Tech Market Analysis

Over the holiday I became aware of a new tech blog that aims to have deep insights into the next generation of technology, which they call The Hypernet.

Why should you care?

Well, it is established by some of the industries more successful investors – Mike Maples and Roger McNamee.

My favorite post was this one (image above) in which they talked about their 10 hypothesis for technology investing.

It maps to a lot of my own views so I was interested to learn more. If you click through to Roger & Mike’s blog you’ll see that this blog post then links to a detailed presentation on the topic.

The ones I focus on the most are 2-7 and 10.

Hope you enjoy it. And I hope they keep up their early momentum.

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There are certain topics that even some of the best journalists can’t fully grok. One of them is profitability.

I find it amusing when a journalist writes an article about a prominent startup (either privately held or preparing for an IPO) and decries that, “They’re not even profitable!”

I mention journalists here because they perpetuate the myth that focusing on profits is ALWAYS the right answer and then I hear many entrepreneurs (and certainly many “normals”) repeating the same mantra.

There is a healthy tension between profits & growth. To grow faster businesses need resources in today’s financial period to fund growth that may not come for 6 months to a year. The most obvious way to explain this is with sales people.

If you hire 6 sales reps in January at $120,000 / year salary then you’ve taken on an extra $60,000 per month in costs yet these sales people might not close new business for 4-6 months. So your Q1 results will be $180,000 less profitable than if you hadn’t hired them.

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Fred Wilson recently posted a great video on his blog with the CEO of Forrester Research, George Colony. The money slide is the graphic below.

The chart shows three scarce resources and their improvements over time. The top line is available storage (S), the middle line represents processing power (following Moore’s law) or (P) and the bottom line is the Network (N).

In it he asserts that the web is dying and in its ashes will see the rise of the “App Internet.” The App Internet is different than the HTML Internet (aka The Web, WWW and in the mobile arena “The Mobile Internet” or short-hand HTML5) because the “presentation layer” and “client side” functionality are defined by applications that run on your mobile device and connect into the open Internet back-end to exchange information with other web services.

He’s right about this. But only temporarily in my view.

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Early today I gave a keynote at the VCJ Venture Alpha conference here in San Francisco. I was asked to speak about the topic of “what is going on in the venture capital world and what is the next big thing after social networking?”

// Future of VC Internet

Tough topic, but what the heck?

Next week I promised to follow up on PE Hub, one of the main journals VCs read about our industry, with a detail description of some specifics that are happening. Watch out for that – I will have a lot more details.

I’ve listed some great VCs in the presentation. I’ve left off many great ones. It isn’t intentional. You can’t cover everybody in a prezzo. Please don’t read anything into that. Some of the big ones I left off was Tim Connors of PivotNorth and Aydin Senkut of Felicis Ventures.

And all feedback welcome! See you in the comments.

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FNAC. I first heard the term from Chris Fralic at First Round Capital. Feature, not a company.

Click this link if you want to see the video – for some reason the image link isn’t working.

It has always stood out in my mind. Whether something is a feature or a company is clearly subjective. And sometimes features (say, Twitter) turn into companies.

For me it is a useful shorthand for a very clever set of product features that in my mind would be hard to remain a stand-alone business or themselves to generate enough revenue to justify the company’s existence. I sometimes use it as a mental shorthand for teams that really have given no thought to how they might make money some day.

It’s really not as pejorative as it sounds. Sure, it’s intended to shock. It’s intended in a discussion with an entrepreneur to get them to question whether there is really amazing underlying value in the product or service they’re offering.

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“People still want calls …”

When I first got into VC I decided I better have some investment themes. My macro theme was “great entrepreneurs” who mapped to my belief system about the kind of entrepreneurs I wanted to work with.

My background was 8 years of telecoms & mobile and 8 years of cloud computing & SaaS – so these two themes were a given.

But then I had to overlay another filter – what kind of deals could I get proprietary access to?

Digital Media was an obvious theme because it’s one in which LA (where I’m based) and NY (where I spend a lot of time) have strong assets, companies and management teams.

While the media industry is driven by a combination of subscriptions and advertising – it’s clear that the latter plays a unique role in media. So my strategy was to focus on technology heavy companies who could bring measurability and performance to inefficient parts of the digital media landscape.

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