Why John Frankel Leaned in Early on Klout and Cornerstone OnDemand and What He Sees Next

Posted on Oct 6, 2012 | 21 comments


It all started in 2010 with Klout. I wasn’t a believer. I had always liked and respected CEO Joe Fernandez but could never get my head around the fact that the Klout was putting up charts showing who influenced me and it didn’t map to the reality I knew in my head.

I had been trading emails & Tweets with venture capitalist John Frankel and we were to meet in person in March 2011 at SxSW to talk about Klout and other investments he had made. We met at a private party hosted by his venture partner Mike Yavonditte and I outlined my concerns for the lack of precision of the algorithm.

I was used to this debate. I had been hanging around Klout for a year and many of my friends had angel funded the company and were champions. Nobody had any sound logic on why Klout would be successful.

John laid into a well-honed thesis on why the social web needed a “Page Rank” equivalent for people. He was an early investor in Klout and was the most compelling voice I had heard on why the company would become hugely relevant.

Other people were convinced including Kleiner Perkins who lead their $30 million fund raising in 2012 (they had previously also invested in 2011).

Most notably Michael Arrington – who was originally as skeptical as I was – also became convinced about Klout and voted with his checkbook.

From this debate about Klout John and I have had a series of in person meetings and debates about our industry (both VC & tech) and what is changing. His views are expansive and his approach non-traditional. But I never leave an encounter with John without a few nuggets of views that I didn’t hold when I arrived.

So I was delighted that he was recently in Los Angeles and I had a chance to have one of our typical private meetings but this time we did it with a camera on. You can watch the conversation on YouTube and as you’ll see – even though the camera is on we had no problem sparring on topics and coming to a common view (or not). Or you can read the quick show notes at the end of this post and click on any link to jump directly to that short topic.

If you’re still not convinced about Klout –  you can see John’s views here. But note that he was equally early and passionate about Cornerstone OnDemand and it’s now trading at a $1.6 billion market cap so he has a history of weighing in early and being right.

And oddly it took an investor in New York to highlight to me Cornerstone OnDemand – one of the most successful software company in my home town of Los Angeles! – and why it would become a powerhouse. Count that two lessons from John.

His latest passion? I almost don’t want to tell you because I love the product and would love for them to stay under the radar screen from investors ;-). But since he talks about it in the video I’ll spill the beans. It is company 500px who has a beautiful product and a burgeoning community on the iPad and web. He’s been bending my ear about the company for a while and each time I see him the product looks better and better. 500px is in Toronto.

And now one of his newest passions is Nova Spievak’s Bottlenose, another Los Angeles company.

We discussed all of this and more in the video. Including ff Venture Capital’s unique approach to finding deals and the services they provide to their startups. The most interesting to me – and this got me thinking – is accounting services provided at cost. Every startup needs accounting and it’s often a huge distraction and non core. And every investor wants better records and transparency. So why not offer this service to startups at cost? Smart.

I know one friend who ran QuickBooks for 3 years and is now in the process of having to restate his financials for the past 3 years culling through millions of records to normalize his revenues. Put offer proper accounting at your peril.

And ff Venture Capital cleverly has created a blog where their portofolio companies contribute. It seems obvious enough – have a centralized place for ideas which can drive more viewership than only blogging on each startups own website. Don’t be surprised if you see me bagsie that idea for GRP Partners.

The funnest theme we discussed was John’s belief that the technology changes that are sweeping through society today are as important, dramatic and pervasive as those that swept across the world in the 1800’s during the industrial revolution.

I hope you’ll enjoy our discussion as much as I enjoyed participating in it.

SHOW NOTES

2:00 Why don’t you like the term VC?
5:30 John: Brands with a proven track record are attracting capital.
7:00 80% of the VC funds last year went to a small handful of funds. What’s your take on that?
10:30 Question from the chat: How do you define the difference between traditional VC and private equity?
12:45 Describe the structural, cyclical trends you’re seeing in technology.
16:00 What should government be doing?
21:00 We’re unquestionably moving towards more democratization, which is a good thing, yes?
23:00 Discussion of California’s social media privacy laws.
25:15 Did you follow the Quora scandal?
27:00 John: Trust and reputation are hard to earn and easily lost.
30:00 What makes ff Venture Capital unique?
37:30 I think there’s an opportunity to train people in several month to be entrepreneurial leaders.
39:15 Why did you invest in Klout? What did you see in them?
43:15 John demonstrates how users can curate their own Klout feed.
46:45 Comment from the chat: Are you familiar with Upstart.com?
47:00 John breaks down the Bing/Klout deal.
50:30 Let’s talk about the biggest company in LA that no one has ever heard of: Cornerstone OnDemand.
52:00 Do you really think LA tech is lacking a sense of identity?
55:00 How much was SuccessFactors bought for?
56:45 Looking at the stock price of Cornerstone.
58:30 Tell me about your investment in 500px.
1:05:15 Tell me about Bottlenose run by Nova Spivack.
1:08:00 Doing a sample search on Bottlenose.
1:11:15 Thank you to Scott Walker Corporate Law for supporting the show. Everyone check it out at walkercorporatelaw.com. Thank you also to Detroit Venture Partners. You can thank them for their support @DVPtweets.
1:15:45 Who are all of the members of your team?
1:19:15 Thank you to Walker Corporate Law and Detroit Venture Partners. And John, thank you so much for joining us today.

  • http://arnoldwaldstein.com/ awaldstein

    Thanks Mark…

    Couple of comments:

    -Still think that Klout is a #fail. Not only don’t I think it has any behavioral tie to people, the lack of restraint in marketing of the company from a distance makes me doubt it more.

    -500px piques my interest bigtime.

    -a follower of Bottlenose and a potential believer if they can indeed deliver. Unclear to me.

    And…love your videos but they are getting long, almost too long to watch. I’m reading summaries and starting to skirt the good stuff;)

  • arniesingh

    Providing accounting services at cost is a great idea. Think its also worth providing basic sales operations services so that investors and entrepreneurs can quickly figure out which customer segments to pursue.

  • http://bothsidesofthetable.com msuster

    I know. Hard topic I don’t know how to solve. Can you really have a substantive discussion in 20 minutes? If I had people who edited and chopped up topics would be much easier. But I don’t have resources to do that.

    Any ideas on what you think I should do?

  • http://bothsidesofthetable.com msuster

    Agreed on both fronts. OpenView Partners (http://openviewpartners.com/) does that. We talked about it in the video.

  • http://arnoldwaldstein.com/ awaldstein

    Tough.

    I simply can’t and many can’t afford that time commitment.

    Hate to say this as I personally know how challenging it is but give yourself a time frame and teach yourself to stick to it.

    My only way of doing this is a pre conversation. Yeah..kills the spontaneous nature of the chat but these are the killer choices.

    Do keep doing these in some form though!!

  • http://bothsidesofthetable.com msuster

    My solution was the links. If I’m asking somebody to give up their time to come to the studio, it feels unfair to only give them 20 minutes.

  • http://arnoldwaldstein.com/ awaldstein

    Links help. w/o them it’s kinda non starter for me.

    Your rich media interviews are really good as the camera likes you and they are really genuine.

    Maybe I’m the corner case and super time crunched.

    But when they are 30-45 minutes, I see them the day they come out. Longer, they are in my video watch-later pile.

    Good news is that I find enough value to care!

  • http://influitive.com/ Abdallah Al-Hakim

    I would be more interested in klout when they integrate with disqus. Still, the concept is flawed because influence is hard to judge. Have you looked into empire avenue or kred as alternatives?

  • http://petegrif.tumblr.com/ Pete Griffiths

    Hi Arnold
    just watched the whole thing. I don’t think you are a corner case but IMHO there is real value in these discursive prolonged conversations. People get a chance to really open up and you get a much better sense of the person than you do in a shorter more tightly structured format. For me the bottom line is that it is just a different format with its own strengths and weaknesses. When you have time it’s a pleasure to soak it up. If you don’t…

  • http://byJess.net/ Jess Bachman

    The two of you going through 500px was great. Like a couple of grannies on the net for the first time. Endearing. Thanks for the show mark.

  • http://byJess.net/ Jess Bachman

    Didn’t Idealab pioneer this, among other things.

  • http://byJess.net/ Jess Bachman

    Keep them long! Or take a tip from Bill Maher who does his panel show, around 40 minutes or so, then he does an “overtime” with the same panel and often goes into greater detail. So while talking with a guest and something gets off topic, you could “save it for over time” then when your 40 minutes are up, you close the show, then keep taping the over time with the list of topics you’ve saved. just an idea. throw in another sponsor for overtime.

  • http://arnoldwaldstein.com/ awaldstein

    You are probably right Peter.

    This discussion is an affirmation of that.

    Like everything else, you choose how to spend your time to bring the most value.

  • https://plus.google.com/u/0/b/114718778524214371963/114718778524214371963/posts kidmercury

    i can’t stand the long stuff, but i like how you time link stuff — that’s great for people like me. in my experience, though, the long stuff monetizes better and is great for passionate fans. i think you may find it advantageous to distribute via amazon instant video as well (they take long stuff only via createspace).

  • http://blog.teamly.com/about Scott Allison

    Amused you have to hyperlink to urban dictionary for bagsie!. Thanks for the laugh, don’t think I’ve heard that in a l-o-n-g time!

  • http://blog.teamly.com/about Scott Allison

    John gave a great talk in London last year, I really thought he was a smart guy and a VC who really gets it. I look forward to watching your interview with him. http://scott-allison.net/2011/08/28/john-frankel-ff-venture-capital-talking-to-london-web-meetup/

  • http://bothsidesofthetable.com msuster

    lol. grannies on the net. ha.

  • http://bothsidesofthetable.com msuster

    ha. i love to slip in my britishisms. i use them a lot in daily life and always forget what is US and what is British. I work with one CEO who calls me out on it all the time. Where you’d get them straight away!

  • wfjackson3

    Some seriously interesting stuff in here. On the subject of accounting, that is one of the things I least look forward to in a company (once I get one to actually have meaningful money anyways).

  • John Rorick

    I second the Klout #fail. Klout had come up a lot in in the prior two years within the recruitment/talent community and aside from the then self-fulfilling prophecy of driving your own perception as a sage/guru in a particular niche more importantly there appeared to be no utility within Klout that would drive an income stream.

    The talent community discovered Linkedin’s revenue stream for them a few years back by placing value and $ behind the capability to use the platform in a variety of extended ways….and were willing to pay for that when the (still) archaic tools available to recruiters did not solve the problem of sourcing talent. Linkedin’s launch of skill endorsements is another expansion of the platform and is logically tied to most folks outward facing professional profile. If anyone did use Klout before, I could see the most basic skill list and endorsement now provided in the Linkedin community making that a moot point. The only opportunity for Klout investors will be its acquisition as an asset within a search engine and/or as part of a current page ranking type service. My two cents…worth less. :) Thanks for the thoughtful blog. I truly enjoy these articles/videos.

  • Platinumloops

    Looks like your site has been hacked. I’m guessing you didn’t know about this? http://www.bothsidesofthetable.com/wp-content/wptouch-data/icons/platinumloops-ultra-metal-drums-vol-1-wavrexaiff.php

    Your site appears to be linking to some pirated download file of our products. I would have used your contact form to let you know but could not find one.