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Web 2.0 Expo Bits

Posted on April 17, 2007
Filed Under General Thoughts, Web 2.0 | 3 Comments

Altair 8800I have been in sunny San Francisco for the past couple of days attending the Web 2.0 Expo (first time in SF if you can believe it) and I thought I would take a quick minute to share a couple interesting thoughts that have come up in the last 48 hours.

1. Why do we think of mobile as separate from the web?

This came up in the Media 2.0 panel the other day and it’s a fantastic question. When you think of it our phones are and will become just another interface to the web. It’s simply a browser with a smaller screen. It seems so simple yet a lot of us think of mobile as a whole other world.

2. Microformats and Feeds

After attending a panel on microformats I started thinking about how microformats could be used in conjunction with feeds. Since feeds are, in and of themselves, a form of structured data adding microformats into the feed wouldn’t work (at least as far as I can tell). However, if you were to include microformats in a blog post for example we could perhaps create a flare that scans the content for the microformats (that would end up in the CDATA element) and when it finds them it can display a flare that users can act on. I am planning to play around with this idea a bit when I have a few minutes.

That’s all I have to share for now but I will definitely put up a quick post today if anything else gets my mind going.

Side note: You can check out my Web2.0 pics if you’d like. There are some really sweet ones from the Computer History Museum.


TECH cocktail 4: Wrap-up and Thank You

Posted on April 13, 2007
Filed Under TECH cocktail | 4 Comments

TECH cocktailThis was the best TECH cocktail yet. We finally found a venue in John Barleycorn’s that can hold the crowd comfortably and provided a great set-up for all of our sponsors and demoers. Not only that but the staff at John Barleycorn’s was incredible to work with. They took care of every need we had and made the night enjoyable for both Frank and I and for all of you out there who attended.

First, I’d like to thank our sponsors since we truly would not be able to put on TECH cocktail without them.

SingleHop: These guys are for real. Not only do they provide great dedicated hosting they also know how to show TCers a great time. They were responsible for the Wii baseball challenge this time around and thanks to them ten of you are going to see the Cubs. SingleHop is a big part of making TECH cocktail happen so I hope that you will think of them first when you need a dedicated server.

Transwestern: This is a top notch group of real estate folks who can help you with your growing office space needs. Henry Lee in particular is the guy who came to me and really wanted to support TC since he believes in what we’re doing. He’s been great to work with and you should give him a ring (312-881-7062) if you are need of more/new office space.

The Saper Law Offices: You may not have noticed Saper Law listed at the sign-in table as a sponsor and that was our bad and yet another reason why making signage in the wee hours of the morning is a bad idea. Daliah is a great lawyer and she knows her stuff regarding issues you’ll face as an entrepreneur. She works with a lot of good folks already and you should be one of them. Please check her firm out if you in need of a lawyer.

Digital Bootcamp: Mike and team are fantastic at what they do and that is to teach you what you need to know. They have classes ranging from PHP to CSS to Business Blogging and they are well worth your time and money. If you’ve been looking to refresh some skills or just learn something new check out Digital Bootcamp (heck, you get a set of personalized dog tags too - you can’t go wrong!).

HTD Law: These are the guys who brought you roulette at TC3 and Wii sports at TC4. They also flew a lucky winner to Vegas for a weekend and gave away a Wii. These are the kind of lawyers I like! If you need some corporate law help give HTD a buzz.

MK Capital: The MK guys have been supporters since TC2. They are very community focused and they continue to be helpful to entrepreneurs in the midwest and around the country. If you’re looking for money to fund your company please let me know and I can get you hooked up with them.

Origin Ventures: If you are a super early stage company and need some cash to get your business off the ground definitely talk to Origin. The guys are great and I would be more than happy to hook you up with them. It’s good to see some really early stage funding come back to the Chicago area.

FR&R: These guys keep our books in order to make sure we don’t end up like Enron. They are fantastic to work with and I highly recommend them if you need some accounting help.

Second, I’d like to thank all of the entrepreneurs. It’s always great to see some fresh ideas and these guys didn’t disappoint.

Meniusm: If you haven’t already rated the appetizers that SingleHop bought for you last night you need to log in to Menuism and do so. The UI is fantastic and you can find reviews of not only restaurants but also the dished themselves. Use Menuism to eat well and help others to do the same.

ParkWhiz: These guys have helped you find parking for the last two TCs and they can help you find it for other events/errands too. They came to TC4 to demo fresh off of their Navtaq LBS Award domination meaning you got to see all the fresh stuff. Keep an eye on these guys. They are going places by helping you find parking at places (ok, that didn’t work quite the way I wanted it to).

Interactive Mediums: Did you see the live text message voting for the best demos (won by Menuism)? Interactive Mediums was behind that and they are also behind a lot of folks text message lists. This is another up and coming Chicago company that is poised for success.

timeXchange: These guys can help big time (or should that be bill time - I’ve got a million of ‘em) if you are an independent consultant or anyone that needs to keep track of and bill time to clients. They have looped in social networking to the mix as well to make keeping time sheets fun (Honestly, I didn’t think it could be done.)

text2store: These guys will help you get coupons from stores you shop at sent directly to your mobile. They will also alert you to deals at stores you like as they come up.

Zaplee: These guys allow you to set-up a call center all powered by skype. This is a quick and simple solution to any call center issues you may have.

Now it’s on to the Oscar speech. Ahem… Is this thing on?

I want to thank my co-founder Frank because it wouldn’t be TC without him.

My girlfriend and best friend Laura: Without her support I wouldn’t be anywhere.

Felicia, Lisa and Chris: Without you guys holding down the fort at the door TC would be a mess. It’s a thankless job and you all do it well.

Paulette: Great job on finding the venue and for keeping things moving forward!

My friends and family who always give their support and keep me moving forward.

All of the TCers out there since you guys make TC what it is.

FeedBurner for supporting TC from the beginning.

All the people that donated to MS.  We raised $150!

If there is anyone I missed I apologize and I think you as well.

That should do if for this post and for TC4. I had a great time and I hope you all did as well. Please keep me posted on any deals or relationships that develop out of the event. I love hearing those type of stories because we put on TECH cocktail specifically to bring people together. Cheers everyone!


Sam Zell is Crazy, Crazy Like a Fox

Posted on April 10, 2007
Filed Under Web, Web 2.0, Media, Media 2.0 | Leave a Comment

Sam ZellFor all of those who haven’t read or heard of the Sam Zell (the new owner of Tribune Corp.) comment on Google and newspapers here is the quote:

“If all of the newspapers in America did not allow Google to steal their content, how profitable would Google be?”

You can read the full Washington Post article if you’d like as well to get more of a background on the situation.

As you can imagine Zell’s comment generated a lot of negative reaction from a lot of smart people like Jason Calcanis. I was almost quick to dismiss Zell as well. Sure, he now owns the Tribune Company but he’s a media and newspaper newbie. What does he know? Well, I wonder if he may know more than we all think he does.

After watching the Frontline documentary series News War I was compelled to write a piece on the state of the newspaper business which I am sure some of you read (I know it was super long so I don’t blame you if you didn’t slog through it - basic gist: public ownership of newspapers might not be the way to go if we want to retain the hard news we all need). Soon after writing that post I read the Valleywag piece defending Sam Zell and was reminded of the quotes I used from Google CEO Eric Schmidt the most pertinent of the quotes being:

“We’re [Google] in fact critically dependent upon the success of these newspapers so anything that screws up their economics, that causes them to get rid of reporters, is a really bad thing. The fact of the matter is that the consumption of news is up but the way in which people consume news has changed and its affected newspapers, in a business sense, pretty negatively.” (from Frontline’s News War program)

After reading that I am sure you’re thinking Zell might not be as crazy as everyone made him out to be. The Google CEO himself has publicly stated that Google is dependent on newspapers and the content they create afterall. But where is the connection?

Most people immediately thought of Google News when Zell’s comment popped up and were quick to point out that Google News is a pro bono venture (i.e. they don’t put ad sense around it) and, on top of that, doesn’t show the full content of the articles. That is true but there is more to the story than just Google News. Google makes money from contextual ads, as most people know, but it seems that a lot of folks forgot where those ads are placed - that is they are places around content.

Search results are one place Google puts their ads and a lot of times the top search results for current (and not current) news are newspaper articles which makes sense seeing that newspapers are a trusted and quality source (yes, I know they have had issues but fact checking works most of the time - I hope). Without those articles the Google results may not be as useful. However, I think the big money lies in the derivative works and conversations started by major newspaper coverage.

The blogosphere is a great example of this. A lot of media in the blogosphere is generated in response to or in order to talk about news that was originally reported by newspapers (heck, this post is a prime example). So what? Well, a lot of those blogs run ad sense ads which make Google money. If the bloggers, myself included, don’t have the newspapers to do the original reporting then they won’t be able to write as much and generate as much ad revenue for both themselves and for Google.

In the end of the day Google is an ad provider that works mainly with content driven sites. Because of that fact Google is dependent on the original reporting done by the newspapers. If all newspapers suddenly took their content away, or even worse, stopped producing their original reporting, things would be much different for Google and for all of us (until of course someone else picked up the ball on original reporting which would no doubt happen).


The Barbell Strategy

Posted on April 9, 2007
Filed Under VC | 1 Comment

BarbellsJeff Bussgang posted on a new strategy a couple months ago that some VCs are starting to employ. The barbell strategy, as it is becoming known (at least in Boston), is a strategy that it allows VCs to keep one foot in early stage deals while being able to continue to grow their assets under management and invest in later stage deals as a result of the growth.

As I have alluded to before on this blog the VC funds are continuing to grow bigger and bigger over time which makes it continually harder for them to cut checks smaller than $10mm - $20mm. This, of course, puts them out of range of early stage companies that they want to invest in. The problem is that the VC funds want to keep bringing in more assets to manage because they make money from management fees which are usually taken as a percentage of their assets under management. Let’s turn to Jeff for a quick sum up of the issue at hand:

…the historical data shows that the >10x return opportunities lie in the early-stage, Series A deals, where less money is invested at a lower price. These companies commonly are looking to raise only $4-6 million at a time, often split between two firms. Thus, VCs have a conundrum - whether to stay focused on early stage, where it’s harder to put big money to work (and therefore earn big fees), or focus on later stage deals, where it’s harder to generate 10x returns.

The barbell strategy is one of the first attempts to combat this issue by simply allowing firms to do some early stage deals (with partners who have a specialty in early stage) where they hope to make >10x while also growing their assets under management and doing later stage deals (again, with partners who have a specialty in late stage investments) where they would hope to take home a 3 - 5x return.

What’s the problem then? Seems OK doesn’t it? Well, not entirely. LPs (aka Investors) don’t like this type of strategy and view it as risky. They would prefer it if a VC fund would stick to a investment size (and geography, market sector, etc.) and stay there rather than wander across boundaries and make investments in different company stages. Typically when VCs roam around performance falls off since they are simply not specialists in each and every area around. In the end of the day the LPs want to work on their own portfolio diversification and do not want VCs trying to do it for them.

If you think about it for a minute the LPs have a great point. Think of the mutual fund industry as a comparison. Sure there are blended funds but most of the time you want a certain type of fund. Perhaps you’re looking for large-cap value fund to balance out your small-cap growth heavy portfolio. In that case you’ll want the manager of that fund to stick to his strategy once you’ve invested since you’ve already slotted him into your portfolio in order to properly diversify yourself and he moves off strategy your diversification will suffer. Of course mutual funds don’t have the same problem VCs do in that raising more money, for the most part, doesn’t force a change in the style of investing.

As Jeff points out in his post, scaling VC funds may simply not work. They are much different animals to mutual funds and hedge funds. Perhaps this is something that just needs to be accepted by early stage VCs. That said, the LPs may someday change their minds if a firm can effectively pull off the barbell strategy. We’ll have to wait and see.


Who Will Pay for the News?

Posted on April 3, 2007
Filed Under Web, Media, Media 2.0 | 4 Comments

USA TodayI have recently been working my way through the Frontline special entitled “News War” which chronicles the changing face of today’s newsmedia. The series tackles some intense subjects including whether or not a reporter has a right to withhold their sources from the government, the role of newspapers in terms of reporting on issues that could compromise national security and the effect of new media on the traditional media.

Covering all of those things in this post would of course mean a very lengthy post so I would like to focus on one of the main issues News War brought to the surface and that is the simple question of who will pay for the news in the future.

Before we delve into the subject at hand I think it is pertinent to discuss the changing meaning of the word news in our society. It seems that most of us have started to view news as something that is more in line with entertainment rather than something that is supposed to inform us about the world in which we live.

We are making choices to view more entertainment rather than news which is, of course, leading to more news organizations trying to entertain us to keep ratings up and ad dollars coming in rather than reporting on what we really need to know. They are a business after all and they need to keep increasing profits each year.

What’s interesting to note is that there was a time when news organizations were not looked at as profit centers. In fact, they were looked at as more of a public interest organization. The FCC even has a rule (section 315 of the FCC code) that states that media companies need to have a news service that serves the public interest (i.e. tells them what they need to hear). As News War points out this notion of news as a public interest org changed when CBS saw how profitable 60 Minutes had become and decided the news could be a big money maker.

As news organizations became a larger and larger part of the profits of their parent companies the parent companies, as any business would, started to make the news service parts of their organizations provide more entertainment which means more dollars flowing to the bottom line. In a sense, they wanted the news organizations to provide the public what they wanted rather than what they needed.

After discovering all of this I began to wonder if we need a news organization that is not a business. I then ventured further into the News War documentary where I began to learn some interesting facts about the news business that I wasn’t aware of and hadn’t given much thought to.

I assumed that newspapers were not doing well and that the companies that owned them needed to make cuts and report more entertainment just to keep them going. However, a stat from News War refutes that. Apparently the typical newspaper achieves around a 20% operating margin which is roughly double what a typical fortune 500 company will do. However, since the LA Times is publicly held through the Tribune Company, they needed to continue to earn more an more money each year or else their shareholders will see a loss in value (it should also be noted that newspapers, even though they make a lot of money - LA Times makes about $1 billion per year with $200mm of that being profit - are still on a downward slope in terms of overall earnings which means shareholders are upset).

Of course a lot of the loss in the growth of newspapers comes from the loss of their classified ads business to the internet. At the peak of classified ad sales in newspapers the average newspaper would see about 70% of their pretax profits come from classifieds (source: News War). With more and more of these classifieds heading onto the net (which provides a far better user experience than the newspaper) the newspapers have had a hard time staying afloat without cutting real news out of their papers and their staff.

As most of the long time readers know I am a big proponent of running organizations as for profit entities since I believe for profit entities are more motivated to find efficiencies which ultimately help them perform better (whether it means making more of a product or helping more people). In the case of the news I am not so sure that is the best approach given what I have written above and what I have read.

The news is truly a public trust. They need to be there to provide us, as citizens of the world, news of what is happening in our world so we can be informed and make good decisions. In fact, I would say that the newsmedia are an important part of the very foundation of the United States since they are the conduits between the world, the government and all of us. They can get us insight and hard news that, for the most part, we couldn’t get ourselves. Of course all news organizations have their biases but the loss of them to media that is fully entertainment would be a bad sign for this country.

Another interesting point that came up in News War was the fact that the majority of original reporting done in this country is done by newspapers. In fact, Eric Schmidt (Google CEO - not that I even need to note that!) says the following in an interview done for the News War documentary:

“There’s no question that we [Google] depend critically on reporters reporting new facts, new stories, new ideas. Who’s going to write it if it’s not the reporters?”

He then goes on to say:

“We’re [Google] in fact critically dependent upon the success of these newspapers so anything that screws up their economics, that causes them to get rid of reporters, is a really bad thing. The fact of the matter is that the consumption of news is up but the way in which people consume news has changed and its affected newspapers, in a business sense, pretty negatively.”

The fact is that most web organizations like Yahoo! News and Google News simply link to newspaper articles. Bloggers are definitely reporting on a lot of new things, generating some original reporting and becoming a larger part of the media world but the vast majority of original reporting and hard news comes from the newspapers which are in serious trouble (blogs also do a great job of promoting and continuing the discussion of hard news originally reported by newspapers which is very important in a free society like ours).

Of course the web will save, or at least help, a lot of these newspapers if they play their cards right but ad spending on the web still has a long way to go to reach the numbers of print ad spending. Perhaps hyperlocalism will help in the meantime. I do believe that hyperlocal data and reporting can be a big profit center and so do a lot of big papers who have started to work on hyperlocal additions to their websites. Even the Washington Post is looking into hyperlocal news on the web. However, world news still needs to be reported on and it seems we still need something other than profit to drive news organizations in order preserve hard news so I am still left with the question of who will pay for the news or, to put it another way, who should own the newspapers? (Side note: Hyperlocal news and info is a whole other post that I may get to soon.)

Perhaps the answer to newspaper ownership is private ownership either through a non-profit foundation or a family. The non-profit structure of a foundation obviously limits the burden forced on papers by profit expectations and family owners can decide to be OK with flat growth or only 5 - 9% profit instead of 20% in order to keep the news organization’s ability to produce hard news intact. In fact, there are large papers that fall into these categories today.

The St. Petersburg Times is a for-profit organization but their owner, the Poynter Institute, is not meaning they aren’t stuck with the profit issues of other papers. The New York Times and Washington Post are also in a better situation being that they are both family owned papers who continually produce hard news that we need to read.

Being part of the media business and, quite frankly, simply a citizen of this country meant that all of this really hit home. Thinking of a world in which hard news is hard to find really worries me and I hope that we’ll be able to find a way to preserve and pay for solid news. As always, I would love to hear some of your thoughts in the comments.

Photo Credit: Photo by Orrin (aka theliar) on Flickr.


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