Fred Destin

Vodafone femtocells inside your house soon ?

Vodafone has just put up an unassuming little note on their  website touting femtocells are "safe" wireless devices. The big picture is what interests me: "Vodafone is developing femtocells to enhance the connection to our network from inside our customers’ homes or small office locations."  Given that they have been in trials with Alcatel and Huawei for a while, are they about to launch a UK femtocell product ?  A Qatar deployment has been announced, but are we about to see the first UK operator deploying at home ?

Wireless coverage is a real headache for 3G operators and femtocells (tiny base stations that operate on licensed spectrum), are a fantastic way of solving this conundrum.  Low power and installed inside your house (possibly even paid by you), they are an elegant way for the operator to provide better coverage, cheaper cell calls and lower churn.  Whether they can also work well for larger groups than your family unit, I don't know;  I will let Will Franks (CTO of Ubiquisis) decide.

It's also big business : 3G Home femtocells are expected to generate over $9bn in service revenues by 2014, according to this report by Juniper. That is way beyond anyone's forecasting horizon, so I guess we should just read that: "some day femtocells will be very, very big".

My partner Graham O'Keeffe -- a fan of both Jesus and the Dude and who is the seed investor behind Ubiquisys (top rated femtocell vendor by ABI Research) and Picochip (whose chips power the Alcatel femtocells) -- says: "if operators expect millions of subscribers to start using data services in anger -- and the latest 3G iPhone will only make this more likely -- they will absolutely need the radical network improvements that femtocells can provide; if they are serious about making data coverage a mass market offering, there is no better way". 

 

<--- Femtocell (actual size :-))

 

As with every new mobile paradigm, some are already questioning its viability.  As Julien Blin reports: "Some reports even suggest that femtocells might not even be needed in the 4G world if the spectrum used for LTE deployment is strong enough to offer better in-building coverage".  time will tell.  What is certain, is that if you can get you head around the LTE Alphabet soup (and figure out how to sustain the Chinese onslaught), wireless broadband remains an entertaining space !

 

<--- Graham is up there with Vint Cerf on real geek star quality !

Seatwave raises $17M Series D led by Accel Partners

SundayTimes brings home the good news: the team is back together!  Sonali de Rycker, my former partner in crime, is back on the Seatwave board as lead investor on the Series D financing for Seatwave.  Together with Mangrove Capital Partners, Fidelity Ventures and Adinvest, we are adding $17 million to the balance sheet.  I am not saying we are the Harlem Globe Trotters of venture here or anything, but it's simply great to be back with Sonali on a project we have been working on together for over 3 years and for which she provided the original impetus.

<--- Sonali (as seen by Esther Dyson)

 

Seatwave is the #1 European live events ticket exchange.  Its success was and continues to be built on a laser-sharp focus on music, theatre and sports fans, hence the tagline of "fan-to-fan ticket exchange".  So far this company has been a case study in great entrepreneurship by the management team led by Joe Cohen.   Long may it continue.  The company raised seed and Series A funding from Atlas Venture (as a co-creation project), then went on to raise $8M from Mangrove and later $25M led by Fidelity Ventures.  Atlas Venture is the largest shareholder and contributed significantly to this round.

 

And here is, for your viewing pleasure, the complete investor group waiting for the Seatwave Tour Bus.  As you can see, Joe is in good hands.

 

Singularity: rise of the ignorant e-commerce geniuses and their lean machines

I think we know a few things about the future shape of startups by now.  They will:

• Remain focused on core expertise and outsource everything else;
• Ignore customer focus groups and rely on tight expertise groups at their core to design differentiated products
• Launch fast and iterate at speed
• Be run according to facts and not opinions
• Test and iterate continuously
• Make decisions quickly and constantly
• Keep capital intensity low

Beyond that, here is a fascinating phenomenon that I have seen happen recently and that seems to be getting prevalent:  Ignorant founders do it better.

Yes I am toying with you, dear Reader, but bear with me. 

I have been talking to a number of e-commerce startups recently who share a few things in common. 

• They do not anticipate any knowledge of their end market
• They do not pretend to understand what their customers want
• ... nor where they can be found online

They understand the basics of product and pricing and how to manage their supplier relationships; they are competent but not stellar on back-end and customer service.

Where they shine is precisely where you would expect them to be weak: they are entirely ignorant of, and refuse to assume any knowledge of, what method will work in terms of attracting customers.  They will continuously spend small amounts of money across channels and simply measure, measure, measure (or correlate, correlate, correlate).  They throw data at the problem. 

In truth, this is nothing new.  It is very similar to how some areas of science are evolving. Algorithms and heuristics are supplanted by simpe data crunching but on a massive scale; throw enough data and computational power at a problem and let the machine tell you what works.  See Wired:

In just over a day, a powerful computer program accomplished a feat that took physicists centuries to complete: extrapolating the laws of motion from a pendulum’s swings.  Developed by Cornell researchers, the program deduced the natural laws without a shred of knowledge about physics or geometry.

The Singularity is Near and coming to a website near you.

PS: this post was partly inspired by some great blogs I stumbled across recently thanks to nivi;

• Steve Blank
• Sean Ellis
• This Wired Article
• and as always ParkParadigm ;-)

And just post writing, stumbled across this one from Eric Ries:

2009 05 21 The Lean Startup At SIPA

View more OpenOffice presentations from Eric Ries.

Europe Media companies becoming extinct in the Digital World

Back in the day, Europe used to line a few of the most powerful media brands.  But the digital migration is not kind to the old continent.  Right now, with the exception of a handful of upstarts, Europe is essentially not existent beyond its own borders.

Case in point: the latest Comscore lists just came out.  G/M/S clearly top the list, followed by WikiMedia and Facebook.  The first Chinese site (Baidu) clocks in at #15, whilst Sina corp is at #18.  The first European sites are Orange and DailyMotion at 34 and 37 ... although if you add the traffic we get from http://dailymotion.virgilio.it/gb, which you should, DailyMotion is in fact the #1 European brand online.

 

Supermoine- Brought to you but europe's #1 online brand :-)

 

Are European media companies missing the web ?  You bet.

If you look at traditional media companies, you will find giants like Vivendi, Bertelsmann, Lagardere, WPP or Reed.  Running this study in April 2008, our friends at Jefferies found that 8 of the top 25 media groups were European, representing 22% of revenues, whilst 2 were Asian.  If you look at global new media audiences, you found 4 European groups representing 3% of audience !!

If I believe the new Comscore April numbers, we now have ZERO European groups in the top 25 and and a mere 5 in the top 50 (Orange, DailyMotion, Terra-Telefonica, Spill Games and BBC).  I don't know how much of an international audience BBC has, but basically we have legacy leaders and two transnational upstart companies.

This analysis also applies if you look at the proportion of media revenues coming from online, which is much higher for US companies than their European counterparts (in April 2008, it was 10% for US players and a mere 3.8% for the Europeans).  Whilst France is busy passing backwards anti-piracy laws under intense lobbying from its industry, the war is being lost.

In a few words, the digital disruption is rocking the content world and wiping out the European media brands.

 

<--- European Media, soon coming to you on a niche pay-per-view channel

Showing Nipples is worse than denying the Holocaust

 

Facebook finds itself under attack today with another aggressive post from Arrington.  The reason ?  They will not ban Holocaust Denial groups (Facebook Remains Stubbornly Proud Of Position On Holocaust Denial).  Explosive stuff.

The argument against banning is that Facebook cannot get involved in what its users are saying, as a guarantor of free speech.  The argument in favour is that clearly all Denialists I have ever listened to believe that humanity should finish what the Nazis started -- and there is the rub.  I would not want to rank people's suffering into categories, but Shoah stands on its own.

What's interesting about this is the following: once again the law finds itself behind the reality of tech.

• Why Nipples are worse then 6M dead: Nipples are banned on Facebook (and that would include nursing mothers) because the now-defunct COPA made it an offence to give kids access to "porn" (including nipples).  Hence if you did not want your site to disappear behing an 18-or-over certification, there was no choice but to remove nipples.
• Why Facebook cannot ban: At the same time , sites like Facebook rely on their status as a hosting platform and safe harbours provisions of the DMCA to keep operating.  If they start meddling with content, they might be considered publishers and hence be held responsible for EVERYTHING that happens on the site.  The US being legally non prescriptive, it has no law against Holocaust Denial.  The recent difficulties encountered with PirateBay highlight the debate.

You can see why Facebook Corp.  are wriggling in this unfortunate position.  Do the right thing and ban the groups, and shut your business down ?  Now what a statement that would be !

I will leave the conclusion to some who has more authority to comment on this than I. As ouriel tweeted to me this AM:  @fdestin holocaust denial is less a crime than showing breast feeding pictures? well something is fucked up with the law

Indeed !

“<--- Do not ask for whom the bell tolls, it tolls for thee”, for all of us

Build that brand !

Seems like Dan Primack wants more (presumably loose lipped) young VCs to differentiate with strong online presence.  Will Twitter cut it ?  Nah, it' too easy and not differentiated enough.  Any dummy can download tweetdeck and post pictures of himself at random conference X.  Blogging is still hard work (comparatively) but you can push real content across.  Get Twitted, that's the way to go.   If you don't already receive this newsletter (probably applies to 1% of my readers) then subscribe now.   Here is Dan's encouragement from PE HUB:

Last week I moderated an ACG Boston panel discussion for younger private equity pros, titled “Managing Your Career in a Recession.” Near the end, panelist Jay Jester of Audax Group noted the importance of “building your brand.” He was referring to behavior within a firm — things like leading by example, not worrying about getting credit and being helpful to others when possible.

All good advice, but I began thinking about it in a more external sense. Namely, why don’t more young PE professionals take a page from the VC world, and begin blogging?

It’s great to be highly-regarded inside your organization, but the deal business is also about how you’re viewed beyond your walls. Not only who you know, but who knows you. What better way to make a name for yourself than by becoming a visible thought leader? The primary subject could be private equity, a specific industry sector, financing restructuring, etc. Whatever you’d like to be known for, with just enough of your own personality thrown in to distinguish yourself from a reference book.

Sure it may be a bit scary, but amateur bloggers aren’t expected to be literary stars. Hell, I’ve worked with “professional” writers who didn’t deserve to pass 5th grade English. All you need to know is what you’re talking about (and if you don’t, then perhaps you’re in the wrong line of work).

It makes sense that VCs were the first investment pros to embrace blogging, given their general tech knowledge and desire to be known to other first adopters. But it is fairly senseless that other types of investors haven’t followed suit — particularly younger ones who are tech-savvy and expected to be even more job-transient than their elders.

So go build your brand. Literally.

 

I am glad though that the bar is low on the required literary qualities since a 5th pass grade should get you there.  Phew ! And I thought grammar mattered.  Me not so stressed now.

So why don't more young people in our industry do it ?  I think it's simple: if you get out there and build your brand early on, you run the risk of getting your wings burned if your first few deals go down in flames.  Hence only seek PR when you have a good story to tell, which of course may take 10 years given the way the world is going.

Brand is not PR and risk IS our business, so get blogging !

 

<--- Dad was a great innovator, great early PR post launch, did not last, became a well known case study post failure, all for the betterment of mankind (C: VinerStudio)

European Venture: back to artisanship

We VCs like to look at the glass half-full and focus on value creation (except of course when it's time to negotiate next year's budget with our entrepreneurs).  But it's hard to look at the current events in VC Land without a deep sense that there is a fundamental shift at work.

Figures out in the US clearly indicate that a deep rethink is under way in the US venture market and this is echoed by market practitioners.  Stewart Alsop (former NEA and occasional pundit) was quoted in the FT (20/04)as saying "for the first time in 40 or 50 years of venture capital, the people who invest are having to decide whether or not to keep doing it or not, and the general conclusion is - to a large degree - no".   Read this quote twice; I can see this happening everywhere. Europe is even worse off.  The latest data from Ascendant shows dramatic trends in UK/Ireland: volumes down 68%, number of active investors down 40% (Q109 to Q108).  The bile of TechCrunch is earned: we talk one game and play another.

It's easy in times of crisis to overuse hyperbole and exaggerate eventual outcomes.  Yet this may be the start of a long-term shrink of our industry, and a brutal selection process of the surviving managers.

If you look at the European landscape, you could create a taxonomy of the market around different generations of managers:

• The Brands.  These firms usually have a strong track record in the early years that they can point to, followed by a more-or-less successful transition from first to second generation, which tends to define how vibrant their brand is today.  Some like Quester are gone whilst others like Wellington have generated a second generation of successful managers.  At Atlas Venture I think we have done a good job of staying relevant and building on the shoulders of our predecessors.
• The Euro-Bubble funds:  There was a large increase in the number of funds in 1998-1999 that moved the European venture industry from a cottage occupation to being quite overcrowded.  The quality of these funds was variable (anyone remember Antfactory ?) , but more often then not they got cut off at the knees just after starting their investment programs and many did not make it to a second vintage or went passive.  Some, like Zouk Ventures, owe their survival and success to the gritty determination of their founders and subsequent reinvention (in the case of Zouk, as an early entrant in the cleantech space).  Mangrove Capital Partners or Index Ventures are prime examples of guys who did well in not blowing through early cash but capitalising on market downturn and great exits to generate lasting franchises.
• The US Entrants: Balderton (ex Benchmark) or Accel are the best known examples of US franchises going global and establishing local presence.
• The Local Stars: each European country has a set of dominant regional funds.  Some of these got bought and dutifully destroyed (mostly) by 3i, whilst others continue to operate.  Let's take Northzone in the Nordics and Sofinnova or Banexi in France as examples.

The game is not set, however.  There are some great teams out there and some great individuals who will keep writing the future of our industry.  Some are new entrants like my friend Sean Park at Nauoikas Park or the folks at Atomico, who clearly stated their intent with their recent investment in Imagini, whilst others have evolved their lineup and have excellent teams, like the guys at Advent Venture Partners.

What is clear in my mind is that CAPITAL SCARCITY IS BACK.  Our market used to be predicated on a scarcity of technology knowledge and capital.  What I believe is scarce today is (a) capital and (b) the ability to assist entrepreneurs in building real, sustainable businesses.  To me, that's a very healthy thing.  As an industry, we might just start making money again !

 <--- Back to our artisan roots !

Call to startups: Innovate Europe application deadline is now !

The excellent folks at Innovate Europe kindly asked me to pass on the message that applications deadlines are upon us.  This is great innovation ecosystem support and you would be remiss not to take advantage.  See below and apply

Innovate!Europe is looking for Europe’s top startup, and the deadline to apply is March 25rd.

Innovate!Europe will be hosting Going Global workshops and networking meetups in Europe and Israel from March 30th - April 8^th (see below or check the calendar). Start-ups will receive mentoring and feedback from Guidewire Group’s renowned analyst team on how to improve your pitch and hone the skills you need to compete in fast-paced markets like Silicon Valley.

Best of all, there is no cost to apply or to participate in the Going Global workshops.

Start-ups in the workshops held so far have raved about the experience. Conor O’Neill of LouderVoice, called it “pure gold” and said it was “the most impressive start-up workshop I have ever encountered.”

If you want to participate in the competition but can¹t attend one of the workshops, fill out the form anyway. If you're selected, Guidewire Group's analysts will conduct a phone interview with you.

30 MARCH Bern, Switzerland

Going Global workshop from 9:30 to 17:30: apply now
Networking Meet-up at 18:00  (co-hosted by Orrick  Swiss Innovation Promotion Agency CTI) – RSVP required

1 APRIL Tel Aviv, Israel

Going Global workshop from 9:30 to 17:30: apply now
Networking Meet-up at 18:30 (co-hosted by Orrick) – RSVP required

3 APRIL Berlin, Germany

Going Global workshop from 9:30 to 17:30: apply now
Networking Meet-up at 18:00 (co-hosted by Orrick and SAP) – RSVP required

6 APRIL Paris, France

Going Global workshop from 9:30: to 17:30: apply now

Networking Meet-up at 18:00  (co-hosted by Orrick) – RSVP required

8 APRIL London, UK

Going Global workshop from 9:30 to 17:30: apply now

Networking Meet-up at 18:00  (co-hosted by Orrick) – RSVP required

Note: You don’t need to be a workshop participant to join us at one of the networking meetups. The meetups are also open to investors, journalists and other members of the entrepreneurial community. However, an RSVP is required

as space is limited.

If you want to follow the competition, learn about the competitors and connect with other members of the ecosystem, subscribe to the blog or join the Innovate!Europe's Facebook and LinkedIn groups.