Month: February 2010

Feb 27 2010

Do You Know The Difference Between A Browser and a Search Engine?

Videos like this one remind me that I live in a very tiny corner of the universe.

Only 8% of the people interviewed (out of a sample of over 50) correctly defined a browser.  It also shows how effective Google has been in their approach to branding, especially given that they just aired their first TV commercial a few weeks ago.

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Feb 26 2010

Senator Lugar on CNBC Discussing the Startup Visa Act

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Feb 25 2010

Startup Visa Twitter Widget

If you support the Startup Visa and have a blog or a website, put the Startup Visa Twitter Widget up on your site.

And – on March 2nd at 12 noon Pacific / 3 pm Eastern – we are going to do a Tweet Hall for the Startup Visa.  All you need to do is tweet @2gov supporting #startupvisa exactly at Noon Pacific on Tuesday March 2nd.  We’ll collect your Tweets and deliver them during our visit to the White House on March 4th.

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Feb 24 2010

Great Pogoplug Review in the WSJ

I love the Pogoplug.  We’ve been investors in the company for about a year and it has been a blast working with the team.  Pogoplug is in our Digital Life theme and has a lot of conceptual similarities to our previous investment in Sling Media (now part of EchoStar).  We love products like the Pogoplug and the Slingbox “software that ships with a little plastic box that does magic stuff” that, in Pogoplug’s case, provides you access to any of your external hard drives from anywhere in the world on any device.

Today, there was a great review of the Pogoplug in Walt Mossberg’s column in the Wall Street Journal titled Get Your Storage Out of the Cloud.  WSJ’s Katherine Boehret also has a nice short video review below:

I have several Pogoplugs – one at each house and at my office in Boulder.  They are remarkable – they just work.  If you have an external hard drive or are considering cloud storage for any meaningful amount of data, you owe it to yourself to grab a Pogoplug.

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Feb 24 2010

StartUp Visa Act Introduced By Senators Kerry and Lugar

Today, Senator John Kerry (D-MA) and Senator Richard Lugar (R-IN) introduced the StartUp Visa Act of 2010.  The group of us behind the Startup Visa project have been working closely with key members of each Senators’ staff on this and we are incredibly pleased with the proposed bill. 

Following is the text from the press release announcing the bill:

“Senators John Kerry (D-Mass.) and Richard Lugar (R-Ind.), the Chairman and Ranking Member of the Senate Foreign Relations Committee, today introduced legislation to drive job creation and increase America’s global competiveness by helping immigrant entrepreneurs secure visas to the United States.

The StartUp Visa Act of 2010 will allow an immigrant entrepreneur to receive a two year visa if he or she can show that a qualified U.S. investor is willing to dedicate a significant sum – a minimum of $250,000 – to the immigrant’s startup venture.

“Global competition for talent and investment grows more intense daily and the United States must step up or be left behind,” said Sen. Kerry.  “Everywhere Dick Lugar and I travel for the Foreign Relations Committee, we see firsthand the entrepreneurial spirit driving the economies of our competitors.  Creating a new magnet for innovations and innovators to come to the United States and create jobs here will offer our economy a double shot in the arm – robust job creation at home and reaffirmation that we’re the world’s best place to do business.”

“Our country should strive to attract to the United States the most talented and highly skilled entrepreneurs.  We should channel the power of innovative thinkers from around the world and American investors towards creating jobs and encouraging economic growth and future prosperity,” said Ranking Member Lugar.

The StartUp Visa Act of 2010 would amend immigration law to create a new EB-6 category for immigrant entrepreneurs, drawing from existing visas under the EB-5 category, which permits foreign nationals who invest at least $1 million into the U.S., and thereby create ten jobs, to obtain a green card.  After proving that he or she has secured initial investment capital and if, after two years, the immigrant entrepreneur can show that he or she has generated at least five full-time jobs in the United States, attracted $1 million in additional investment capital or achieved $1 million in revenue, then he or she would receive permanent legal resident status.

More than 160 venture capitalists from across the country have endorsed the senators’ proposal.  That letter of support is attached.”

The support from the venture capital and super angel community has been fantastic.  Now that we have both a sponsored house bill (HR 4259 – sponsored by Jared Polis (D-CO)) and a sponsored senate bill, it’s time to crank up the grassroots support.  Look for a few specific things to do in the next few days on both this blog and the Startup Visa blog.

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Feb 24 2010

BlogTalkRadio Thought Leaders Series

Jon Hansen has started interviewing me periodically on his show on BlogTalkRadio as part of his Thought Leaders Series.  Yesterday’s interview focused on my experience of investing in Rally Software and included short discussions on how Rally got started, how and why I decided to invest, and the role various factors play in my decision making process.  Jon does a nice interview. 

 

I’m very proud of my friends at Rally – they’ve created a company that is well on its way to being one of – if not the – most significant software company in Boulder.

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Feb 23 2010

When I Decided Not To Become A Doctor

My folks stayed at my condo in Boulder the last few nights with me so I was inspired this morning to write a quick post in the Letters to my Dad series that I’m writing with my father (he’s calling his posts “Father and Son.”) 

In my dad’s last post, Father and Son #3, he wrote about our overthrow of the administrative regime in my high school at the start of my senior year when they botched the AP course schedule because of a “computer glitch.”  He calls it a “lesson in leadership and self reliance” and tells a great story of how we (him and I) quickly mobilized about 60 parents and students in 24 hours to get together, proposed a solution to the problem, presented the case the superintendent and principal, and then fixed the problem.  We all got to take more than one AP class (even though school was over for me my senior year at lunch time since there were no other classes to take) and I even wore a tux to prom.

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But that’s not today’s story.  When I was young, my dad regularly took me on rounds with him at the local hospitals.  He was the most experienced endocrinologist in Dallas (and one of the first doctors to specialize in clinical endocrinology) so he was in high demand.  He was also extremely respected by his peers, loved by his patients, and adored by the nurses and hospital staff.  Looking back, I like to say that he was the doctor that we all dream of having – engaging, funny, 100% focused on you and in the moment, extremely responsive, and extraordinarily competent. 

I loved going on rounds with my dad.  I’d bring a book, sit at the nurses station, and read while he saw patients.  Occasionally the nurses would let me look through charts (this was well before HIPAA) or play around with the medical equipment (in the 1970’s there were a lot of beeping noises and flashing lights – perfect for an eight year old.)  Hospitals were big places which seemed huge to me at the time.

However, there were two things I didn’t like.  I hated the way hospitals smelled and was always afraid of touching things.  I didn’t realize what this was at the time, but looking back on it I realize it was an early instantiation of OCD which I’ve struggled with throughout my life.  I’m sure the linkage between the environment and the events in the hospital (sick people, dying people) reinforced something around this at a deep psychological level. 

More obviously, I disliked a lot of the doctors.  I thought my dad was amazing and loved listening to the nurses talk about “Dr. Feld” when they thought I couldn’t hear them.  I’d have my head buried in a book in the corner and they’d be chatting about how amazing (where amazing is a proxy for a wide variety of great attributes) he was.  In the mean time, they’d bitch about virtually every other doctor.  I learned the word “asshole” at a relatively early age as that was the most common descriptor I remembered.  Most of the other doctors were assholes – they were arrogant to the nurses, short with patients, and many of them seemed genuinely uninterested in what they were doing.  Now – a few of them were like my dad, but only about 10%.  The rest turned me off.

When I was about 10, I grabbed a thin green book on endocrinology off of my dad’s shelf in his study.  I discovered a lot of books in his study over the years (including Atlas Shrugged and Zen and the Art of Motorcycle Maintenance).  The endocrinology book wasn’t titled “Endocrinology for Dummies” but it could have been – it was an introduction to endocrinology presumably aimed at a first year medical student.  By 10 I was devouring ever book I could get my hands on so I’m sure I laid down on a couch in our house and started reading.  The only thing I remember is how unbelievably bored I was by the book.  I’m sure it was way over my head, but this wasn’t a unique experience for me – even when I didn’t really understand very much of what I was reading I usually sucked it down anyway and went back and tried again at a later time.  I remember finishing this book and thinking something like “I never want to read about endocrinology ever again.”

My dad tried to be home for dinner every night.  He’d often head back to the hospital after dinner to go do more rounds.  At dinner we’d go around the table and talk about our day.  We alternated who went first – there was no rhyme or reason to the order that I could tell although my parents might have had a secret sequence that I didn’t know about.  A few days after I put the book back on the shelf, I went first.  I was really nervous so I just blurted out what was on my mind “I don’t want to be a doctor!”  It probably came out more as a plea or a shout, but I remember it sounding like a scream in my head.

Once I had said it, I felt so much better.  I’d been carrying around the thought for a few days terrified of what my parents would say.  All of my relatives were already asking the typical jewish “is he going to be a doctor when he grows up” question every time they saw me with my parents.  I hadn’t realized how much this was weighing on me – now it was out in the open.

I remember a short moment of quiet followed by my father quickly saying “you can be anything you want to be.”  We then spent most of dinner talking about this and when dinner was over I had a bunch of different possible careers in front of me to explore.  None of them were being a doctor.  And – I felt great because I’d learned that a huge lesson that day – that I could be anything I wanted to be.

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Feb 22 2010

Annual Escalating Patent Fee Proposal

I love the stuff that ya’ll email me (or comment) after I write a post that challenge my thinking.  While occasionally the notes are hostile (which is mostly just entertaining), they are usually really thought provoking even when I disagree.  And, when they give me a new way to think about something, they are really satisfying.  For all of you out there that read this blog – you guys are great – thanks for helping me think!

Last week I got an interesting proposal to deal with the problem of patent trolls.  Here it is. 

“It seems to me as though the solution to patent trolls is a pricing issue.

If patents were to get progressively more expensive over time, a patent holder would have to weigh the financial return of a patent against the cost of maintaining it. For example:

Patent Fees
Year 1 — $1,000
Year 2 — $10,000
Year 3 — $100,000
Year 4 — $1,000,000
Year 5 — $10,000,000
Year 6 — $100,000,000
Year 7 — $1,000,000,000

The model above protects really valuable patents and sets patents that aren’t valuable free. Pharma could live with the fee schedule above, and software companies which have patents that are really core to a business would be protected for 4-5 years, an eternity on the Internet.”

What do you think?  What’s the fundamental flaw in this?

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Feb 22 2010

Show Don’t Tell – Especially In Video Pitches

Every day I get emails from folks either raising money or telling me about their new idea and asking for feedback.  The conventional wisdom is that VCs rarely invest in things that reach them randomly (or “over the transom” in someone’s VC vocabulary – I can’t for the life of me figure out why that phrase hangs around.)  However, this isn’t the case for us as 10% of the companies we’ve funded in the past two years were initially from “cold call” email inquiries (Brightleaf and Organic Motion).  So – I’m very happy to get a steady stream of random emails – keep them coming!

I’ve noticed a trend toward more video presentations lately.  I looked at one this morning and it reminded me of the old writers adage “show don’t tell.”  This applies nicely to every pitch you ever do.  Specifically, I don’t want to hear you describe what you are going to do, I want to see it.  Or – if it’s not built yet, see an example of it.  It’s always better to point me at a URL, even if it’s a very rough prototype, as I can usually get a much quicker view of what you are doing by simply playing around. 

The video I watched today was a two minute segment of the entrepreneur looking into the camera and describing his business idea.  The idea was fine although I could tell within 15 seconds that it wasn’t something we’d invest in given the market he was going after.  I ended up watching the full two minute video to see if he ever shifted from “tell” mode to “show” mode.  He never did – the two minutes ended and the whole video was the entrepreneur describing his idea. 

In my book, this was a wasted opportunity.  I could have read one paragraph that contained the same content.  The entrepreneur didn’t take advantage of the medium (video) in any way.  While he did a nice job on the monologue, he wasn’t trying out for a TV commercial, a TV show, or a movie.  He missed the goal – get my attention and hopefully get me to engage to the next level.

For most of the great VCs I know, the way an entrepreneur makes a connection when there is no pre-existing relationship is to generate an immediate interest with the product.  That’s what happened for us in the case of Brightleaf and Organic Motion.  The entrepreneurs were highly credible, but more importantly we immediately got excited about their products, which caused us to be more interested in going deep and exploring an investment.

This is a repeating theme that for some reason isn’t said strongly enough.  The great entrepreneurs (and sales people) “show”.  Just think of how Steve Jobs does it.  Show me!

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Feb 21 2010

Sawyer Weighs In On Intellectual Ventures

I have a number of friends who are patent attorneys.  Some have strong negative feelings about software patents that mirror mine while others keep me entertained by arguing both sides of the situation with themselves while I sit around and listen.  One of my friends – let’s call him Sawyer – has very strong negative opinions as he’s spent most of his time recently defending his clients against software patent suits including an increasing number from patent trolls (non-practicing entities).  He spends a lot of time in East Marshall, Texas and has figured out where all the best restaurants are.  While East Marshall isn’t quite as nice as an invisible, mysterious island in the middle of the Pacific Ocean, it clearly has a number of similar characteristics.  Sawyer has decided that he can’t write publicly about his thoughts and experiences so I’ve agreed to channel his experience into my own parallel universe.  Look for more missives from him (and better references from me with regard to Lost as I finally learn what really has been going on.)  In the mean time here’s his reaction to the New York Times profile last week on Intellectual Ventures.

Last week there was an article in the New York Times profiling Nathan Myhrvold and his company Intellectual Ventures ("IV").  I suppose since it’s a profile, the article is by nature one-sided, but given how I broke into a cold sweat upon reading it, I was a little surprised at how unbalanced the presentation was on the merits.  Mr. Myhrvold is characterized as a savior of inventors while his detractors are those big scary companies who want to infringe patents without compensation to the little guys.

What is the underlying premise of IV as a net positive for innovation and the U.S. economy?  The traditional defense is that patents incentivize innovation.  That has to mean innovation in a particular field, e.g., "software patents incentivize innovation in software."  Let me underscore this point:  there is no positive evidence for software patents improving or increasing innovation in software.  None.  I could make the same statement for pretty much any other field except biotech (which has its own problems that can be explored another time).  There are a variety of articles setting forth why patents actually hurt innovation in software particularly, (e.g., the famous Bessen and Maskin working paper on the subject).  Note that raw empirical data is hard to come by either way by nature of how the patent system operates, but the lack of positive evidence is telling.

Perhaps Mr. Myrhvold recognizes this, because in the article he says “I’m trying to get inventions that kind of respect as an economic entity.” (Emphasis added).  IV apparently incentivizes innovation on…inventions?  "Inventions" are actually a term of art in patent law, they are the things for which one can legally be granted patent rights.  IV, therefore, seems to admit that it wants to enforce patent rights so that we can…have more patents.  Mr. Myhrvold wants to create an entire economic category based on payments to entitles that don’t build, produce, sell, etc, any products, or create anything of value (i.e., that don’t innovate, at least in any useful way that advances human progress), in exchange for not being sued on exclusionary patent rights.

Let’s internalize that for a second.  IV has collected over a billion dollars so that it can get more patents.  They make no products.  They apparently don’t funnel ideas to anyone else who makes products.  Heck, the only useful thing I’ve seen out of IV is that mosquito-killing laser that Mr. Myhrvold showed off at TED this year.  They collect massive amounts of money for their investors, and funnel much of it into buying and developing more patents.  When I talked to a headhunter recently, in the midst of the worst market for legal jobs ever, she told me that the one employer who was always hiring people with experience in patents was IV.  So, anecdotally, they hire a lot of lawyers.  They set up a lot of shell companies.  They sue people, or threaten to sue people, for massive license fees. 

Now think about where this money would go otherwise.  Microsoft, Apple, and Google, not to mention other large technology companies, have sizable legal departments with teams of attorneys focused full-time on managing the 50+ software patent cases they each are a defendant on.  My guess is that they individually spend hundreds of millions of dollars defending and settling such suits per year.  Most of the suits are backed by investment funds (here’s an example of one) through shell entities.  Many of these funds are backed (with no transparency) by traditional investment banks and hedge funds.  What we have, then, is a net outflow, on a yearly basis, of at least several hundred million dollars, from technology companies who "make stuff" and unquestionably innovate, to speculators and investors who don’t.  I don’t think that baseline fact is something anyone would question.  IV dresses that up in the clothing of "invention," but they’re really just out to capitalize on a broken patent system like every other non-practicing entity ("NPE" as we call them – they hate being called trolls).  What kinds of cool products and technologies would that money be used to develop?  We’ll never know, I suppose.  At the very least we can presume that the pace of innovation in technology is being slowed by this net outflow of capital to non-innovating parties.

One thing I haven’t mentioned is that it isn’t just big companies who get sued.  Startups, especially in software, are constantly targetted by patent suits, especially by pseudo-competitors who want to kill more innovative upstarts.  How many great companies have been sunk by the costs of patent litigation?  Think about it this way – if Facebook had been sued on a social networking patent within a year of its existence, would it be around today?  It’s doubtful.

Finally, I think it’s important to address the moral point that’s always in the background when NPE’s talk about their business – having a patent doesn’t mean that you really invented anything, or that the person you’re suing would actually infringe in a rational world (the U.S. Constitution also only allows Congress to grant patents for "promoting progress," not for moral reasons).  Patents are legal documents, highly opaque, and the meaning of patent claims rarely, if ever, rationally corresponds to a real world product.  Patents are granted through a pseudo-adversarial administrative procedure where highly trained lawyers do their best to push extremely broad claims with extremely sparse/vague disclosure through overworked and underpaid patent examiners.  That’s the name of the game.  As much as companies like IV want to turn patent enforcement into a moral issue, it isn’t.  Patent lawyers are paid to get broad patents, not capture the essence of a real "invention."  And alleged infringers, in every case I’ve been involved in at least, don’t flagrantly violate patents.  They’re caught unaware, and even when they are aware, have the impossible task of figuring out if they would infringe.  It’s really a difficult Catch-22, but the patentees enjoy it, because it allows them to call defendants the "bad guys" while taking the moral high ground.

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