I have writing a blog now for almost 2 years. From time to time get comments, sometimes an email (or even an old fashioned phone call, usually from Elie Wurtman) complimenting me on a blog posting. The feedback is nice, reminds me that I am not only writing for myself (which I am) but also for others.
While I am not the world's greatest fan of Facebook, or its bloated valuation, it definitely has created a public commons, a place where people feel free to express their opinions. Perhaps, like Wikipedia, it should be turned into a massive non-profit. Throw a search box in there, share the ad revenues with Google et al, will definitely be enough to cover costs of operation (like the Mozilla browser).
What prompts my thoughts on this? Well, was on a super boring conference call a few days ago, and was fiddling around with Facebook and decided to write something in the "status" box. I wrote that I was waiting for President Obama's speech to start, and that I hoped he would "say the right thing." That launched a debate (on my rather vague status update) which currently has more than 19 comments. More than any blog posting I have written, and the comments are well thought out, whole paragraphs, not just a few words here and there.
Incredible. As always, proves that people have way too much free time, but also that a simple to use interface, which will guarantee "exposure" will be enough for many to write and write. And it is somewhat unmoderated. As long as you are a "friend" of mine you could comment to anything I throw up on my facebook page. and yet for the most part the self moderation works...not too much abuse, language is kept in check, little outright digital vandalism.
Facebook has developed as a powerful medium, and I am not sure if it is yet at the peak of its power (we will have to see how its kissing cousin, Twitter, develops), but it certainly is no closer to developing a real business than a year ago. And perhaps that's OK, if Marc Zuckerberg gives up on dreams of billions of dollars, and instead decides to donate facebook to the people. He is young, I am sure he will figure something else out to make sure he gets his riches. And/or he could donate it with the caveat that he gets a $X million a year salary for 10 years, enough to feel that he has real money, but far short of Sergei like riches.
If any of you know Marc, pass this thought on to him. From an ego point of view, he did it. Now he needs to decide where to go from here. Meanwhile I am thinking up my next creative status update....
Ok, you ask, what possibly could be the connection between the suggestion of Henry Blodgett that Google purchase Twitter for $1 billion and the Jews?[see Henry's full posting below] Well, besides the fact that there are a nice number of members of the tribe at both companies, I really am using the "Good for the Jews?" question as a way of asking two parts:
-Is this good for the world in general?
-Is this good for Israeli start-up scene?
On both counts, answer I come up with is NO!!
Regarding the world in general, or more specifically the start-up world, wacky prices paid to one-off "success" stories are never a good thing. I am not going to start arguiing right now if Twitter has or has not brought about a real paradigm shift (as I believe Google did, not so much with search technology itself but how it was applied). (I do not believe Twitter has yet accomplished that). But paradigm shifts do not a business make (sometimes they could, a la Google).
Twitter has yet to show any clear business direction, and until they do their value is somewhere between zero and the amount of money invested in building the product and attaining the user base.
For the Israeli start-up scene, we need to be building businesses. The more entreprenaurs are fooled by Twitter-like companies that building a no-revenue company is a good idea we will sink deeper into a real depression of the tech sector here in Israel. We do not have the capital allocation in Israel that allows for silly investments (just think how many companies will get funded to be the next Twitter...if Google buys them for $1 billion).
Specifically, it should offer the company $1 billion, cash.
Google needs a huge new growth engine and Twitter might just fit the bill. The current search product cycle is coming to an end. Google needs an "Office" to go with its "Windows." It hasn't found one yet. Twitter--and real-time search--could end up being a monster. If Google waits around to see whether it really WILL be a monster, Twitter will be a hell of a lot more expensive. Remember when Yahoo's Terry Semel whiffed on buying Google?
Twitter is a hell of a lot more relevant to Google's business than other big Google ideas, such as YouTube or Larry Page's plan to have Google solve the world's energy crisis (see his crazy talk of two years ago). Twitter is also about communications, which is the one part of the content-communications-and-commerce Internet tripod that Google is still weak in.
$1 billion is couch change for Google. Google generates $1 billion of cash every two months. If Twitter ends up being worth $0, as some people persist in thinking, Google can just say "oops" and take a minor write-off. If Twitter ends up being worth a lot more than $1 billion, however, as we and others think is likely, Google will make money. If it ends up being a monster, Google will make a lot of money.
Twitter could conceivably threaten Google's cash cow--search. This "real-time search" meme is actually a compelling story-line. If you want to know what people are talking about right now, you go to Twitter, not Google. Twitter hasn't figured out how to make bank off that yet, but it may well do so. Remember how much ridicule was heaped on Google's worthless "search engine" in the early days?
Like Google, Twitter is already a verb. What company do you know of that owns two verbs?
Would $1 billion be enough to get the Twitter boys to part with their baby? It might, actually. $1 billion is still a lot of money, especially for a company with no revenue. And Google's global distribution and technology infrastructure would be a help to Twitter. So they'd be silly not to take the offer seriousy.
Yes, I continue to be stalked in Twitter land. I have not "twitted" (or is it "tweeted") in over a year, yet almost daily get messages that someone new has signed up to follow me on Twitter. Must be boring to follow me, as I have been standing in place in Twitter land. Yet the guys at Twitter continue to "succeed," by certain metrics. The media love them, elites all over the US have adopted it as a platform of "communication" (how much can you really say in 140 characters, perfect for the ultimate soundbite). And they continue to raise money from "serious" VCs.
Keep in mind, while they do theoretically have 6 million users (how many are like me?), as of today they have generated ZERO revenues. Nada. Nothing.
Now I think Twitter is inane enough that even as a non-profit it should be shut down -- I posit that their value proposition is negative. But that's another discussion. Now I want to limit myself to the question of value creation...why is Twitter worth anything in this environment, shouldn't the VCs wait to invest more until after some business model emerges (and has traction)? How much does it cost to run Twitter after all??
Twitter is succeeding at making fools of all of us that are calling for sanity in start-up culture, and has a negative influence on entrepreneurs (everyone wants to be Twitter).
Anyway, I think Jon Stewart best sums up my personal frustration on the service and its contribution to the world...see here:
Long ago a business colleague told me that he operates according to the KISS principle. Now, he was a nice guy, reasonable good looking, but I was not interested in that kind of relationship. He quickly explained that KISS stands for Keep It Simple Stupid. Ahh...that king of kiss sounded great to me.
We have enough complexity in forming start-ups, given the challenging nature of a new business, the last thing we want is to add layers of complex corporate mechanisms. KISS sounded like a great principle, and one that I have tried to live by...in the face of law firms doing their duty and looking to make a living.
This week we at Jerusalem Capital were involved in a refinancing of one company, M&A transaction of another, and "regular" course of business in a few others. And there is my new Hanaton project (more on that some other time), non-profit board meetings, etc. Throughout all of that I struggle to keep people working according to KISS.
With that in mind was pleased to come across a posting (pointed out by Brad Feld )from Techstars giving actual copies of financing documents for a typical seed stage deal. The full posting and the docs themselves can be found here. If that link doesn't work for you, try http://www.techstars.org/2009/02/07/techstars-model-seed-funding-documents/.
In these challenging times, we need to do everything we can to strip away noise and focus on what's important. Thanks to Techstars, at least the financing part can be kept to KISS.
Received a Facebook message notification this morning through email. Now, this was actually an important message that I needed to respond to in a timely fashion, from someone I became Facebook "friends" with, but did not have his direct contact info (nor he mine, which is why he used Facebook to communicate). When I tried to respond, received the message below (yes, tried a few times)...obviously Facebook is not ready to be a "mission critical" application. No company is too big to fall. Unless Facebook grows up and becomes a truly always-on app, achieving a 99.999% service level, they will fall.
So Twitter still hasn't figured out a business model, but from my personal experience these last few months they have continued to grow. I, however, question the value of that growth.
You see, I have used Twitter a handful of times, mainly to get the feel for it when it first started. I quickly lost interest, as I did not really feel the need to broadcast my location or thoughts on an instant basis throughout the day (and night...). And for a few minutes "followed" the Twitter output of a few friends (and some folks I thought looked interesting). I stopped following because I felt the information I was receiving was beyond boring, or made me feel like I was eavesdropping.
Then over the past few months I started to receive "________ is following you" notifications from Twitter. Over the past few weeks its at least 1-2 a day. Shows the power of ongoing viral spread. Most of it is of very low value, as shown in my case. People are not choosing to follow me, but rather are signing up for Twitter, and then simply pressing "next, next, next," and automatically Twitter signs them up to follow anyone found in their contacts that has a Twitter account...in other words, they become stalkers without even knowing it. While this is growth of the Twitter "network," it is very low (to zero) value). It is one step away from spam.
On the other hand, had a different experience with Twitter last week, which was high value and quite positive. As you know, I spend less than zero time promoting my blog, but here and there it still gets out. I recently wrote a posting about managing a start-up during these difficult financial market conditions, called Running on Empty, which got picked up by Guy Kawasaki in one of his twitter broadcasts (not even in his blog !). I saw an immediate surge in readership, hundreds of people came to my blog simply because Guy had included reference to it in a "twit" (or is it "tweat?").
Now here I think i start to see the real value of Twitter. Not as a way to know when my long lost cousin is crossing the street, but rather to get up to date suggestions from Gurus as to what I should be looking at. That sounds like something I would even pay for...and I'm a cheap guy!
In the old days there was a thriving newsletter business, where smart people published newsletters, and sold very high-end subscriptions -- because there was recognized value in the content, based on the author.
Twitter is poised to transform from a Spam machine into a nex-gen broadcasting service, but they need to stop with the annoying (and devoid of value) network creation, and go back to the old model, of targeted audience paying to hear what their oracle[s] have to say.
OK, so I have not been the greatest Facebook fan in the world (but did just check my Facebook account for first time in a week, discovered that a friend's dog died. That was a waste of time). But even I am surprised that Facebook co-founder Dustin Moscovitz is leaving to start a company that...now get this, will be leaving to start a rerun of Lotus Notes (remember that program? It actually ran the majority of Fortune 2000 systems for a period of time). Huh?
According to Valleywag Dustin sent out an email to colleagues at Facebook, in which he said:
"I've seen us unblock ourselves time and again with new tools to increase transparency and passive information flow and many times it was the fruit of my own labors. While working on improving Facebook's tools, however, I came to a very difficult conclusion: doing this for all the companies of the world was not the same project as doing it for one of them. This idea is one that needs an organization that was built to do it, with every fiber of its DNA engineered in a way that producing an extensible enterprise platform becomes little more than the logical consequence of an organism executing its own nature." [emphasis added]
Wow. A bigger pile of [nonsense] would be difficult to find. Either Dustin is smoking some really good stuff, or five years of being poked finally got to him.
We all knew that keeping good people around would be almost impossible for Zuckerberg and friends would be difficult if the future at Facebook became cloudy, and cloudy it is. No business model, high overhead, and a stock market barely functioning. Moscovitz's stock is not vesting, its his, and I am sure he will have no problem raising big chunk of $$ from silicon valley VCs still starry eyed by Facebook fluff. He will be able to pay himself a nice salary, and dream about corporate organisms executing their own nature. Sounds like VC version of Adult content [read PORN] to me, but hey, if it sells...
Now nothing is impossible, and Dustin could very well have some incredible concepts for better corporate organization, although he probably should spend some time in real corporations that have real products (and things like revenues and profits) before thinking he has figured enterprise nirvana.
What does all this say to me? The consumer social network eco-system has run out of gas. When one of the stars starts talking about enterprise software, means VCs should head for the exit.
For me, anything associated with the Wall Street Journal takes on an air of seriousness, woodcuts instead of photos, distinctive typeface, the whole package commanding authority. Now I know that perception is often far from reality, but the highlight of attending Demo conference last week was a fireside chat (well, without an actual fire) between Walt Mossberg and Kara Swisher, the producers of D conference, and columnists for the Wall Street Journal. And let me tell you, the conversation was nothing like I expected, especially from Kara Swisher.
Before I get to Kara's substantive comments about my favorite over-valuation in the past ten years, I want to dwell for a moment on how personal Kara got in her comments. From her "bite me Comcast" to her reactions to the "other conference" happening up in the BayArea (TechCrunch50), Kara was not at all the reserved Wall Street Journal reporter/columnist I was expecting (Walt stayed more true to pre-conceived notions).
First, in reaction to TechCrunch, Kara said (and this is in front of entire Demo audience, not sure if it was web-cast):
"Getting lectured in journalism ethics by Michael Arrington is like getting parenting tips from Britney Spears."
Kara and Walt then turned to social networks and the grandaddy of them all, Facebook. Again Kara got a little [too] personal, talking about Facebook CEO Mark Zuckerberg as a "twelve year old with stupid clothing choices."
Of course, she did follow that with some somewhat more serious thoughts/questions on Facebook and other social networks like: How do they make money? How do they grow?
Both of those are the key questions, Kara didn't have any answers. Not sure that Mark does either...
Why do I dwell on all of this so much?
For me, a relative outsider, in from Jerusalem to check in on the pulse of technology entrpreneurship, I was reminded how much of an insider game the tech world remains, even in the always on, twittered to death era we live in. What do I mean by that? Well, why do people physically gather in conferences to begin with? Because being there matters, and in the end personalities drive business.
A lot can be accomplished in the virtual world, where things can get personal as well, but in the end physical interaction can't be beat.
Last week TechCrunch passed 1,000,000 subscribers to its RSS feed, which is quite an accomplishment (consider that the Wall Street Journal subscriber base is only about 2 million). Michael Arrington and friends definitely are a force to be reckoned with -- and they know all too well that physical beats virtual hands down. Which is why Techcrunch hosted a competing [physical] conference to Demo.
What does this mean for Jerusalem Capital and our portfolio companies? That we need to get personal as well, we need to be in direct contact with key industry players on a regular basis, and need to show up in order to be counted.
Oh, and regards to the 12 year old with poor clothing choices, well, you all know what I think about Facebook....definitely not worth what Mark and Microsoft think it is/was, but also not going away anytime soon, unless they run out of money. And with Lehman days away from a fire sale, anything is possible.
Pretty soon there will be a global "denial of service," caused by the ever increasing hi5 attacks. I hope that somewhere in hi5 management (and/or board, VCs) there is someone paying attention to the blogs, because public frustration is building. And at some point (if we have not reached it yet) a class action could be filed against hi5, on behalf of the Net public, for harassment and waste of good screen space. Just think of all the milliseconds we waste deleting all those hi5 "friend" requests.
Here is another email from a real friend of mine, in response to my query as to whether he really sent me a hi5 invitation:
Lets hope that the hi5 attacks end soon, and we can return to our regular spam....