VCinJerusalem

Defining a "User"...Skype Says They Have 276 Million of Them: Questioning Where We Are in VoIP

Just reviewed a recent presentation by Skype GM Jonathan Christensen at Ecomm2008 entitled "A Brief History of VoIP." The full presentation can be viewed here or below. Besides a nice ego boost, in that Jonathan cites Delta Three, which I co-founded and helped lead, as a "pioneer," I came away with a few highlights, and questions.

Number one highlight, is that Skype (and others) went from talking in 2003 about downloads (500K in 2003) to "users." Jonathan says that today there are 276 million users of Skype. Believable? I think not, but depends on how expansive your definition of user is...When I tried to use Skype tonight (more on that below) there were 12.4 million "on-line." Not using, obviously, just running Skype in the background. No usage statistics are ever given....would be fascinating to hear what those 276 million actually are doing.

Number two, is that Jonathan does not relate to quality issues, which in my mind are still A BIG DEAL. VoIP has had a bad reputation since the beginning as a low quality phone quality, when in reality we geeks know that true VoIP should be better quality than the PSTN. Why is it [still] not? Because unless you control the network[s] you run on, you have no quality of service. Tried to talk to one of our CEOs tonight on Skype (he in hotel room in LA, me in my house in Jerusalem where I have 5 MB line), and after few minutes of CB radio like static has to IM him asking for hotel room number, and I called him using my POTS phone.

Number Three, while Jonathan claims profitability for Skype, as far as I know the only revenue they have is from Skype Out, which is nothing more than a cheap calling card for the PSTN -- in other words, they generate no revenue from  actual pure IP communications. Could they at least put ads on the Skype app? Sure. But I guess being part of Ebay, there is no rush to bring in new revenue channels...

Finally, Jonathan talks about "mash ups of web based communications," but as far as I know, Skype "users" are restricted to calling, on net, other Skype "users." Not much of a mash up there. In fact, sounds very much like a closed garden, even worse than regular phone network. Where are the inter-op agreements for Skype users to talk to MSN/ICQ/AIM/GoogleTalk users?

I have a lot of respect for Skype team past and present, but think VoIP community is still taking baby steps from the "pioneering" days of Delta Three, ITXC, VocalTec, and others. It is time for new pioneers to really move us forward in leveraging the power of IP communications.

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Sewing and Running, or The Jerusalem Half Marathon and My Daughter's Skirt

My father always says, when you want something done give it to a busy person to do...I've lived long enough to agree with him. But that doesn't mean that busy=efficient. I still am struggling with time management, as I have mentioned before in these "pages." In addition, there is a ordering of priorities that needs to take place, to find the place that best suits you in the life/work balance.

With six kids, multiple civic commitments, and running a start-up venture fund, I know what busy is -- and I know what can happen when you lose control over true priorities.

Anyway, yesterday was the annual Jerusalem Marathon, which is really a half marathon (21.1 kilometers). I pledged I would train, I told myself to get to bed early the night before. I didn't train at all, in fact only ran twice in the past month. Work, new baby in the house, etc.

The night before the race, I said, ok, now I need to get to bed early. My 9 year old daughter comes to me at 10 PM and says, "Abba, you need to sew my skirt -- my dance recital is tomorrow and we need to wear THIS skirt." I thought, oy, a button fell off, who has time for that...but then she held up a large piece of cloth, a strip of elastic, and scissors. I have never made any article of clothing before, let alone a skirt. I took a deep breath, and having realized that my highest priority at that moment was my beautiful daughter, I sat down with her and a needle and thread. After half an hour, threaded the needle. 2 hours later, we had a passable skirt.

Time management is important, and I need to get better at it, but priorities need to be order. Nothing was more important than that skirt.

Oh, and how did I do in the [half] Marathon? My best time ever in Jerusalem, 1:56. I guess sewing helps running...;-).

Shabbat Shalom. Spend some time with your family.

Trust and Ethics: Do they Exist in VC Culture?

Two stories below that we recently experienced, when I related them to a friend (an ex-VC), he said, "Jacob, come on, VCs have no ethics -- trust them only when the definitive agreement is signed and money in the bank."

Story One: A portfolio company of ours went out for next round financing, getting too-close for comfort to the first major launch of their service, and their cash reserves. Well known venture fund XYZ (unlike in the "The Funded" I don't think names are necessary here) became interested in the company, met with management many times, and began serious due diligence (I never have seen such intensive due diligence for early stage investment). After 2 months, XYZ says to us, we want to the deal, you will receive a term sheet from us in the coming days. I sat with one of XYZ's managing partners and explained that the company will soon run out of cash, and that we had a competing investment offer, at better terms, but we wanted to work with them--so, I asked him, please tell me if this is 100% done deal. He said yes, unless something comes up in "technical due diligence (checking IP, etc). Great, I said, looking forward to being partners. Sure enough, we got term sheet, signed it, and of course told other potential investor group no thanks. Two weeks later, XYZ calls management in for meetings, and starts asking questions like it was a first meeting. A few days after that, we receive an email from XYZ releasing the company from the "no-shop."  Explanation: none really given, but hear whispers (from one of the partners, quite embarrassed) that they realized they didn't really understand the market our company is in....this occurred over six weeks ago, XYZ has not bothered to call us. Thankfully for the company, a new investor did come to the rescue, who we really like -- but the company (and we) were put through many difficult weeks.

Story Two

We have a small investment in a company that has raised a lot of money, this was opportunistic for us, not strategic (we are not involved at all in the company). The next round of the company was done at a nice uptick, and we were approached by outside party to buy us out, at a healthy profit. We felt ethically that first we should turn to existing shareholders to sell to them. They [the existing shareholders] agreed to buy us out, and we drew up paperwork. Turns out there was an Israeli tax issue, permits needed to be obtained, the closing of the deal dragged out. Meanwhile we reported our holding as a a sale in progress. The final paperrwork was not completed for almost a year. And then...we were told that our fellow shareholders, well known large VC funds, who had repeatedly confirmed sale was happening, "would rather not complete the transaction just now." Legally, we could sue for performance -- and perhaps we will. Again, I was shocked at the lack of ethics and breach of trust.

What do I take away from these stories? That we have a lot of work ahead of us in restoring a sense of ethics and values to the VC community. How will entrepreneurs trust us if we cannot trust each other?

Where Google Goes, the Dollar is Not Far Behind

Google has represented the decade we are now winding down, and tracked the resurgence of the American economy after the blows of NASDAQ implosion in 2000 and then of course 9/11. With the succesful growth of Google, its IPO took off, and while I thought it was a short at 80, stock price continued to climb.

While the dollar did not follow the same meteoric rise over the past 6-7 years as the Google stock price, Google is many ways was keeping the dollar propped up, overshadowing the many serious problems in the American economy and government (not the least the American invasion and occupation of Iraq, costing the American taxpayer, which includes me, more money than it would take to feed all the hungry people in the world).

Clicks. Click throughs. PPC. Adwords. Adsense. These are the ingredients of Google's billions of dollars of profits (and still insane valuation). What it boils down to is the ultimate American value point: marketing. The Google guys convinced the world that clicks=$$, and until the emperors cloths start to fade noone knows he is standing there naked (or nude, if you prefer). But how well tested is the core Google theory? What are conversion rates really like? None of "know," tremendous amount of guesswork involved. Look back to my post on Jaxtr for a taste of emptiness of usage--10 million users and no revenue to speak of, in my eyes that is not a business.

Now, let me stress that while I know little about the public markets, I know far less about the global currency market. When my children ask me about the dollar falling in value against the Shekel, I blabber for a bit about "shakiness in the American economy," but actually have no idea what I am saying. I do know, however, that much like Google, America marketed itself well, even in the face of some astonishingly stupid moves in the world. In 1990 we defended one dictatorship from another (to this day not clear why). In 2001, in response to 19 Saudi men bombing New York and Washington the US went to war in Afghanistan and Iraq. Go explain that one to your kids.

Now people are losing confidence in Google, and in the Greenback. As long as you cashed out and your life is all in dollars, nothing to  worry about.

For those of us who live in the world, and I mean in the world...multi-currency,  multi-lingual,  multi-national,  the  rapid deterioration of the  Google stock price and  the dollar  remind  us  that we cannot rest  all our hopes on one player. Going global means being global, and even living in Jerusalem (in the center of the world) I am feeling left behind. Time to move savings in multiple currencies. Time to figure where the next waves are coming from -- because Google Greenbacks are so....what do we call this decade?

Mazel Tov: And Now There Are Six (Ner-David children...)

With great joy Haviva and I, along with Michal, Adin, Meira, Hallel, and Nachum, are proud to tell you of a new addition to our family, Mishael Binyamin.

No, you did not miss anything, Mishael is a wonderful 7 month old baby boy, who comes to us via an orphanage here in Israel where he has been living since he was born. Some time ago Haviva and I decided we had room in our hearts (and house, after most recent expansion) for another child. Influenced by many, including our families and friends (most of all our dear friends Yosef and Susan Silverman-Abramowitz and their children, Aliza, Hallel, Adar, Zamir, and Ashira), we decided to synthesize our desire for another child with our dedication to Tikkun Olam--Repairing the World.

While there are needs all over the world, we decided to look right here at home, and over a year ago registered with the Israeli Ministry of Health and Welfare (Service for the Child division) as being open to adopting. There were many meetings with our social worker, and then a six week intensive course together with other families with biological children that are open to adopting.

Last week we got a call, and we answered it. Today Mishael comes home.

Mishael (pronounced Misha-El) is named after my maternal grandfather, Moshe (Morris) Sterenbuch, of blessed memory. Zayde Morris moved as a young child from Russia to America, being "adopted," as it were, by his new country. My grandfather loved his new country, and I am the result of that wonderful process. We pray that we can provide a home for Mishael as loving and warm as my grandfather had, as a child and as an adult (I have never met anyone who loved as deeply as my Zayde Morris, he was a true family man).

Binyamin is the name our new son came to us with, but by "chance" it is also the name of Haviva's great grandfather.

In due course there will be a formal celebration, but obviously could not wait to share the news. May we all be blessed to find the home meant for us.

Pictures below....Mazel Tov.

When I have None, Rely On Other's Words

When I am lack for words for myself, as I have been the past few days (really weeks, but hit home more this past Thursday night), as I passed the Mercaz Harav Yeshiva minutes after 8 teenagers were slaughtered while they studied in the library. I again passed there yesterday morning and afternoon. And then word came our that their killer was a Palestinian Jerusalemite from Jabel Mukaber, a village less than a mile from my house.

With so many conflicting thoughts racing around in my brain, trying to stay focused on my immediate family, my venture business, was so moved to receive the following note from a friend in California, for whom we are her only connection to Jerusalem:

 

Jacob, I just had to write to tell you how sad I was to read today’s news about the murders in Jerusalem.   I know how hard you and your family have worked for peace, and how especially devastating it must be to see it eroded within your own city, and in such an ugly and senseless way.  I am praying for reason and a shared humanity to prevail over ignorance and hatred, and am ever more grateful to know people like you and Haviva who live your lives in peace and teach your children love. 

           Wishing you the best,
            Martha

I certainly could not have said it better. Amen Martha. Amen.

JAXTR HAS 10 MILLION "USERS": Now what? Oh yeah, MAKE MONEY

Back in April 2007 I posted short notice about a cool new thingie (that's a highly technical term, sorry) from a start-up called Jaxtr. At the time I had no idea what their business model might be, and as I was not considering investing in them was only mildly curious.

Now I come across this press release from Jaxtr, with this headline and summary:

Jaxtr Goes Out of Beta; Launches World's First Talk Network In Less Than a Year, Jaxtr User Base Already Tops 10 Million

Jaxtr (www.jaxtr.com), the social communications company that links your phone to the Web, successfully completed eleven months of beta testing today and released version 1.0 of its service. The centerpiece of the new release is café jaxtr, a place where users socialize around the question: "What do you want to talk about?" With this 1.0 release, the company is also implementing its revenue model via the integration of text and display advertising within café jaxtr.

Now, I added the emphasis on the last line there, but find it so interesting. Over a year into the company's existence, with "10 million users," they are only now "implementing [their] revenue model." And, that model is...drum roll please....advertising. Wow. What a radical new concept.

Also, take a step back at Jaxtr's claim of "free international calls." What they really mean is to a limited subset of countries, with you calling into a local number (anyone say calling card?) they will complete the call. Not exactly free.

But anyway, in their press release they give no statistics of actual usage, just "users." I remember in the late 90s at VON conferences Jeff Pulver used to challenge all the speakers coming from VoIP companies to say how many minutes were actually going over their networks, and what minutes were really origanting on the net.  As one the frequent speakers at VON I loved that moment when we all would have to "open the kimono."

A year ago I liked the Jaxtr widget, for its creativity, but that was about it. I did not understand the company they were trying to build. Still don't. But glad to see they remember that the point of a business is to make money. I hope they do.