VCinJerusalem

If a "Tweet" Falls in the Forest....Does a VC hear?

If you have not yet heard of Twitter you are part of the blessed 99% of the population of the Western world that are not "early adapters." For professional reasons and general curiosity of the 1% (I consider myself to be a bemused observer of the early adapters) I signed up for Twitter back in January, although Twitter has been around as a public service since October 2006 (see here for more on history).

OK, so what is Twitter? Its is a messaging service limited to 140 characters...wait, all of you semi-Geeks ask, isn't that the same as SMS? Well, yes. And aren't there dozens of companies that allow you to message blast from/to mobile phones, PCs, etc.? Yes. So what is new about Twitter? Well, nothing and everything. Nothing technically new, that's for sure.

So what is/was new about Twitter? Well, they picked a funky name, that's always important (think Yahoo!, Google, Ebay...). And they specifically marketed their service to US semi-geeks (think self-important VCs and well-known bloggers). And timing was right, when [finally] the 1% crowd in the US felt comfortable messaging from their mobile devices. And of course after the first blogging wave, which already prepared us to be interested in complete nonsense(;-)).

One of the "features" that Twitter added (this feature exists in many blogging platforms) is to sign up to receive the tweets of a certain Twitter. Basically, to get their micro-blog feed. The 1% crowd loves this, all zapping messages to one other all day long.

As I said, I signed up, literally to just see what the sign-up process was like, see how it worked. Sent a few twits to test web/sms interfaces. haven't twitted in quite some time. But slowly slowly people have found me on Twitter and have signed up to "follow" me. So far only 18, but half of those people I don't even recognize their names! And there is nothing to follow.

To understand better how Twitter is being used by the 1% crowd, I popped over to Brad Feld's Twitter home page, and see that he has 1,383 people "followers" and that he is "following" 132 people. Very believable, and reasonable, given that Brad is one of the best living VCs, and prolific blogger. Persusing through his "tweets," I recommend he stick to blogging, and stop tweeting, but whatever makes you happy.

And then I looked at super-uber-blogger Robert Scoble's Twitter page, and see that he is sending tweets every few minutes (while awake, and sometimes while sleeping). He claims to be following 21,209, and to have 22,545 followers. Meaning every time he sends a tweet, goes out to 22,545 people. That's a lot of virtual ink. Does this make sense? Could he really be keeping up with 21,209 people? Doubt it, but maybe he has outsourced himself...

Bottom line: with all this tweeting, does Twitter make any money (you knew I was going to ask)????

Answer: a few weeks ago, on their Japanese version, started running some ads. Other than that, nada. no revenues.

The aptly named Peter Kafka wrote the other day on Twitter's current fundraising round, see here (asking the age old question, but this time for Twitter, How Much Is Twitter Worth?):

The bigger question: How do you put a value on Twitter, anyway? The company has only just started seeing a trickle of revenue, via advertising on its Japan version. But beyond that there's no money coming in, and it's not clear what the model will be.

While Twitter itself has great buzz, we hear the majority of the site's traffic comes from outside the site, via other apps like Twhirl, mobile access, etc. So traditional online advertising--a difficult prospect to begin with for a communications service (see the struggles of various IM, email platforms) may be even harder.

That said, based on Twitter's growth and brand dominance, $75 million post-money seems plausible. There must be a pony in there somewhere.

I am sorry, Mr. Kafka. A company that has no real technology, a usage base of uber-geeks, and no significant revenue should not be valued at $75 million. It's bad for the business of creating businesses.

The Facebook Explosion

So when something viral reaches me, it's really viral! While I follow the industry, unlike some of my friends I do not Twitter, rarely look at LinkedIn, IM limited to my very close business colleagues (ok, and sometimes my 14 year old daughter Michal), etc etc.

I know my widgets from my gadgets, my blogs from my blooks, and my avatars from my gizmoz. But a real user? Not really. When I am on downtime, I sit back with a good book (after reading the printed versions of the daily newspapers we receive on our front doorstep every morning).

Recently I started to see several "Facebook" invitations  in  my Inbox every day...a  phenomenon  my friend Jeff Pulver commented on as well. The main reason I have heard for Facebook's sudden surge is a new API, that has made easier than ever for people to connect various social networking platforms to Facebook. Or maybe simply Facebook passed the tipping point, and the viral vortex finally started to suck me in.

Whatever the reason, compelled me to take a look at Facebook...and I walked away [virtually] scratching my head...I cannot understand why this particular platform has caught on in such a big way. The interface is not intuitive or graphically pleasing.

But I will knock my head against the wall, but rather will embrace. See you soon on Facebook. We don't always need to understand everything, and we never will...

We Have All Thought About Answering This Way...

Email has long become the established means of communications for the global community. Its "free" (after the input device and Internet connection), works on almost universal standard, and fairly flexible (HTML format, plain text, attaching files, etc.).

However there are competing communications technologies and formats,including IM , SMS, blogs, and new entrant Twitter.  Each have their own  customs,  rules, and etiquette. Sometimes we forget that an email is not an IM, or SMS. We rush to answer, to show that we are part of the 24/7 generation (the Blackberry Effect) that is always "on."

For the past few days  I have  watched a  conversation  play out between  partners of  a venture  fund  in the  US and one  of our portfolio  companies.  Now, the  partners in the  US are  firing off  questions by email, and the CEO of our portfolio company is answering either on his Nokia E61 (full QWERTY keyboard) or his laptop. He is answering at the speed at which the questions come in, which I think is a mistake. Email is meant to be what is says it is, electronic mail, and mail should be an exchange of letters, hopefully that each sender develops with thought, and is treated the same by the recipient.

Unfortunately we are juggling these different formats and slip from one to the other and sometimes they blend, so that emails look like SMS (my 14 year old daughter uses SMS abbreviations in email, telling me LOL after I send her some witticism). Obviously the rapid fire approach does not lend itself to sufficient investment of time and/or thought when answering, and often we press send way too early in the process. [Perhaps Mr. Gates should introduce a warning after pressing Send -- ARE YOU SURE YOU WANT TO SEND THIS EMAIL??]

I came across this spot-on commentary to emails [click here ]...worth looking at, but keep in mind, as you watch, that the review process is very important in communication, and we should resist the slippery slope into IM life. Not everything  is meant to be instant, certainly not answers to questions about the very fundamentals of your business.   

No Business Model...But

So much of the time we (those of us playing venture capitalist) focus on questions of business model, revenue generation, path to profitability, exit, etc. Once in a while it is necessary to sit back and just appreciate how cool some of the applications we deal with are -- Twitter is an example. I have no idea what the eventual business model will be, but I recommend spending a few seconds looking at TwitterVision. It shows how quickly something can spread around the world...all I could say after first seeing it was "cool."

Would I have invested in Twitter? Probably not (at this point probably way out of our ballpark, valuation wise). That doesn't mean its not cool....