Author: Chip Hazard

iPad Field Notes

Chip Hazard3 Comments

I wanted to post this a couple of days ago, but it has taken me that long to pry my iPad from my kid's fingers such that i could actually write with an informed perspective.  Anyways, a few months ago I wrote a post about the winners and losers in the tablet wars.  Now that the device has actually shipped and I have used it for the past couple of days, I thought i would share some quick impressions both on the device itself and an update on my take on the winners and losers.


With regards to iPad itself, the biggest difference relative to my expectations is that I think of it more as a net-book than i do an eReader or large iPhone.  To me this is the real genius of Apple: for the past couple of years people have been pushing them to release a net-book, which most people took to mean an inexpensive stripped down laptop, but instead they took that market need as an opportunity to create a whole new category.  In keeping with Apple's mantra the device is incredibly easy to use and set up.  My aforementioned kids had it up and running in minutes with no help and no documentation.  Applications download seamlessly and once installed they launch instantaneously.  The iPad native apps look and feel great and many of the iPhone apps are equally good, even when scaled up to fit the larger screen.  I fully expect that any successful iPhone app will be quickly ported over to the iPad and that the store will expand from the current 1,000+ apps to at least an order of magnitude larger in the next several months.  In terms of use cases, I find myself using it as a quick look up device for articles, news, videos and email and the kids also love it for gaming as the larger screen makes for a dramatically different and better gaming experience.  New games that take advantage of this real estate will be hits with my crowd.  The on-screen keyboard is also great and responding to emails, or typing up blog posts like this one, are no problem – a vastly different experience than smart-phones which I find to be primarily read only devices.


That said, like most first generation devices it is not perfect.  First, I am finding that I don't love it as an eBook reader.  Blog posts, magazines and newspapers are good, but the device is too heavy for long term book reading, especially if you are like me and you read the kindle one-handed while lying on the sofa.  Further, I find that the screen creates more eye strain than the Kindle screen, although if you read in low light conditions the brightness is an obvious plus.  I also found that the screen switches between landscape and portrait mode too quickly, which can be a challenge while reading.  Like many others, I also wish they had decided to include a webcam, although it sounds like that will be part of the second generation device.  Finally, after traveling with the iPad today, I wish I had waited for the 3G version as I constantly found myself looking for coverage and with such, feel it would be functional enough to leave my laptop at home for the day.


In terms of my winners and losers from my previous post, I am sticking by most of my assertions.  Winners, in addition to Apple itself, will include cloud service providers, real time web applications, and game application developers while losers include Nintendo, Sony and Microsoft.  That said, I don't think the device is quite the Kindle killer I previously thought and believe Amazon, through both the kindle device and their very well executed iPad app, will continue to do quite well in the eBook arena.  I also believe my list of potential winners was too limited.  Counter intuitively, the Android operating system should benefit as any original device manufacturer has to be thinking about their own iPad knock-off and Android is the most obvious operating system for them to work with if they want to get a device to market quickly.  The device will also be a boon to a broader set of application vendors than I previously thought not only because there will be an expanded number of devices upon which to run their apps but also because consumer's propensity to pay will be higher.  The average app in the iPad store currently has a price that is almost 50% higher than in the iPhone store and I think the screen rela estate and processor speed will lead people to understand the applications are more fully functioning and therefore more valuable.  As an example of this, my partner David plunked down $100 to fully "app out" his iPad, something that would be quite hard to do on the iPhone.  I also agree with Marc Benioff's assertion that the iPad will be a great opportunity for healthcare IT vendors as it is the first tablet that is both light enough and fast enough to be used in a clinical setting.  I also suspect the iPad will be great for ecommerce oriented applications where the broader screen real estate creates more merchandising opportunities.


If you have an iPad yourself, I will be interested in your take and comments.

Quick reminder of the challenges (and opportunities) in enterprise IT

Chip Hazard1 Comment

Last week I did several reference calls on a new project we were looking at in the enterprise IT market.  In each case I was speaking with a senior IT executive at a large financial institution.  The calls were not to the company's existing customers, but rather to people I just felt would be thoughtful on the company's market opportunity.

As it turned out, each had actually evaluated the company's product and they started out the conversation by saying how impressed they were with the company's technical approach, how it was really innovative and superior to other solutions, and how much they liked the company's management team. So far, so good.

Then I asked the obvious next question: so did you buy the solution?  In each case, the answer was no. The why behind the no, however, is what is illuminating on some of the recurring  challenges for traditional start up enterprise IT companies.  Although they used different words, the consistent themes were:

  1. We went with our incumbent vendor.  We know their solution is not as good, but it is good enough and it is already integrated into our infrastructure and we know how to work with them.
  2. This project, while important, was not high enough on our priority list to get everyone's attention.  Given tight budgets, the only new initiatives we are doing relate to driving revenue or addressing pressing regulatory changes in our business.
  3. The company wanted to do a paid pilot with us to prove how much superior their solution was, but given a pilot required standing up new iT infrastructure and integrating into some of our core systems, this was a significant undertaking and not something we were willing to do given point two above.  Further, the pilot was required to demonstrate the business case which left us in a Catch-22 situation.

Many of the takeaways from this conversation are the same as I wrote about two years ago in my long enterprise IT post, but I felt they are worth repeating in the light of this conversation.  First, if your product/market focus requires a traditional enterprise IT approach, which for me means high touch direct sales with a product that requires some level of IT support and integration, you better make sure that:

  1. Your "superior solution" is significantly superior.  As in 10 times better, not 50% better.
  2. You are focused on a company's top three strategic initiatives, because nothing else is going to get funded in amounts or in a timeframe that will make you happy.

As you have likely figured out, these two things are hard.  In the fast paced technology world, sustainable 10x product differentiation is uncommon and fitting that with the ever-shifting strategic priorities of large organizations is even harder.

The alternative, of course, is to think creatively about ways to reduce the friction in the adoption process which is why we continue to be attracted to open-source, freemium and SaaS business models.  Instead of the conversation I had above, imagine if the customer was able to download/ sign up for the company's product -  without consuming any IT resources or getting into a lengthy procurement cycle – and then use the product and see its value.  If the product was easy to use and understand, did not require deep integration or if it did, the integration came "pre-built" via some partnerships, the potential customer would have been able to develop its business case and pre-qualify themselves as a relevant customer.  Thus they would consume minimal resources from the vendor until they raised their hand and said, I am ready to buy.  While this is by no means easy, if you have the right focus across your company in terms of product management, development and sales and marketing, it is likely an easier approach than trying to find that magical 10x better product that meets your customers top strategic priorities in an era of constrained budgets and shifting priorities.


Will hubris get the best of Google?

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I would likely do the same thing if I had $25B in cash, was generating $9B more each year and had a legion of super talented engineers, but I wonder if Google is letting hubris get the best of them.  As near as I can figure out, over the last month the company has opened, or deepened, competitive initiatives with Facebook (Google Buzz), Apple (Nexus One and HTML5), numbers telco providers (high speed internet initiative) and a sovereign nation of 1.3 billion people (China) not to mention the ongoing battles with Microsoft in search, although this remains a lopsided fight, and enterprise apps.


All of these initiatives, in true Google fashion, are innovative, disruptive, principled or all three combined.  That said, the concern is one of focus.  Yes the organization has tremendous talent and capital resources, but do all the new battlefronts suck up the company's management and engineering talent in a way that keeps them from innovating on the core driver of the operating cash flow mentioned above: traditional search and search advertising?  Could this result over time in the equivalent of a Windows Vista search product that leaves them vulnerable to new competitors?  In the end, I conclude it is unlikely, but how the company ensures it continues to invest in the core and manages its ever expanding initiatives and ambitions will be interesting to watch.

Winner and Losers in the Tablet Wars

Chip Hazard5 Comments

The long awaited Apple Tablet will finally be announced on Wednesday.  Like many folks, I believe the device will be quite successful and continue a transformation is how media is consumed.  As a result, i thought it would be worthwhile to review my quick takes on the winners and losers, apart from Apple of course, which will benefit more than anyone:


Winners

  1. Real time web participants.  As more and more folks have a network connected tablet at their fingertips at all times, it will continue the growth in usage of services such as Twiiter.
  2. Bloggers.  One of the primary use cases for the new tablet will be reading and catching up on your favorite blogs at all times.  In the short run,  don't know if the sheer number of readers will increase significantly, especially as most of the early adopters will be those who are already active readers of blogs, but the readership per post will certainly increase.
  3. Major media outlets.  Assuming they get with the Apple program, major media brands will benefit as the device goes mainstream and readers who recognize and trust major brands will be drawn into consuming more content.  Not to mention that the tablet will be able to make the trip to the rest room much more easily than a laptop!
  4. App developers, particularly gaming and vertical content vendors.  Just as the iPhone and iPod Touch became a new gaming and app consumption platform, the same will hold true for the tablet which will have the added benefit of offering a richer user experience.  In addition to games, I suspect there will be significant usage of travel guides, local search and other such applications, many of which have already been successful in the AppStore.
  5. Ad Networks that support all of the above.  As more media is consumed on such devices, ad platforms that benefit from the increase in content usage will see an increase in their reach and frequency.  One more reason why Apple purchased Quattro Wireless.


Losers

  1. Amazon.  Why have both a Kindle and a Tablet, especially if Apple can re-create a buying platform for books and magazines that is as compelling and easy to use as the Amazon store is on the Kindle.  Further, Amazon's efforts to woo developers to the Kindle run the risk of being too little, too late as most developers i speak with are already overwhelmed with supporting the iPhone and Android platforms and it will be easier to add the tablet to the mix than to add yet another platform such as the Kindle.  The same will hold true for the dozen or so other folks who aspire to the e-reader throne, especially as they don't have Amazon's heft or ability to drive low price points for a dedicated device such as the Kindle.
  2. Nintendo and Sony's handheld gaming platforms.  Some disagree with this assertion saying that the device wont sell enough units to make a dent in the DS and PSP, but in our household the usage of the iPod Touch as a gaming platform has rapidly eclipsed the handhelds we own and i suspect, as mentioned above, a richer UI will only serve to further drive this trend.
  3. Traditional media, including mainstream TV, producers that don't get with the program. This is not a new trend caused by the Tablet per se, but rather it will serve to accelerate what has been transpiring over the last several years.
  4. Microsoft.  Yet another device that will have zero content from Redmond and will further drive usage of cloud based services.
  5. Romance.  More media consumption at anytime and anywhere in the household, no doubt including the bedroom, won't be good for relationships with your partner!  Maybe divorce lawyers should be on the list of winners.


If you want further insights into prospective usage of the Tablet, Flurry has a great post of what they have observed over the past few weeks.  More importantly, I will be interested in your take on whether you will buy a tablet and how you expect to use the device!  

Room to grow?

Chip Hazard2 Comments

The other day I decided to import my entire set of LinkedIn contacts into Twitter (via an intermediate step into gmail, so the whole effort was a bit kludgy) and follow them all.  Given the recent debates about whether Twitter has peaked or is still growing rapidly, I found the results interesting.  As a quick background, my Linkedin contacts are all professional, not personal, and virtually all of them are in the technology world and therefore presumably early adopters.  That said, first via a manual effort and then by using The Twit Cleaner, I found that 40% of them were not on Twitter, another 20% were on but had never posted and another 15% had posted less than 10 times.

So what does this decidedly unscientific survey tell me?

  1. Twitter still has a lot of room to grow in terms of new user acquisition, both here in the US and in the rest of the world, and
  2. Twitter still has an on-ramp problem that needs to be addressed such that those who do join can see immediate benefit and become part of the community, otherwise the growth may indeed peak sooner rather than later

You thoughts?

At Least Someone Is Putting Their Job On The Line

Chip Hazard3 Comments

Fifteen years ago this month, I made the first investment of my venture capital career.  While I had previously done some diligence on projects for other partners at the firm, this investment was the first company I felt true responsibility for within the firm.  The company was called The Vincam Group, and it was founded by two fabulous, self made, entrepreneurs who had immigrated to the US from Cuba, Carlos Saladrigas and Jose Sanchez.  We invested $6 million in the company, which was at the time, interestingly, the largest initial investment the firm had ever made.  The company was what we would today called a technology enabled services firm that outsourced the entire HR function for small to medium sized businesses.  The company was a pioneer in the field and they referred to themselves as a Professional Employer Organization, a term that still is used in the market.  


Given the size of the investment and our relative lack of experience in the HR field, the decision to invest in the company was relatively controversial within the partnership.  As a result, we turned the business inside out from a diligence perspective including using outside consultants to pore through the financial statements given the company had relatively little by way of professionally prepared audits.  My guess is that in the post Canopy Financial world, this approach may become more common again and we were fortunate to have a real pro, Bill Teuber (who has since gone on to become the CFO and Vice Chairman of EMC) lead this effort for us.  As the investment decision came to a head within the partnership, one of my partners had a classic comment in which he dryly observed, "fortunately at least one of us around this table is putting his job on the line with this decision".  Given I was working on the project with one of the most senior partners of the firm and I was the only non-partner around the table, I knew who he was referring to!  Luckily for me, and my nascent venture career, the company went on to go public in 1996 and subsequently be acquired by ADP, where today it comprises the core of ADP's Total Source division.


The venture industry has changed tremendously since 1994 and this investment.  In 1994, the industry raised total capital of approximately $8.5 billion and there were less than 4,000 principals in the industry, versus approximately 8000 today.  As previously discussed, these numbers may not be far off where the industry is heading today. That said, what is more striking to me is how, at the core, how little has changed.


Our investment in Vincam had all the characteristics we continue to look for today: Talented and passionate entrepreneurs who have developed a compelling and disruptive value proposition targeting a large, untapped, market opportunity.  Further, from a partnership decision making process, there remains the constant tension between the excitement of transforming markets and the potential upside and the fear of all that can go wrong.  So we approach the business in a remarkably similar way: surround the decision with smart, skeptical, experienced partners who push the thinking on all the critical issues and risks and ensure no rock is left unturned.  Finally, and most importantly, I still feel as if I put my job on the line with every decision we make!

Family Traditions, Part Two

Chip Hazard7 Comments

Later this week the extended Hazard Family will congregate for Thanksgiving.  The group includes my parents, 3 sisters & 3 brothers-in-law and the 13 kids we have between us that range in age from 8 to 19.  I am exhausted just writing about the long weekend!


One of the last times we were all together we had an interesting conversation sparked by my father on all the technologies that did not exist when he started his work career in 1953.  It is an fascinating set of technologies to think about including cell phones, fax machines, personal computers, pacemakers, ATM machines, and the Internet.  A common denominator of this list is that they all benefited from the staggering advances e have seen over the last 50 years in semiconductors and networking technologies.


This led to an even more interesting conversation, which was unfortunately cut short in our last evening together, about what technologies and trends would our kids look back on 50 years from now and say they had the same kind of profound impact on their lives, and society in general, as the advances of the last 50 years.  A few ideas that did surface were:

  1. Cures for diabetes and other diseases based on advances in stem cell research
  2. The advent of personalized medicine, specifically therapeutic courses of action that are modified based on a person's specific genetic make-up, based on the ability to sequence genomes at a very ow cost
  3. The vast majority of energy production coming from sources other than oil, coal and natural gas based on the tremendous advances in "clean" energy
  4. The majority of defense technologies will be based on unmanned, remotely controlled, vehicles, planes and and other robots
  5. The advent of real telepresence applications that truly can replace face to face meetings (one of the favorites of the kids, perhaps the impact of watching too much Star Trek)
  6. Another favorite of my kids:  high-speed mag-lev superhighways connecting major metropolitan cities


So in preparation for this Thanksgiving's conversation, what ideas do you have that we missed?  Or are the Hazard Family's ideas crazy and far fetched and we should instead stick to watching football?

Welcoming 10gen to the Flybridge portfolio

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While I try to avoid promoting Flybridge portfolio companies on this blog, from time to time I will write about our new investments in the hope it sheds some light into how we are thinking about opportunities. 

Today it was announced that we recently invested, along with Union Square Ventures, in a New York City based company called 10gen. 10gen was founded by Dwight Merriman, Kevin Ryan and Eliot Horowitz and they are an open source software company that developed the non-relational database, MongoDB. 

We invested in 10gen for a few reasons:

  1. Strong founding team: Dwight was the co-founder and CTO at DoubleClick, Kevin was the President and CEO of DoubleClick and Eliot was a lead software architect at DoubleClick.  As a result, the team knows a few things about both building large scale web infrastructure and growing and scaling businesses.  We were also fortunate, in a prior life, to have been investors in DoubleClick so we also had the benefit of knowing the team well.  
  2. A belief in the "NoSQL" database market: while the name is a bit of a misnomer, we believe that databases are getting more specialized over time as users realize that the one size fits all relational database model does not often fit what they are trying to achieve with their applications.  Specifically, a schema-free, non relational document oriented database such as MongoDB is particularly well suited to web applications where scalability, performance and flexibility will be highly valued. Virtually all the web developers we spoke to in our diligence were using, either in production or in their labs, NoSQL databases with very positive results.  We expect this trend to only increase as more applications are deployed in Cloud environments as these databases are particularly well suited to that architecture.  
  3. MongoDB is a leading solution in this emerging market: while MongoDB was only recently introduced into the market after a few years of development, the product has been downloaded by tens of thousand developers and is in production at companies such as SourceForge, Business Insider and Disqus.

While there are other reasons we, in short, liked the team, the market opportunity and the company's specific solution.  We look forward to working with this great team to take advantage of this exciting opportunity.  If you have an interest in downloading the product, please click here, or joining the team, please click here.

Immigrant Founders

Chip Hazard2 Comments

A few weeks back, I had the pleasure of doing a panel discussion at a TiE DC event focused on strategies for growing and financing entrepreneurial ventures.  TiE now stands for "The Innovative Ecosystem" and is a not-for-profit global network of entrepreneurs and professionals, although when the organization was originally founded TiE stood for The Indus Entrepreneurs and was focused on entrepreneurs primarily from India.  Befitting this heritage, most of the entrepreneurs I spoke with had Indian roots and as many of them reached out to me to discuss their ideas for their new ventures, i was struck – as i often am at TiE events – by the quality of the entrepreneurs, their passion for their new businesses, and the general level of aggressiveness in networking and seeking advice on how best to move their business forward.  All good signs for the local DC entrepreneurial community!

As I was speaking to everyone, I was also reminded of a study that was commissioned by the NVCA on the impact of immigrant entrepreneurs and professionals on the U.S. economy.  In short, what this study found was that over the past 15 years, immigrants have started 25% of US public companies that were venture-backed and that the market capitalization of these firms exceeds $500 Billion.  Further, 40% of US publicly traded venture-backed companies in high-tech manufacturing today were started by immigrants, including companies such as Intel, Solectron, Sun Microsystems, eBay, Yahoo! and Google.  For those of us in the venture industry, this is not new news as we see this in our daily lives as we meet with new companies, but it is interesting to think about why this is the case.

From my perspective, there are three reasons immigrants to the US make up a disproportional amount of the start-up companies backed by venture capitalists.  First, most of the immigrant founders were drawn to the US for either college or graduate studies in technology driven fields, so they are well trained technically and are no strangers to innovation.  Second, as I saw when I lived for a couple of years outside the U.S., being in a culturally different place tends to lead one to be more curious and to take less for granted, resulting in a proclivity to identify something that "just does not make sense" and therefore is in need of a solution.  Finally, immigrants tend to have a lower fear of failure and seem to be much more open minded to take the calculated risks that are required by entrepreneurs.  From my lens, I think this is because the shear act of leaving one's homeland to study and live outside of what is naturally comfortable is, in and of itself, a significant risk and that those who succeed in thrive in having taken that risk realize that with such decisions often come great rewards.

The frustration with this analysis is how hard the US immigration policy makes it for these talented folks to stay in the US, especially as they are leaving university programs.  If you want to stay in the US post university and work at a company, immigrants quickly discover the H1-B visa program is an annual mess and if you want, heaven forbid, to start a company, it is even more complicated.  It makes no sense that as a nation we do a great job attracting the best and the brightest to our world-class universities and then make it incredibly hard for people to stay, something that is exacerbated in today's world when the idea of returning home for an immigrant from India, China or the like is far more attractive for an entrepreneurially minded individual than it would have been 15 or 20 years ago.  I am not alone in seeing this as a lost opportunity for the US – both Brad Feld and Paul Graham blogged on this in a far more eloquent way earlier this year – but I wanted to throw my hat into the ring of pushing our policy makers to think more creatively about driving entrepreneurship and the associated job creation opportunities in this country.  I recognize this is not a politically popular stance for our elected officials, in fact one Congressman in a discussion of the visa issue recently remarked to one of my partners, "try telling that to the gas station attendant", but if they hear from enough people, perhaps the tide can change.

Family Traditions

Chip Hazard4 Comments

One tradition that has developed in our family is that each night before they go to bed, my two oldest kids ask me about the new companies I saw that day and whether they were interesting as investment opportunities.  Apart from occasionally leading to "proud parent" moments when they dissect the business opportunity to a T, I am always struck by how some stories I hear retell easily and how others don't retell well at all.

While it would be easy to chalk this up to the more technology driven stories not making the transition from board room to living room, the common denominator is actually that great entrepreneurs have an ability to deliver a message that is compelling, concise and easy to remember such that it can be retold in a way that others understand it perfectly.  In our evening sessions, this has proved to be true whether the company is focused on consumers, SMBs, enterprises or OEM partners.  

While delivering a compelling, concise and easy to remember pitch such that I can discuss the opportunity with my kids is not terribly important, the gist of the message is.  Every time you make your pitch as an entrepreneur the recipient will retell the story to someone else and if all they get is blank stares, your likelihood of success goes down.  This is true if you are recruiting and your candidate goes home to speak to their spouse or significant other; if you are selling and your prospective customer discusses the opportunity with their boss or colleague; if you are speaking to the press and the writer reviews the story with their editor or tries to summarize in their blog; or if you are raising capital and your prospective investor discusses it with their partners.

What makes a good pitch?  The first key point is a simple vision of what you are trying to do and why this is important.  Far too frequently this gets bogged down in how you are doing something rather than why.  My kids, and anyone else for that matter, don't care that you have the best technical approach in the world.  Instead they want to know what the technology allows you to accomplish.  As an example, our portfolio company Goby launched today what they describe as a "search engine for your free time".  While the company is based on a tremendous amount of technology from very smart people at MIT, note they don't use the term "semantic" or "federated" or "deep web" in their pitch because, again, people care about what you help them to do, not how you can do it.  The second key point to communicate in your message is a sense for target markets and how broadly applicable your solution can be.  It is surprising to me how infrequently entrepreneurs fail to connect their idea with concrete market opportunities.  In the case of Goby, the connection point is that 71 percent of US adults find themselves frustrated with the irrelevant search results returned by traditional search engines and there is nothing more frustrating than spending your free time researching how to spend your free time!  Finally, the third key point in any pitch is how the idea, customer value proposition and market translate into a compelling business opportunity.  This is the point where my kids often surprise me with their insight based on the simple statement, "but Dad, i don't see how that would ever make any money".  At the end of the day, we are building companies and if there is no means to generate significant revenue, there is no company to be built.

Don Dodge recently had a good post on what should be in a short pitch, but the discipline I would encourage is to distill all your messages into a single powerpoint slide or if you are more ambitious, a single twitter message.  Either really forces the communication of what you do, why it is important, who cares about it, and how that will translate into revenue into a few, powerful sentences.  And then, when you are done, try it out on a 13 year old!