter has pissed off the developer community.


Right.


Like, are there any other obvious holes that Twitter is going after?


Well, so first of all, let
me just say about the photo
thing specifically because I think
this is such a controversial
one because this is really
one of the first major third
party eco-system plays that anyone did.
TwitPick was one of the
first ones and, this
was just, like, oh my god,
they’re helping out Twitter so much
because they’re really adding
value to it by adding these photos.


And even if Twitter did
give them little hints of that
something was coming a year ago, what’re they going to do?


Right.


They can maybe do
a white label service and partner
with some major content players or something like that.
But they really are kind of getting screwed by this.
And I mean Twitter’s in
a bad position too because they
have to do what’s best for them
from a product perspective and from
a monetary perspective whether or not this plays into that at all, photo integration.


But that’s the place they’re in.
And so, what they do
next, what other things they
have to fill in, there’s a
lot of things out there still that they could.


Analytics.


Right.


Analytics is an obvious one.


It keeps talking about moving up the value chain or something.


Right.


I was like, well, how much
further up the value chain do
you have to go before Twitter eventually
is going to get there in a year or two?


Yeah.
I don’t know why
people are still kind of in this eco-system at all.
Why third party developers are in this eco-system at all playing?
It’s just too dangerous.
It’s too dangerous to try and build a company.
If you’re doing a weekend side project, that’s fine, that’s great.
You have some fun.


Twitter’s pretty easy to work with in that regard, I think.
But if you’re trying to build a real company, yeah.


It’s a little scary.


Yeah.
All right.


So, I think that does it for this week of OMG/JK.
Thank you for tuning in.
Make sure to subscribe using the iTunes link below.

In this week’s episode of OMG/JK, Jason and I start off with a preview of what may be coming at Apple’s WWDC event next week in San Francisco. Then we get into what Google unveiled at their NFC event in New York City last week. And finally, we talk about Twitter’s move into the photo space.

All three topics have a bit of controversy surrounding them. First of all, WWDC will not feature a new iPhone for the first time in several years. Second, it took PayPal a matter of hours to sue Google after Google Wallet was announced. And third, the Twitter developer ecosystem is up in arms again after Twitter has moved to fill another hole. Well, at least TwitPic is, for sure.

Below, find some of the links relevant to the discussions this week.

Subscribe to us on iTunes!


Hornik on Blippy: “Apparently I Was More Interested in Sharing Credit Card Purchases than the Average Person” (TCTV)

Let’s be honest: One of the reasons David Hornik actually agreed to be on camera at All Things D is that he didn’t have a startup about to file to go public any second. So we talked about some of his more high profile investments that haven’t always lived up to the hype.

Hornik explains why reports of Blippy’s death have been greatly exaggerated, and why he says the investment still wasn’t a mistake. What’s more he dishes (sort of) of the nine-figure annual revenues of another portfolio company Say Media– the love child of VideoEgg and SixApart. And he tells us about an enterprise software company that’s a budding sleeper hit.

More broadly, he argues the immediate-hit-or-it’s-a-failure misses the point of venture investing. (A philosophy Reid Hoffman might agree with after a decade-long slog at LinkedIn.)

Let’s talk about you as a venture capitalist.
I’m just kind of
thinking off the top of
my head, deals that I associate you with.


Yes.


Video X is expired, they’re now one.


Same media.


Blippy, now it’s gone.


No, no.
Not at all.


Well, it pivoted?


Not at all.
Here’s the thing.
The thing that
people associate with Blippy may
not be the billion dollar idea.
But Blippy, this group
of incredibly smart entrepreneurs, is anything but gone.
Actually it turns out that… So
Chris and Ashvin, who were
the founders of Blippy, are
some of the greatest… If you’re
talking about entrepreneurial athletes, like
these guys are unbelievable and you would back them.


And it’s sort of like saying that
it’s too bad that they
didn’t win that particular world
series, but we’ll see you next year.”


So they’re working on some really interesting stuff.
They have a great team that
no one is leaving.
They’re really excited to be working these guys.
And they have enough money
for the next 10 years or something.
So, this idea
that… Gee, it either
works or when it
doesn’t work, then it’s a failure whatever.


Kind of misunderstand the history of startups, right?
And it’s a lot… And
I going to see this
a lot and I can’t… You
have to bet on the
ones that are the winners and the losers are the losers.


Right.


Look, there will be some
that are big winners and it’s
exciting and if you’re
an early investor that’s amazing and congratulations.
But it turns out that there
will be companies that are
built over a period of
time by really smart, hardworking
entrepreneurs that build important
stuff that people value.


So look, I will
admit that our apparently I
was more interested in sharing my
credit card purchases than the average person.
I’m still sort of shocked by
that, to tell you the truth because I
thought it was super fun.


Yeah.but
it’s maybe a good example of
“don’t invest in the things
that you love”, because what
you need to do is find out
the things that are compelling more broadly.
That’s fine.
The good news is that I really…


But I think someone needed to test that assumption.


Yeah.


We wouldn’t have known.


No, it was great.


Like I actually… I mean Alexia wrote a story about TechCrunch about.
Oh, we were too pro-Blippy, I don’t think we were.
I mean looking back at coverage…
Again really, really smart entrepreneurs, trying
something that is completely crazy just because of the outcome?


Yeah.


That doesn’t make any sense.


Yeah, thank you.


That’s exactly right.
Because there have been lots
of Twitter-like things that people tried and didn’t work.
And so what?


I mean, how many times did social networks not work.


Yeah, exactly.
Look at Mark Pincus, he had one of those.
So clearly he’s not
a failure by virtue of
the fact that Tribe.net didn’t succeed
and social networking wasn’t
a bad idea because Friendster
didn’t end up succeeding.


Right!.


And that; so the good
news is that, as a general
matter, you know, at
August Capital, our focus has
been on people we really like
who are gonna, you know,
who are gonna build great stuff and then hopefully they do, right?


Right.


And in a disproportionate amount of
time, they actually end up building pretty interesting stuff.
And so that’s, I mean, that’s a VC that’s all you can do.
So you like, you mentioned Six
Apart and Video Egg; they’re now together.
Well, you know, it’s a huge company.
Same media is a many
tens of millions of dollars of business.


I heard how big their revenues are.
Would you like to share that with our readers?
It’s like fifty million.


No, it’s well more than that.


Like a hundred million?


It is well more that that.


It is my conservative estimate
that this company is worth.
hundreds of millions of dollars.


Yes, there isn’t any question.
It is, it is orders of
magnitude larger than the
things that think they’re
competing with say media, right?


Yeah.


So, people are
focused on other things and
if they want to under value that or whatever, that’s fine.
But the reality is, these were
teams of people who are
focused on very clear things.
So, Video Egg was
about bringing real value to brand advertisers?


Mm-hm.


How do you create a better
brand experience across the social media infrastructure?
And then Six Apart was
about how do you build the
best possible engagement experience
for bloggers, for, and
ultimately for passion based media across-


Right.


-160 million uniques or whatever.
And when you put those things
together, you have a
very big interesting business that
ends up being, I think,
the paradigm for the next
generation of digital media companies.
So you know, eventually people will look and go “Holy cow!,
how did that get to be such a big business?”


So, are they your most exciting company now?
Who gets you out of bed in the morning?


I don’t know.
I mean they’re great.
They’re a fabulous company and I love the people involved.
You know, I have this enterprise
software company called Splunk that I funded.
That where three really smart
engineers who said, “you should
take log files and figure
out how to correlate them and manage systems.”


And it’s, again, I don’t
know, is it a hundred-and-something million dollar business this year?


Right.


I guess we’ll see.
It is a big business.
Companies are getting a ton
of value and the people
building it are worried about
creating value for their companies
and doing a better job of system debugging.
And all these things you go, “well, what is that?”
Who cares about that stuff?
Well, you know, they’re just doing a good job.


So, I love
all of my children the same,
but you know, the ones that
are gonna make more than a hundred million.


He will become your favorite?


Did I?
My kid?
Yeah, that was my daughter.
Yes, of course she’s still
my favorite.
But I’ll tell you
what, if my son, Julian
wins a Tony, he gets to be my favorite for that week.


It’s just up to the Tony jury.


Yeah exactly!
When Noah starts the next
Facebook, he can be my favorite for a week.


So, only for a week though?


Yeah.


David Hornik: Why Real Entrepreneurs Aren’t in it for the Money (TCTV)

We haven’t done Ask a VC for a while thanks to my hectic travel schedule, so I pulled David Hornik out of the hallway at D to catch up on his thoughts on his portfolio and the industry.

But first, we chat about the highlights from the All Things Digital conference. Or we started with that and then talked about how the motivation for starting companies is changing in Silicon Valley, given the soaring valuations and ease of raising money.

And Hornik explains why he’s not a fan of Peter Thiel’s 20 Under 20 Program, although he admits he still hasn’t paid off his own law school education.

Hi, this is Sarah Lacey
with TechCrunch TV down here
at sunny Southern California at
All Things D with David Hornik.


Hello.


Hello, David is bailing me
out because I’ve been doing too
many hallway conversations, that
are off the record, with people
who won’t be dragged on camera, and
you are always willing to be dragged on camera.


I enjoy, I enjoy talking
with you Sarah, on camera, off camera.


Not at the lobby this year, unfortunately.


Well that’s, I was going to say, that has nothing to do with me.
There are two things that interrupt
people from coming to the
lobby: weddings, babies.


Yeah, that’s about it.
So, hopefully I’ll have neither of those next year.


Good.
Next year.


So, you know, we ‘ve
met at the lobby which is sort
of an homage to the fact
the you are always in the
lobbies of conferences gossiping and rarely in the session.


It’s never gossiping, it’s about
industry conversation, doing business.


So, I want to ask
you, a little bit, about
the step that you’ve seen on stage
so far, but then also
about you know all this
super secret conversation you are having.
You have been in the sessions more than usual.


I have.
You I find myself sitting and listening to what’s being said.
It’s exciting.


So tell me, what you
thought about, I mean I
know there was Eric Smith
last night, Dick Costello
spoke today Jack Dorsey, what
were some of the things that
jumped out at you about these guys?


I’ll tell you, as
an investor, right, you
spend all your time meeting with
the entrepreneurs and the
interesting thing is right, you
think that entrepreneurship is about,
people who want you to
think that the entrepreneurship is about getting rich.


Oh yeah.


Entrepreneurship if successful then everybody
gets rich, and its
turn out that is true. That’s
a beautiful byproduct of
entrepreneurship but the people
that you wanna work with that’s it
is not, they are not motivated,
that is not their motivation, right?


Right.


So, if you listen
to Jack Dorsey just
now or Dick Costello
or Reed Hastings all today.
Talking about their businesses and how they’re thinking about them.
What they’re building whatever.
Its about I mean Jack was explicit.
It was like, I’m trying to make people’s lives better here.
Now Kara Swisher called
him on it and said, “Is this a movement or is it business?”
But I don’t think that’s a dichotomy, I think that ultimately.


Well and she had to ask him
that three of four times and
it was clear that the question wasn’t even translating with him I mean.
There are certain people who
sound phony when they talk
about that, and there are certain
people who just sound
really genuine and I think actually
Andrew Mason was the same way.


One thing that jumped out at
me about both Andrew Mason
and Jack Dorsey is, you
know, we are in this
point of the cycle
in Silicon Valley where it’s so
easy to start a company that
most people would say there’s
a lot of people starting companies who probably shouldn’t be entrepreneurs.
And seeing both of
them on stage talking about building
their business, to me, it
is so emblematic of that
is that thing you see in an
entrepreneur when you know they are the guy who should be starting.


Yeah, I mean, its interesting,
we saw this in the late
90’s, when it looked
like there is a lot of money at the end of rainbow.
And people, you know, oh I have
to got stop doing whatever I am doing.
You know even with this
business with Peter Teo and
trying to convince students to stop going to college.


No, I think it’s insanity..
I think its terrible advice.


You think he is like an awful person for
doing it then or some people are.


No, I don’t think he is evil, I just think it’s dumb!
Like if I were the
mother of one of these
students, I’d say, “Real like,
really this is it?”


It’s two years.


So fun you know,what,
spend, make a hundred
thousand dollars, quitting school
for two years or I mean, here’s a thing.
This is what, but it
can this is a bit like we’re like talking about with start ups.


Right.


If you think that going
to college is about increasing your earning potential?
Then, you know, then fine.
Go stop doing it ’cause maybe it’s not increasing your earning potential.
But when I talk
to my children, I don’t say,
“Hey, can’t wait for you to
go to college so you can increase your earning potential”.


Right?
My oldest son intends to be an art history major .
I am fairly certain that no
number of years as in
our history major will repay
his college education. So that can be it, right?
So On the other hand, I would not have them do anything else.
Like why would you?


Your children are also not going into half
a million dollars personal debt Ok.
Maybe.
That is the crucial difference.


But to be fair like I’m still paying off law school debt.


Are you?


Yeah I am, maybe I should pay it off.


You’re a venture capitalist.


I should probably pay it off.
I should probably pay it off.
Yeah every month it subtracts.
I look at my bank account statement,
it has you know Sallie Mae or whatever.


And how’s that law firm going?


Yeah well yeah, I have
been a VC now for eleven years, so.
But I am still, you know,
I am still an inactive member
of the bar, because you just never know.
I might need to represent you.


Probably.


So, when that day comes, I will reengage.
So, anyway.
Okay fine.
I think that’s fair, but it’s
not about, you know, so what,
it’s not about earning potential.
It’s about the people that
you engage with, and meet,
and the conversations you have
and the opportunities and all that.
So anyway if you
look at company building today, I
think people should be building companies
because they cannot think of anything else they want to do.


like what, you know, that’s when you should start a company.


And I think a lot of people
are starting companies because, why wouldn’t they?
Because it’s so cheap and easy to get capital.
Capitalization is so low.
I mean it’s different things driving it than in ’99.
You know I am not a big fan of saying, this is just like ’99, because it’s not at all.


Yeah, it’s not, it’s not at all.


But you are seeing this phenomenon, where there
is a set of circumstances, where if
you’re a kid who has a
halfway decent idea and you’re
coming out of school, there’s not
a downside to starting a company.
I mean, I think it’s more
that has just been taken away than it is…


Yeah, no, I think it’s right!
I mean the reality is that’s also
true, if you don’t mind, if
you can afford to live, right?


Right.


The thing that I don’t
get is this, so like, hurry
up you gotta get out because time is of the essence.


Yeah.


Well, look, by the time
our kids get old, they’ll be living to a hundred or something.
So, if they miss two years, it’s two percent.
It’s two percent of their lives!
It’s fine.


Well, if you listened to the
data that Ron Conway talked
about at Disrupt, those are their best two years.


Yeah, come on!


Do you buy that?
That to be an entrepreneur…

No?


No, I mean I buy that there are great entrepreneurs but what.


You know them by the athlete thing?


Well, they don’t need as much sleep.
I feel I need more sleep.
Then I used to not
sleep at all, now I actually
occasionally I have to sleep, so
I do, I recognize that, but
I don’t know you know, work smart.
The reality is that there have
been very interesting important
businesses built by very young people.


And they have been very interesting
you know its like Henry Betmason is not nineteen.
Ev Williams and Jack Dorsey and Mark Pincus.
They are not nineteen.
He is an old man.
Like he is the Shaquille O’neal of you know.
Although Shaq did just today announce on twitter that he is retiring.
I find news on twitter.
See look at that.


Poor the real Shaq

But
he has a giant superman bed.
You can’t really feel that sorry for him.


He has a pool area is called Shaq Poco.


Why wouldn’t it be?


Do you have one of those?


Yes Hornik a Poco.
Oh, go.


I think something that’s a dormant account.


In Palo Alto, Hornik a Poco is
like a deck, the size of the postage stamp.
But please, enjoy yourselves.


Once again, you’re a venture capitalist, you shouldn’t be throwing-
you should be paying off law bills,
you should be-

Look, you know what, I don’t wanna be frivolous.


Gillmor Gang 6.04.11 (TCTV)

The Gillmor Gang — Robert Scoble, John Taschek, Kevin Marks, and Steve Gillmor — shuddered with expectant glee at Apple’s presumed iCloud announcement at next week’s WWDC event. It’s clear from all the leaks, most interestingly from Apple itself, that the record companies are finally healthy enough to move into the new streaming era. With Lady Gaga selling five times as many records as the next entry on the album charts, the numbers have strongly tipped from retail to downloads.

Amazon helped by subsidizing over a million copies at $1 a sale (8 bucks to Lady Gaga), but by next time, the market will have moved almost completely online. This gives Apple the leverage to get the TV/cable networks and the movie studios on board, with Netflix playing the Amazon role in stoking demand for streaming. Live events are last, probably following the heavyweight boxing matches of Ali and Tyson via pay-per-view but direct to Apple TV and its competitors, of which there are none. iCloud is the moment when the bits stay where they are, and the checksum becomes the value point. See you Monday for a special Gillmor Gang extra.


(Founder Stories) Reddit’s Alexis Ohanian Bows To “Lord Jobs” And Jabs Investors

Color gets bashed as being a contributing player to the so called startup bubble and the frat-boy attitude of investors from the Web 1.0 era don’t do much better in this episode of Founder Stories with host Chris Dixon and Reddit Co-founder Alexis Ohanian, who is now with Y Combinator and Hipmunk.

In a conversation spanning a variety of topics, you’ll hear Ohanian describe how “Lord Jobs” has indirectly contributed to the success of Zappos and Instagram, the gaping opportunities for start-ups to solve, and the attitude adjustment seen in present day investors; swinging a big load of cash (and something else) doesn’t cut it with this class of start-ups.

Make sure to watch the clip to hear insights on the above – and why we might expect to see a softer landing if the speculated bubble ever bursts.

Below, Ohanian describes his leadership style, why he thinks start-ups fail (it has more to do with just “bad logos” says Ohanian when pressed by Dixon) and what Ohanian looks for when hiring.

Past episodes of Dixon’s interview with Ohanian are here and here.

Prior Founder Stories interviews with leaders such as Seth Sternberg, Mike Walrath and Dennis Crowley are here.


SEC Watch: Tiger Global Bought Massive Amounts Of LinkedIn Stock Pre And Post IPO

LinkedIn and investment firm Tiger Global both filed separate SEC filings yesterday evening indicating that the firm loaded up on LinkedIn stock both before and after the company’s IPO in May.

According to the filing, a Tiger’s head Chase Coleman and Tiger fund, PIP V, acquired 2,436,001 shares of preferred and common stock of LinkedIn on secondary markst, from December 21, 2009 to August 10, 2010, for $31,740,600.70. Some of Tiger’s investment during this time was reported, but the filing shows Tiger had a much bigger stake.

LinkedIn Holdings, another Tiger/Coleman vehicle, acquired 1,306,927 shares of LinkedIn stock on secondary markets from August 10, 2010 to April 15, 2011, for $29,796,007.50.

And post IPO, which took place on May 19, Tiger Funds purchased 300,000 Class A Common Shares, for a purchase price of $45.00 per Share or $13,500,000.

While we knew Coleman was buying up shares of LinkedIn, we didn’t know it was to the tune of over $75,000,000. And Coleman himself now owns a little over 4 percent of LinkedIn, according to the filing. The filing also states that Coleman has agreed to not offer or sell any shares for a period of 180 days from the offering in May.

LinkedIn’s IPO priced at $45 per share, but started trading at $83 per share, giving the company a market cap of $7.8 billion. Shares have since dropped to $77.92 per share.

Tiger has made a number of investments in large internet companies including Zynga, Facebook and Yandex, which just went public two weeks ago. On the public markets, Tiger has recently bought stakes in Amaxon, Apple and Netflix. Tiger Global has $1 billion in commitments and is reportedly raising another $1.25 billion for a new fund.

We’ve confirmed Tiger’s stock purchases with LinkedIn.


The Kno Textbook App Hits The iPad

Last night, Kno quietly released its first digital textbook app for the iPad. It includes its own store of “over 70,000 titles at 30% to 50% off list” price. And the app is a full textbook reader.

Kno, whose CEO Osman Rashid previously founded textbook-rental service Chegg, originally developed its own oversized tablet for textbooks. But once the iPad and Android tablets hit the market, the company saw the writing on the touchscreen and bailed on its hardware efforts last April.

At that time, when I spoke to Rashid, he was talking down the iPad because it does not support a stylus, which is the input method the Know software was designed for (although there are styluses that do work with the iPad). Maybe he was just trying to throw me off the trail.

The iPad app allows you to organize your digital textbooks and PDFs by dragging and dropping them into “courses.” Once you open a textbook, you can swipe through the pages or navigate via a filmstrip of thumbnails up top. There is also full text search. Pages can be bookmarked and highlighted. You can also add digital sticky notes which pop out from the margins.

The highlight feature is a nice touch. You can also launch a Web or Wikipedia search based on a highlighted word. There is also a “WTF” feature, which stands for “Words to Friends,” although it could mean the more common acronym since it’s a nit of a head-scratcher. It allows you to send out little study messages to friends on Facebook or Twitter, but doesn’t link back to the text or even make it easy to cut and paste a quote. WTF, indeed.

All in all, though, the Kno textbook app is pretty solid and will compete based on the breadth of its textbook selection and pricing. It certainly beats lugging around a backpack full of books.

Information provided by CrunchBase


Could This Be The First Solar Powered Laptop?


While there are plenty of solar-powered peripherals that plug into your laptop to boost its battery power, we haven’t yet seen a model that runs solely on solar. Industrial Designer Andrea Ponti‘s concept for the Luce Solar Panel Powered PC could become the greenest laptop ever made.

The computer has two solar panels: One on the back of the monitor and one underneath a touch keyboard. Ideally, the two panels would be able to power the computer continuously, though it’s unclear whether this has been successfully tested. Using a laptop in the sun is far more battery intensive than indoors since the screen brightness needs to be cranked up to compete with the sun’s bright light.

One solution could be to use an electronic ink display in place of the usual backlit flat panel. Although the laptop includes a battery, the cordless design means your productivity will plummet in the evening — at least until you reach for another digital device.

The Luce, which means light in Italian, is made from a clear polycarbonate and weighs about four pounds. It was shortlisted in Fujitsu’s 2011 design competition.

There’s no word on whether Fujitsu plans to turn Ponti’s design into reality, but either way they’re not the only ones thinking about integrating sunlight into computer design. Last year Apple filed a patent for “harnessing external light to illuminate a display screen.”

In Apple’s vision, a reflector could fold down to brighten the display, and the company is rumored to be looking at integrating solar cells as well.

Design images by Andrea Ponti
Apple Patent images via Patently Apple


White-Hot Flickr Alternative 500px Raises $525K In Series A

As the complaints about Flickr continue to pile on, scrappy Toronto-based service 500px continues to grow, going from 1000 users in 2009 to over 85K (around 45K of which have joined in the last three months). And after two years of bootstrapping, the startup is today announcing its $525K Series A round with investment from High Line Venture Capital, Deep Creek Capital and ff Venture Capital.

Says co-founder Oleg Gutsol, “The idea of making 500px arose from Evgeny [Tchebotarev] and I having difficulties with the current available platforms — there wasn’t a good service that would allow us to display our photos is a visually pleasing way and be easy to use. I think we tried every somewhat popular service online and still were not quite satisfied. So we decided to build one ourselves.”

Founders Gutsol and Ian Sobolev migrated their Livejournal-based photo sharing community to the current site on Halloween 2009 with little fanfare. Recently garnering some positive press as well as drawing in Flickr power users like Thomas Hawk, Troy Holden and Ivan Makarov and this whole thread of  Flickr migrations, the site grew 60% in the last 30 days, bringing in an impressive 2.5 million visits last month.

Despite its unexpected scales, 500px is committed to its main goal to help photographers reach larger audiences, with Digg-like Popular and Upcoming pages as well as an editorial staff that curates the Editor’s Choice and Fresh collections.  ”We encourage young talent,” says Gutsol Tchebotarev, “It is not uncommon to see someone new joining our site and have their photo appear in our popular feed in a matter of hours.”

Gutsol plans on using the money to hire more engineers, like everyone else in tech right now, hoping to build a “global platform” for digital photography. The company currently makes revenue by offering a $50 pro-account that gives users custom layouts and giving photographers the ability to sell their prints.

Information provided by CrunchBase