TBJ Investments, LLC

The Big Whiff; Facebook IPO and the Boston Investment Community

This post has been a long time coming. Maybe it's the historic date itself, the wooziness from a stomach virus, or the realization that you rarely see such a stark contrast between success and failure.

Namely, the Facebook IPO, valuing the company at $100B, exposes the sharp distinctions between the Boston and Silicon Valley investment communities. In effect, the inability of the Boston investment community to put even a sliver of investment in Facebook, a company that started here, is probably one of the largest squandered opportunities in business.

Facebook raised over $2B in the march from dorm room to IPO. Not a single dollar is from a Boston angel investor, venture fund, hedge fund side pocket, or corporate strategic investor. Not $1. The closest claims are the west coast office of Greylock and the trivia that Jim Breyer of Accel grew up in Newton, MA. That's it.

Not being a baseball guy, I may have my analogies wrong, but this reminds me of Babe Ruth. The Boston Red Sox undervalued Babe Ruth and traded him away to the Yankees. The Babe went on to a storied carrier, and 80+ years later the Red Sox finally won something. Boston had first crack, but just whiffed.

The failure doesn't just end at the first up at bat, the Seed/Series A, but in every successive round. Whiff, Whiff, Whiff.

The question is why?

When I first came back to Boston in March 2006, I saw major cultural differences with Silicon Valley. These differences were based on my having had ~20 years experience in high tech as an early employee, entrepreneur, CEO, Limited Partner, and even VC associate. That experience was in areas as diverse as SF/The Valley, London, Paris, Atlanta, and DC.

At the time, I compiled my ideas into a short deck:

http://www.slideshare.net/tbjbuzzient/boston-vs-the-bay

Now, obviously many of the points raised in this presentation have changed. There still do remain, IMHO, some fundamental differences in the regions that led to this outcome.

1. Risk Tolerance:

Frankly, Boston has essentially none when compared to the Valley. Sorry, but that's just the way I feel. Even the "risky" deals I've heard certain investors beat their chests about have some sort of hedge, financial or otherwise. I've had conversations with a ton of investors who are really growth/momentum investors in VC clothing.

2. The Outcome, not the Process:

I've never been exposed to as many so-called investors who really are interested in multiples of Revenue/EBITDA and not actually building a company.  The shift to SaaS in the software industry has created an even better cover for this behavior, with companies being reduced purely to CMRR, CAC, CLV and assorted other metrics. I don't know any successful Valley entrepreneurs who started a company to maximize CMRR or CLV. The Process of building a great company is what drives the best entrepreneurs I've known; their investors thus support that belief system and help the entrepreneurs BUILD companies vs. harvest the financials.

3. Clubbiness, not Competition:

Boston investors seem way more driven by colluding with whom else might be in the deal, vs. originating a deal and having to compete.  There is far less outright competition between Boston VC firms to invest in new deals. So, that creates a slower tempo, less risk-taking behavior, and little desire to do something out of the box.

There are plenty of other factors that I will analyze in successive posts. I'll also make a series of suggestions on how to avoid whiffing on the next big pitch.

 

 

 

 

Pitching a VC: Why Financials Matter

I was once being pitched by a very smart entrepreneur who, when he got to the slide about his companies financials, said "I made all of this up, but here you have it." On the one hand, it was an pretty flippant approach to a relatively crucial aspect of his business. On the other hand, he was saying what ever other early stage entrepreneur was thinking when describing to me the financial outlook for his or her extraordinarily risky and unpredictable business. So why bother with a slide on your financials when pitching a VC? It is well understood by entrepreneurs and VCs alike that the specific numbers an entrepreneur pitches when describing her early stage business are completely made up. Most early stage CEOs are lucky to have visibility into the next 6 months, let alone the next 3 year that are reflected in their financials (and the 5 year forecast is mere fortune telling). Nonetheless, there is a huge amount of information about a business, and about an entrepreneur, that is reflected in those financials. The key is not to focus on the numbers themselves but, rather, to focus on the assumptions in those projections and the points of leverage for that business. It is almost assuredly the case that a early stage company's projections are wrong. In the last decade I have only seen one company actually hit the numbers they pitched me on. The rest of the companies have missed by varying degrees of big time. But the real question when listening to a pitch isn't whether the company will actually hit the numbers they are projecting, but rather what those projections say about the entrepreneur and the business? Is the entrepreneur focusing on the right things? Do the financials make reasonable assumptions? If the assumptions are anywhere close to right, is there a big interesting business to be built? Smart investors will dig into your financials to get a better sense of how you are thinking about your business. Company financials are rife with assumptions. Entrepreneurs can easily gain or lose credibility based upon the assumptions that are embedded in their financials, their understanding of those assumptions, and their ability to justify them. How long will it take to hire the people you need? How much will you pay them? How much will it cost to acquire a customer? How many engineers will it take to build your product? What is your margin (are you selling software, hardware, a cloud service)? What is the length of your typical sales cycle? How long will it take for you to collect earned revenue? How much are you spending on marketing? What is the expected return by channel? If you are pursuing a freemium business model, what percent of your user base do you expect to pay? How much will it cost you to support the free members? How much money will your company make, if any, and when? How much more money will it realistically take before you get the Company cash-flow positive? What will you achieve with the money you are raising now? These are all incredibly important questions for any startup and how you are thinking about them will have a huge impact on the success or failure of your business. No one will have perfect answers but an entrepreneur's ability to be directionally right will often be the difference between success and failure. Not only will it be important to understand the assumptions built into your financial plan, it will also be crucial to appreciate the sensitivities of your model. There are often single variables that make the difference between a good business and a great business (or, more likely, between a viable business and a failed business). If the cost of acquisition is off by 50%, do you still have a viable business? If free customers only convert at 1%, can you support the 99% who will always be free? If the viral co-efficient of your service is 1.2 instead of 1.5, what does that do to growth? What if it takes 90 days to collect on billings rather than 30 days? These "what if" questions are critical to the understanding of your business. You should appreciate the places your business has leverage, and the places that your business has potential vulnerabilities, and be ready to engage in an honest conversation about those pivot points. I will be the first person to acknowledge that early stage financials are a work of fiction. But some fiction has the ring of truth, while other fiction is so outlandish that it is impossible to suspend disbelief. It is an entrepreneur's job when pitching her business to convince an investor to suspend disbelief. The better you understand the underlying assumptions in your plan, the more effectively you'll be able to do just that. So embrace the opportunity to build credibility. As an investor, I'm happy to buy into your fiction, I just want to avoid unbridled fantasy.

via www.ventureblog.com

I totally agree with testing and uncovering the assumptions in the financials. The challenge is doing it if you actually have a real company up and running,and the metrics are incomplete. In this scenario, the entrepreneur who has NOTHING is actually better off than the entrepreneur who has actually gone off and generated revenue, albeit inconsistent.

Zuckerberg in Boston, or "Yet another one that got away"

The last week, Boston has been abuzz with the news that Mark Zuckerberg was coming back to "visit". In one of his various interviews, the founder of Facebook remarked that "if he could do it all over again, he'd have stayed in Boston".

Almost immediately, select members of the Boston technology community seized on that statement as proof of Boston's equivalent status to Silicon Valley. There was just one little problem that those people conveniently overlooked...

Rather, there were 2.3B problems those boosters overlooked. $2.3B worth of funding that Facebook has raised since leaving Boston; none of that from Boston angels, investors, hedge fund side pockets, asset managers, private equity or venture firms.

Instead of crowing about Zuckerberg's comments as some sort of self-serving justification of their own existence, I think that Zuck's visit should be viewed more in collective shame.

Shame on Boston for letting him get away. Shame on the local angel investor community for not getting into the deal. Shame on the VC community for not only missing the early stage rounds, but with the exception of Greylock's west coast office, not being a part of ANY successive round. Shame on the Hedge Fund and PE communities for not getting into the deal via side pocket funds in later rounds.

Download Who-owns-facebook.jpg (JPEG Image, 600x446 pixels)

For a city that is one of the major money centers in the US, this is a major failure. This was never a matter of lack of capital. This was all about lack of will, lack of vision.

As it turns out, Zuck's trip to Boston wasn't just a simple visit, but a recruiting trip. Hundreds of the best and brightest students of MIT and Harvard were pre-selected for interviews with Facebook. I look at this as the biggest talent suck in Boston seen in recent years. Some of the best talent coming out of Boston universities was just drained away to the west coast.

I would hope that this visit, and the fact that Facebook is now valued at ~$50B would serve as a teaching moment, and an opportunity for reflection. I fear that lesson will be lost in the rush to claim some hollow victory in Zuck's initial comments.

How to avoid the next one? How to keep the next Zuck from leaving? Here are my thoughts:

1. Enable VC associates to originate deals up to $100K on their own, investments in technical members of their peer group.
2. Support a standard Boston Seed Deal termsheet, pre-vetted with local law firms and VC's. This termsheet should be similar to the Series Seed terms, but adjusted for East Coast investors. One page, easily executed.
3. Boston LP's should scorecard Boston VC's on their ability not just to generate returns, but invest in companies that create jobs in the Boston metro. Given that most VC's haven't generated returns aboove the S&P the last decade, this extra requirement shouldn't cause undue alarm.

Last, no one gets fired in VC for missing a deal. In the operational world of high tech, a sales rep missing the big deal in their territory would be fired. Not in VC. Somehow that lack of accountability needs to change.

 

Race In Silicon Valley

In the furor over race in Silicon Valley, I had a few ideas on how to improve the situation:

- Expand recruiting beyond Stanford, Cal, CMU, MIT. Georgia Tech is the #4 engineering school and one of the most diverse engineering student bodies around. One of the things that's always pissed me off is SV hiring managers not taking the 4 hour flight to recruit in the US from a major public school, vs. bitching about not being able to find diverse candidates.

- Be transparent about your workforce diversity. Mike Swift of the SJ Mercury news tried to cover the hiring practices of a number of major Valley companies (who shall go nameless) and they slapped an injunction on him, stating this was competitive information. My understanding is that the data showed that these "select" companies were far more likely to hire overseas nationals than US minorities, even when the overseas nationals didn't go to the sacred 4-5 schools.

- Also look at the better ranked HBCU's, Tribal Colleges, etc, several of which have joint degree programs with the top schools. For example, one can attend Morehouse and get a joint MS in Engineering, Physics, etc. from Georgia Tech. Wellesley has a joint deal with MIT as well. The NSF is a great resource for other schools for recruitment.

- Kill the STEM education in high schools, etc. canard. It's always used to justify the lack of brown faces in SV companies. There are plenty of minorities in engineering fields, though from my perspective clearly not enough. The issue is that SV companies/VC's have to stop being so lazy and recruiting at the same 4-5 schools. I also wonder how many SV companies even bother to check the NSBE/SWE/SHPE memberships on the top 4-5 campuses?

- Not everyone needs to be a BS/MS/PHD in Engineering/Computer Science to work in High Tech..How many Sales/Marketing people are PHD's in Electrical Engineering from Stanford? As a point of comparison, look at the relative diversity of Pharma sales forces; most of those people don't have life sciences masters or PHD's. Same thing with big Telco. Far more diverse in sales/marketing than High Tech w/o the necessity for advanced degrees from a select group of schools.

- Increase diversity of the VC GP pool. I think there are less than 50 GPs of color in VC firms nationwide. I'm a strong advocate of bringing back the SBIC program for Equity Investment firms, and creating a new generation of more diverse VC firms, by composition, strategy, etc. That will also create more competition with the incumbents.

- Public retirement LP's of venture firms have to start scorecards for VC's. Little known secret is that VC's only need to put in 1% of the Fund from their own pockets as per NVCA rules. That means the other 99% is OPM (Other People's Money). Much of that is from public LP's(Calpers, Calstrs, Utimco, etc). So, retirement fund money from a diverse population(50%+ in California) goes to VC funds who then overwhelmingly invest in startups led by white men (87% according to CB Insights http://bit.ly/aiQ50C ). Over a 10 year basis, most VC firms have barely tracked the S&P, so you can't say that this strategy is yielding higher performance. I think this is one of the roots of the problem; change the funding behavior and the trickle down effect of having a more diverse leadership group in funded companies will naturally create a more diverse pool of employees.

That's all I got. Now, gotta get back to running my company and being a statistical anomaly...;o)

Will write a longer post on this, but TBJ Investments just led a $1.1M Series A in Buzzient!

Oracle CrossTalk 2010

Buzzient has had a great opportunity to present during the general session at Oracle CrossTalk 2010, Oracle's Retail industry conference. We've met with top retail executives from all over the world.Social media is clearly emerging as a new channel for multichannel retailers; Buzzient's ability to integrate social media data with Oracle applications gives these retailers tremendous competitive advantage.

I'm attaching my presentation here:  http://slidesha.re/aGUIIn

Having a great time at Oracle #CrossTalk 2010 conference!

Buzzient got a GREAT writeup at BostInnovation:

http://bostinnovation.com/2010/04/24/buzzient-social-media-analytics-with-enterprise-solutions/

Buzzient updates

A lot has been going on at Buzzient, the company we started out of research Andreas Goeldi and I conducted at MIT. www.buzzient.com

We've seen a dramatic pick up in customer activity in Q42009 and into 2010. Basically, a number of companies that were experimenting with social media decided to put a stake in the ground and get going. These customers are in a variety of vertical industries:

Financial Services:  Credit Suisse, Motley Fool

Life Sciences: Perkin Elmer

IT: Xerox

Higher Ed: Pace University

We also developed a relationship with a leading applications developer for online social networks. Without saying who the customer is, I can attest to the fact that we're playing a much larger scale than any other application in this vertical industry.

So, all in all, a real positive shift in the winds and a lot of velocity in 2010!

SAP CEO resignation is an interesting bit of news. Not sure what it means for SAP's cloud or social media directions.

Happy 3rd of July!

It's a Friday. July 3. The official holiday is tomorrow.  Kendall square is practically empty; just a few straggler tourists looking for the Duck boats, MIT PHD/SDM students wolfing down lunch, and  probably about 10-20% of the normal Kendall SQ.- located workforce is around.  The Cambridge Innovation Center, where the Buzzient offices are located, has locked doors and relatively empty halls.  My cofounder and I can actually get an elevator within a minute of hitting the button.

The first thing that popped into my mind was "THIS is the difference between Silicon Valley and Boston". Like it or not, but in a bunch of places in the Valley, this would seem like a normal workday, not as if the neutron bomb hit.  I've been in offices on a major holiday where half the management team has shown up, to "get caught up on email, paperwork, whatever low-value stuff I can do on a holiday so I can optimize high-value stuff during the workweek".

When I lived in South of Market and launched Eba Systems from my basement, I would often wander out in the streets on holidays not even knowing what day it was, let alone think of taking it off. We're in the supposed "epicenter" of Boston innovation and it's pretty vacant. Oh, wait, the CEO of LiquidBits is here. Hell, he's ALWAYS here; nights, weekends, you name it. Old school entrepreneurship at its best.

I'm all for work/life balance; heck I rowed an extra few miles today and came in late. However, I still came in.  Seems like in trying to catch up to the Valley, a lot of local folks want to make sure they don't impinge on their Nantucket beach house time.

I'd love to be at the beach myself; in fact there are numerous striped bass and bluefish that are missing a shot at one of my elegantly (I wish) lofted flies, and my unique line-stripping style that's far too influenced by having watched so many bass fishing shows as a child (are you supposed to say "Booyah! as  a fly fisherman?) . Alas, not to be. Innovation (smirk) calls...

So, my cofounder and I pound away at all the "other stuff" that needs to get done in a startup; accounting, company blog posts, etc.  Wish we weren't so lonely here in the epicenter...

Social Media and the Iranian Election

I've had some time now to reflect on what we saw here at Buzzient with the recent Iranian election.

First of all, I was amazed at how quickly the social media community jumped on this issue and instead of being passive, became very active.

Second, I observed that the "digital resistance" organized very quickly, into self-managed and led groups. These folks put together proxy server lists, changed their posting locations to Tehran, whatever it took to add themselves to the legion of those wanting the results challenged. This resistance also took it a bit far with DDOS attacks and otherwise, but it was fascinating to see how quickly the partizans formed.

Last, I have to admit I felt proud that Buzzient's product, Buzzient Enterprise, was able to monitor Twitter in real time and create a social network of who was posting about the election. We've subsequently had more than a few requests to share the data, but we're going to err on the side of extreme caution here, as we don't want to endanger any of the people involved. That being said, it is remarkable to see how technology can enable both the resistance to political impropriety(suspected, not confirmed) as well as inform the casual observer.

Buzzient

After a long, self-imposed hiatus, I'm back posting. I've been deeply involved with the formation and launch of Buzzient. Buzzient is the result of work my cofounder Andreas Goeldi and I started at MIT in looking at cloud based applications. We realized that there was a huge opportunity not only in running an app in the cloud, but in helping enterprises understand the wealth of data growing in the ether.

Long story short, over the last 2 years we've built an application that harvests, analyzes, and quantifies what people are saying in social media. We've linked that to applications such as Salesforce.com and SugarCRM, and will expand the set of applications dramatically over the next two quarters. Thus, we're able to not only provide insights into social media, but can make social media actionable by connecting it to application workflows.

That's it for now. Check out www.buzzient.com or our crunchbase entry: Buzzient on Crunchbase   for more on the company.

Why I got out of the Homeland Security Business...

I've not posted for a while due to a stealth mode startup I'm involved with. In the interim, I've had the chance to reflect on past areas of interest, including homeland security technology. Though I still maintain active interests and relationships in this area, and have a deep belief that technology from our existing labs and universities can be marshalled to detect and project against terrorism, it's frankly a lousy place to do business.

Here's a classic example why:

Big Box Retailers block cargo container scanning

Net Net: Large, influential companies such as Home Depot and WalMart are actively lobbying to PREVENT the use of technology to scan 100% of containers coming into the U.S. . That's right, PREVENT the scanning of containers for potential radioactive, biological, or explosive threats. Why? Because it will generate  an expense of ~$20 per container. Now, there are 20M odd containers coming into the U.S. each year, so the aggregate expense is substantial, but spread across several multi-billion dollar revenue companies, plus a network of transporation interests, this strikes me as incredibly short sighted.

I had the pleasure to visit the Kennedy Space Center over the winter, and I marveled at how we once "girded our loins" (In the Shakespearean sense) during the '60s to go to the moon. Once upon a time, personal courage and national interest came together to achieve great things. Now we live in an age where large, stodgy companies who invent NOTHING block the use of technology so that they can keep the cost of Chinese flip flops as low as possible.

Time for Home Depot et al to Cowboy up and act responsibly. In the interim, there a sea of companies like AESI, Savi, etc. that could potentially help introduce new technologies to achieve a 100% scanning goal, but they're at the mercy of the big boys. Hence, a noble cause, but a lousy place to do business.

Global Mobility

I'm in Sweden and Holland for a week, but couldn't help but write about wireless and mobility on this side of the pond. I'm continually astonished at how mobile technology is embedded in Scandinavian society; on a trip out to Sandham in the Swedish Archipelago, we had top notch coverage on mobile devices and were able to download ringtones and songs on our way into the Baltic.

Contrast that with Sand Hill Road, where I ALWAYS lose a connection at the junction with Highway 280...Hmm....

Enterprise 2.0 update

I'm just coming off a week spent at the Enterprise 2.0 conference in Boston:  Enterprise 2.0 Conference

My general feeling is that this market is in the early stages where the food chain isn't clear. There are a number of collaboration companies that classify themselves as E2.0, but it's not obvious what if any greater capability they bring to users. Even more daunting is the lack of clear financial benefit to this movement. Though some dismissed my constant badgering of speakers/presenters as to the ROI, I think it's important that financial metrics be established to enable faster adoption.

Eba Systems

This is definitely a month where I'm having a lot of flashbacks. Today, someone in Australia sent me a link to a product I conceived and architected as founding CEO of Eba Systems.

Eba Systems Archived link

Download eba_systems_press.zip

Eba Systems product lives on!

Back in the early, painful, optimistic days of enterprise wireless data and WAP, I was convinced that enterprise users would demand corporate data on handheld wireless devices. Never mind the fact that in 1998, the convergence of the internet and wireless applications was just starting; I foolishly believed this would all come together in 3-5 years. At any rate, I put together a team that developed the first wireless application server that connected Siebel Sales Enterprise to PalmOS devices. We managed to generate about $250K in revenue AND ship the product in 9 months on only $1.2M of outside funding(yours truly was in the hole on this some additional amount I don't even want to know to this day).

We were early, I made a bunch of mistakes as a first time CEO, but came pretty close to selling the company to Siebel before having to settle for a lower cost sale to Iormyx. The day of our big demo to Siebel was probably one of the most important lessons I've every learned; EVEN if you delegate something to your direct reports...Verify, Verify, Verify...but that's another story...

I believe that enterprise wireless applications aren't dead at all; actually I speculate that a lot of companies are toying with deploying low cost, internally developed apps to WiFi or WIMAX  in the near future.  A lot of wireless development energy has focused on the consumer; I will be interested to see if the widgetization on the consumer side leads to better experiences for enterprises.

Download iormyx_wireless_framework.doc

MIT 100k 2007

I hadn't gotten around to posting this earlier, but this is the list of 2007 Semi-finalists for MIT $100k. I'm unfortunately going to be either in NYC at the Enterprise Search Summit, or on a plane to China, so I'll miss this year's presentation. That being said, the trick with $100k is not to find the winner, but the first or second runner up(those are the companies who end up being good investments, e.g. Akamai).

Download 2007_semifinalists_mit_100k.pdf

The Economist and Enterprise 2.0

I just found a great piece of additional validation of the Enterprise 2.0 theme. The Economist Intelligence Unit(EIU) just published a great survey of why companies have begun to use Web 2.0 technologies for business use. All of the major cost drivers previously mentioned are there, but it's also quite significant that a big reason is the ability to extend channel relationships and customer intimacy via these platforms.

The impending disruption for enterprise software, applications, and infrastructure companies will, IMHO be huge.

Download serious_business_web20_eiu_white_paper_o8eqe1.pdf

Biotech for Business

A friend of mine sent me a link to an old article from the Duke Alumni Magazine. It's about the time I spent at the "Biotech for Business" course at Duke. Duke Biotech for Business Certificate Program

I HIGHLY recommend this for people trying to get an overall grasp of biotech as an industry, and the key processes and technologies.

Actually, I'm tempted to attend again, since there's been so much change in just the last few years...

2007 Lemelson-MIT Prize

I'm setting up a meeting with Prof. Timothy Swager, who recently won the $500k Lemelson-MIT Prize.  Dr. Swager heads the Chemistry Department. Notable innovations include lasing sensors for building security, imaging agents for detecting Alzheimer's as well LCD manufacturing technology. One of his most notable inventions are fluorescent polymers that can be used to detect explosives. This technology was licensed to Nomadics, which has deployed the product as a hand held explosives detector:Dr. Timothy Swager, Nomadics, Lemelson Prize, Explosives Detection

This is an area I've spent a LOT of time in. Actually, four years of my life trying to spin out technology from Georgia Tech to do a similar thing:  BionTTech  Unfortunately, the technology at GA Tech wasn't mature enough, but we did get as far as TSA testing. It is good to see market validation of the idea, and acceptance by a device/platform vendor.

I believe that a number of innovations such at Dr. Swager's are out there that can be easily translated into working dual-use solutions for both Homeland Security as well as industrial purposes. With over 75% of the nation's infrastructure in private hands, I believe that infrastructure protection will become an increasingly more important agenda item for boards of directors and risk managers. Given that ADT was acquired for over $2B cash for simple fire and intrusion alarms, I have to believe that the opportunity to protect buildings, bridges, airports, shipping etc from explosives and chemicals is a much bigger problem.

Google Apps

One of the reasons I came back to MIT was to work with great people in the IT space. The Information Technology group at Sloan has been consistently ranked #1 for research productivity as well as for output. Key faculty like Erik Brynjolfsson, Stu Madnick, Peter Weill and others are principal thought leaders in how information technology changes the lives of business and consumer users.

I had the pleasure to work with some great colleagues this year, Andreas Goeldi and Bobby Lo. Together, we created a strategy piece for the rollout of Google Apps Premium. This is Google's first major attack on Microsoft's desktop hegemony.  The analysis was very well received, and has led to a number of great dialogues with Google.

From this experience, I see a LOT of opportunities in the application layer above search. More on this later...Download 15_567_google_enterprise_installed_solution_goeldijoneslo.pdf

Convera and RetrievalWare

Well, sometimes an idea is so good that you can't be alone in thinking it. Basically, since December I've been trying to put together a way to acquire the Retrievalware product from Convera. Enterprise Search is going to be one of the key battlegrounds for Enteprise 2.0; Oracle, Google, Endeca, Microsoft, IBM/Yahoo and others are already battling it out to become the dominant provider of Inside the Firewall(IFW) search. Even though Google is the winner Outside the Firewall(OFW), they see the need to create recurring revenue streams from corporate customers.

Without going into details, I wasn't able to get private equity backing in time for a deal. Last week, FAST, the Norwegian enterprise search company did pretty much the exact deal I proposed, for $5M less than I thought possible($23M). With this deal, they're buying a franchise of enterprise search customers in the government/security area, plus the ability to expand into adjacent markets. Details of FAST purchase of Retrievalware

Oh, well, it's like flyfishing. There's always a bigger fish out there somewhere...Download enteprise_2.0 Business Launch Proposal_Feb107.pps

Enterprise 2.0

Well, it's taken a few years, but my original thesis of web technology replacing existing enterprise software infrastructure appears to be taking hold. Enterprise 2.0 is fundamentally about professional consumers, or "prosumers" bringing web 2.0 technology to work with them to build now classes of applications. We've seen the same thing happen in the past with Microcomputer applications(Lotus 1-2-3), with Client Server applications, and with intranet applications running against web servers. Now, the next generation has arrived. Blogs, enterprise search tools, wikis, are all going to supplant/augment/replace more expensive applications.

I detail some of my thoughts here...Download enterprise_2.0_General Overview.pps

Optics on a Chip

MIT Optics on a Chip

Recently, a lot of buzz has being created around a new optical semiconductor approach out of MIT. Erich Ippen and Fraz Kaertner in the EECS department have developed a new means of dealing with polarization problems in photonic circuits. A few of my colleagues and I are starting to look at this, and will try to determine how much real opportunity there is here.

Treethanol

Sometimes truth is stranger than fiction. For the last several years I've been talking about pine tree property in Georgia, in the area where my parents where born. Because of the boom in construction, and exports of hardwoods to china, the market for timber has boomed. More recently, the desire to create additonal high-yield sources of ethanol from other than food crops has caused energy investors to look towards pine trees. Recently, Vinod Khosla committed to invest over $200M with Range Fuels in Soperton Georgia, the same area I've been looking at for a while. Right now, my email is filling up with notes from people trying to jump into this "treethanol" boom in Georgia. Hopefully, this is a sustainable alternative to using corn or sugar cane for ethanol production.

Superbugs

Well, after a long winter break(I'd forgotten how long MIT breaks and how discontinuous it is...)I'm back. I've also had a nasty run in with one of the new superbugs, which I caught after rowing(Norovirus). Not only did it spread like wildfire through my rowing team, but also through my Sloan Fellows cohort. It's clear that there are a new class of bugs that are pretty resistant to existing treatment. Bill Ericson of MDV was interviewed a while back about how certain bugs are emerging in hospitals, and are resitant to antibiotics. I could see with demographic trends, greater reliance on health care, and more globalisation, that this problem only gets worse.

Cyberposium 12

Yesterday, I attended Cyberposium, Harvard Business School's annual tech conference. In a nutshell:  heinous.  This isn't the MIT alum in me speaking out, but the difference in quality between MIT Sloan conferences and HBS was staggering. I really expected more, even on the superficial stuff.  Not even close.

The Keynote speaker was Marissa Mayer of Google. Since she's been with the company almost since the beginning, I thought we were in for a real restrospective look at user experience technology, and where the cutting edge is evolving. No such luck. Instead, we were treated to a hour + "GoogleMercial" of all the cool things that they're building. When someone in the audience rightly asked about why we were talking about such "groundbreaking" products as Orkut, when it was Adwords/Adsense that generate 98% of the revenues, it was just glossed over.  All sizzle, no steak.

I also attended an interesting discussion on Healthcare Informatics. Despite the seemingly obvious benefits of electronic patient management systems, the healthcare industry seems to lag other industries like finance in the use of technology. This panel made it pretty clear why: it's fundamentally disfunctional. It seems that every player in the value chain is captive to the insurance companies and to the handful of doctors/agencies that control licensing of specialists.  I walked away with the concern that even if substantial technical advances are made in drug discovery, pharmacology, etc, that the industry is so broken that it wouldn't really matter.  The analogy I thought of is the airline industry. If all of a sudden, every passenger plane could fly at mach 3 with the same fuel costs, would the industry get any better? Probably not.

The healthcare panel did spotlight one of the more passionate entrepreneurs I've seen in a while: Jonathan Bush of Athenahealth. He's got an ideal background for this industry, with both on the ground experience as a combat medic and EMT: 

AthenaHealth

I did walk out of the room feeling that this is a market that doesn't need slight adjustments, but total obliteration. Someone needs to attack the billing, management, collaboration elements of healthcare information systems and bring a 10X force of cost reductions to this business.

Object Recognition

One of the other background projects I've been working on is with Ken Zolot, who I teaches the i-Teams course, where student teams build commercialization plans for Deshpande Center innovations.  One of the technologies that came through earlier is a method of visual recognition that attempts to simulate how neurons operate. Theoretically, this will provide faster photo/video recognition for internet applications than current methods that utilized pixel differentiation. The technology comes out of the Department of Brain and Cognitive Sciences, and the Lab of Tomaso Poggio:

Poggio Link

Right now, a number of VC's are crowding around this technology to do a seed round. Most likely, it's greed caused by YouTube and the potential to ride off of that valuation. However, this is a crowded space, with a lot of competing methodologies. At this point, I'm encouraging the Post-Doc who's working on this to build some sort of conceptual demo that uses the core technology; it's important to understand how well this stuff really works.  More on this as it progresses.

The Flying Car...revisited

Ok...I'll say up front that I think the guys behind  this are certifiable. Absolutely in need of clinical help. that being said, I appreciate the outrageousness of this...the flying car that you can drive home. Yes, they're trying to go after the X-prize as well. The thought of Boston drivers cutting each other off at 25,000 ft is frightening, but I gotta give them credit for vision(whether peyote is behind it or not)...

the Flying Car is back...