Head in The Cloud(s)

Back to the Future: The Revival of Defense Investing

Time really IS a flat circle. Once upon a time, the collaboration between the U.S. Department of Defense (DOD) and the tech industry was ironclad. In truth, the tech industry WAS the defense industry. What we know as Silicon Valley and Route 128 were spawned from the needs of DOD to iterate outside of the procurement process, and to source groundbreaking new designs for hard technical problems.

This all changed in the early 1990s with the "peace dividend" resulting from the end of the Cold War. Almost immediately thereafter, the Internet (developed with DOD money), was co-opted by the advertising industry, and the rest is history. 

Recently, this has all started to change.

A combination of several factors is contributing to a newfound interest by venture firms and early-stage startups in working with DOD:

• The rise of Great Power competitors
• Government funding for key enabling technologies (CHIPS Act)
• New Platforms (AI)

Over the next several posts, I'll explore these themes and why, this time it IS different.

Back to the Future

Thoughts on how to allocate equity for early stage startup founders:

https://www.slideshare.net/tbjbuzzient/dividing-startup-equity

Thoughts on whether or not to become a Startup CEO for scientific founders:

https://sway.office.com/xsyL23sjXCGXNxD0?ref=Link

Cleantech 2.0 is coming

As expected, a second wave of clean energy investing is now in force. Experienced investors from the first wave (2005-2014) who had less than impressive returns are back in action. Much like the second wave of internet investing that led to the massively valued social media companies, I anticipate the Cleantech 2.0 will yield a number of valuable franchises.

On a related note, the research on VC and cleantech that TBJ Investments contributed to is on Connected Papers, which links the paper to prior art and derivative works:

https://www.connectedpapers.com/main/61a95467ba058f0ced44cb5afd4ea5805f804ef3/Venture-Capital-and-Cleantech-The-wrong-model-for-energy-innovation/graph

Recent Media Appearances:

https://www.youtube.com/playlist?list=PLozrF7JyXfJ9WDTCG7cv9zPSWsWh2tDbc

Here's where SPAC's make sense:

If you take the old school mentality that an IPO is a financing mechanism, and not a liquidity mechanism, a SPAC is ideal for Cleantech. A SPAC IPO provides access to funding to take a clean energy innovation to scale; this is far beyond the time/patience window of VC's and even the most patient corporate investors. SPAC's therefore are one of the BEST ways to solve the duration problem pointed out in the paper published in collaboration with Dr. Ben Gaddy a few years back:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2788919

For more on SPAC's and CleanTech read here:

https://climatetechvc.substack.com/p/-the-state-of-climate-tech-vc-and

Predictions for rest of 2018:

1. SAFE Notes will increasingly show themselves to be one way piers, and not bridges to preferred rounds

2. Lowered barriers to entry mean that there is an oversupply of SaaS companies. We're start to see consolidating in the private market as a result

3. The Intel security debacle will re-energize the semiconductor market

More Later...

Congrats to iRhythm Technologies on their IPO today! Proud to be an investor.

Quick Summary of Past/Current Investments:

* Mohr, Davidow Ventures ENF VII * Mohr, Davidow Ventures ENF VIII * Bessemer Trust Meadowbrook Equity Fund * Buzzient * BionTTech * Eba Systems * OpenVision Technologies * Veritas Software * Symantec * CardioDX * Finsphere * Genomatica * Gordon Murray Design * Infusionsoft * iRhythm * RainDance Technologies * ZeaChem * CarrierIQ * PBworks * Technorati * X/Seed Capital Management * Adamas Pharmaceuticals * AudienceScience * Nomi (Merged with Brickstream) * Brickstream * Buzzient * Pacific Biosciences (IPO) * Panasas * Verinata Health * Xambala

Seems that the #Brexit is settling in. From my experience running a software operation from the UK with multiple European operations and customers, it's about to get nasty if England(!) doesn't get access to the Common Market. Bring back the days of overpriced, bad English products/services.

Venture capital (VC) firms spent over $25 billion funding clean energy technology (cleantech)
start-ups from 2006 to 2011. Less than half of that capital was returned; as a result, funding has
dried up in the cleantech sector. But as the International Energy Agency warns, without new
energy technologies, the world cannot cost-effectively confront climate change. In this article, we
present the most comprehensive account to date of the cleantech VC boom and bust, aggregating
hundreds of investments to calculate the risk and return profile of cleantech, compared with
those of medical and software technology investments. Cleantech posed high risks and yielded low
returns to VCs. We conclude that “deep technology” investments—in companies developing new
hardware, materials, chemistries, or processes that never achieved manufacturing scale—drove the
poor performance of the cleantech sector. We propose that broader support from policymakers,
corporations, and investors is needed to underpin new innovation pathways for cleantech. Public
policy can directly support emerging technologies by providing easier access to testing and demonstration
facilities and expanding access to non-dilutive research, development, demonstration, and
deployment (RDD&D) funding. The public sector can also encourage new investors and corporations
to invest in cleantech innovation. Corporate strategic investment in emerging technologies
coupled with deep sector-specific expertise can accelerate scale-up and provide access to markets.
And non-VC investors willing to supply substantial capital for a decade or more are more likely
to reap satisfying returns in the long run, if they work with those partners to help develop and
de-risk technology.

Research I contributed to on Cleantech VC is now up on SSRN. It made the top 10 Downloads list:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2788919

Great to have @POTUS call for Silicon Valley to get more involved in National Security. In reality, the valley has taken a 10 year hiatus from this domain.

Kissing Your Sister on the Cheek -- VCs and Risk Asymmetry

There's an interesting article today by Sarah Lacy in Pando Daily.  In it, she analyzes why there seem to have been a lot of high-profile failures among "celebrity" startups that had raised tons of money, and were being touted as doing very well by their boards and investors up to the point at which they failed.  In addition, she laments the fact that, in today's environment with the growing cult of the celebrity entrepreneur, boards seem willing to let "celebrity" startups spend all their money despite the obvious fact that the business is going to fail.  Here's what she wrote:

via allensblog.typepad.com

I'd argue that there is a 3rd prize; a healthy income on the 2% mgmt fee...

Here's my recent comments on Fred Wilson's blog re: Tech Diversity

http://avc.com/2015/01/some-thoughts-on-workplace-diversity/#comment-1784511010

I'm hearing more and more about Open Data. Good discussion to have; we don't need to create as much new data as much as provide access to what's already there...

Lots of big VC rounds are being raised. A number of companies have raised $100M+. It's probably important to note two things:

1. The collective market caps of companies in certain sectors exceed the market sizes of those sectors

2. 75% of most exists are below $100M.

This chart is a good primer on where most exits fall:

 

Getting awful bubbly out there...

Tom Siebel for President

Source: Flickr

via www.brucedaley.com

Needless to say, the campaign would be quite...explosive...

Oracle Siebel Release Schedule Changed

In his Siebel Essentials blog, Alexander Hansal continues his exploration of  the Siebel Open UI.

via www.brucedaley.com

VERY interesting. Oracle going to monthly updates on Siebel.Implies a lot more life in the platform. This is logical since Oracle gets $1B in maintenance reveneue (equivalent to $3-$5B in market cap effect).

Alex Hansal also points out the underlying reason why so many production Siebel customers are neither upgrading nor migrating from Siebel: The upgrades require such a major repository merge that for a large organization, this could be person-years of additional development to resolve.

Migrating to Salesforce(and losing years of customizations) would be an equivalent expense.

Hence why so many customers are looking to "Innovate around the Edges" of Siebel vs. upgrade or replace.

Lessons from the Death of a Tech Goliath

By Bruce Cleveland

via www.brucedaley.com

Couple points to add:

1. Siebel maintenance spend is actually growing not decreasing. Siebel customers spent $1B on maintenance in 2013, up from about $600M in 2011.

2. Saleforce may dominate the edge of the network(marketing), but especially in Telecom, Siebel still owns the core (alongside Amdocs, Oracle, SAP, etc)

3. With my portfolio company Buzzient, we've seen  a few behaviors recently:

• Users giving up on Salesforce for departments other than Sales and Marketing
• Users choosing Oracle CRM On Demand (i.e Siebel On Demand) in NEW deployments, over Salesforce and Microsoft
• Users refusing to upgrade Siebel to Version 8.2, where Oracle provides Social CRM support. In fact, we've learned that many of the largest Siebel customers are not even v8.1, and many are v7.x

We all have a lot to learn from Bruce's recollections of this moment in time, but it's also valuable to step away from they hype and see what's really going on with customers still using Siebel, potentially alongside Salesforce.

New Year, New Location, New Investment Themes

2013 was a year of transition. 2014 is going to be a year of dramatic changes. First off, we've made a few key moves at TBJ Investments over the winter. The most dramatic of which is that we moved out of Boston to Washington DC. Some of this is related to career opportunities, but the essential fact is that DC is going to go through a significant set of changes, and with that will be a number of investment opportunities:

• Unstructured and Big/Social Data Analytics
• Reorganization of the Intelligence Community, as fallout of the NSA/PRISM disclosures
• Rebuilding of the Security Software Stack
• Jumping off point to Emerging and Frontier markets, where GDP growth rates outstrip those of the USA.

Each of these themes will be explored in greater depth, but expect 2014 to be a dramatically different year.

 

Oracle Acquires Responsys

Adding to its portfolio of CRM solutions, Oracle Corporation (NYSE: ORCL) has entered into an agreement to acquire Responsys (NASDAQ: MKTG),  a cloud-based email and social marketing company to be part of the Oracle Marketing Cloud. Under the terms of the deal Oracle will acquire the company for $27 per share in cash or approximately $1.5 billion, net of Responsys’ cash. This represents a 38% premium over its share price the day before the transaction. In response to the annoucement, Responsys shares climbed to $26.90 in morning trading. Oracle Corp.'s stock added 3 cents to $36.63.

via www.brucedaley.com

Another "marketing cloud" acquisition. At some point companies will stop marketing to each other and start selling, supporting, and building things again...

Getting Social with Siebel #3: System of Record Management

By Richard Napier

via www.brucedaley.com

Why the Buzzient Social CRM offering for Siebel is superior; ability to link social data to current systems of record! #buzzient

Getting Social with Siebel #2: Can I Support Hosted and On-Premise?

By Richard Napier

via www.brucedaley.com

Unique to Buzzient is the ability to do Social CRM for Hosted, On-Premises, and Hybrid configurations

Getting Social with Siebel #1, Supporting Real World Scenarios

By Richard Napier

via www.brucedaley.com

Great summary from On Demand Education on the value of adding Buzzient to Siebel for Social CRM. A TBJ Investments portfolio company!

What I Learned at CCE 2013: Reality is Broken

The opposite of play isn't work, it's depression

via www.brucedaley.com

Great points by Bruce Daley from CCE2013. I'd also add that Social is a clear theme for all the enterprise players, and customers have this on the NEED list.

Siebel Blog Launches Siebel App Exchange

A leading Siebel blog has launched  an applications exchange for Siebel specific code similar to Salesforce.com's AppExchange. Called the Siebel Store, the new marketplace is the brain child of Oli Ollerenshaw a long time Siebel consultant.

via www.brucedaley.com

This is a BRILLIANT idea for the Siebel ecosystem. There are tons of production applications like Buzzient Social CRM which could be accessed this way.

Pando Marketing Platform Now Integrated with Siebel

EarthIntegrate has integrated its  Pando Distributed Enterprise Marketing Platform with Oracle's Siebel CRM and will use the interface to help onboard a large financial institution.  The institution in question has agreed to a $3,500,000, three-year contract in an effort to improve their customer's experience through better sales execution. The new customer will use the "Product Creator CMS," "Data Profiler," "Plan Administration >CMS," "Impersonation & Delegation" and "Approval Auditing & Archiving" modules of Pando.

via www.brucedaley.com

Interesting data point for those who don't realize how vibrant the Siebel economy still is. $3.5M deals are hard to come by, and most SaaS companies claiming the "death of Siebel" are nowhere near this ballpark.

More Buzzient social media analytics on $BA Boeing Dreamliner

There's more evidence of $BA Boeing brand damage after the battery debacle. Some of this has been listed in a previous post on the Buzzient blog:

www.buzzient.com/blog/the-boeing-dreamli.../

Since this original post, there's been a lot of noise about various aircraft fleets delaying purchase of 787's or even shopping for alternative airframes. If we take a look at Buzzient sentiment analytics for the last month, we can see this clear divergence for the 787 product line, where sentiment drops appreciably when compared to other Boeing products:

(click to enlarge)

The dramatic drop in the red line (787 model) corresponds to the time period where it became known how bad the battery problems are. Since that time, Boeing announced decent results, but we can see in the social sentiment charts a lingering gap in product sentiment. Will this show up in delayed orders in subsequent quarters? I think prudent traders, using this Buzzient data alongside other measures would advise a HOLD on $BA.

$CAB Cabela's: Negative correlation between sentiment and stock price?

 

 

This is one worth exploring. In comparing the Buzzient sentiment charts for Cabela's over the last 7 days and the Bloomberg chart for stock price, it's almost like they're inversely correlated:

 

 

Case in point, Feb 8 was the high point for sentiment, which correlates to the low point for the stock price in the past week. Is it that social sentiment drives new stock purchase behavior, hence the increase in stock price lags? If so, then using social media sentiment could be a VERY interesting and profitable technical indicator of where stock prices are going to go, particularly for long-oriented investors.  Will analyze this further over time, but another tidbit of data on the potential application of social media analytics and sentiment to equities, ETF, and other long instrument trading.