The “ventures” we need…

I just read Dave Winer’s essay on the future of the venture capital industry.

Ditto. Great insight. One thing before I start thinking, I always thought it was bizarre that entrepreneurs couldn’t get funded when they needed it (when the economy sucked and they needed a little revenue to get them through the rough patch). Anyway…

…then I started thinking. Yeah, I know, that’s dangerous. ;-)

What are the “ventures” the entrepreneurs actually need?

See, in the 1980s, they needed money. Why? Cause the growth was in computers and other electronics goods. I worked on an assembly line at Hewlett Packard one summer in the early 1980s. Why did these (and smaller startups like Apple or Atari back in the early 80s) need money? Cause building physical machines costs money. Assembly lines. People. Materials. There was a high marginal cost of goods.

But today’s world isn’t money constrained. You don’t need much money to build software or services.

Today’s world is mostly an audience aggregation one. At least that’s where the money is. Think about it. What does Google do? Gather audiences! How about Yahoo’s Flickr? Or Microsoft’s Live.com? (More on that in the next post about guitarist Robert Fripp, don’t miss that one).

So, if money isn’t in short supply (it’s not, which is why being a venture capitalist right now is actually very tough work) what is? Here’s some ideas of “ventures” that we need:

1) Venture USERS. How do you build a Flickr? Get half a million users. But how do you get there? After all, there are hundreds of services vying for our attention right now. So, anyone who can provide a network of users is going to be valued. Got a network of users that listen to you? You’ll be sought after.

2) Venture Search Juicers. If you are an audience starved startup how do you exist if you aren’t in the first page of Google results for what you want to be known for? So, how do you get there? You gotta get people who have search engine juice to link to you. You need “Venture SJ’s” (for search juicers) to be in your network. You think you can just get a few bloggers to link to you? That’s increasingly going to be difficult. Wanna come and look at my “blog this” folder? It has 2321 items in it. So, how you gonna get noticed in that kind of world?

3) Venture advertising. You’re in the audience aggregation business now, remember? How do you get an audience? Well, you won’t get one if no one has heard of you. So, if you can advertise services (say, if you’re particularly talented in front of a video camera, like, Amanda Congdon of Rocketboom) you’ll be sought after.

4) Venture offices and IT. If you’re a geek who can build cool things in Ruby on Rails what’s the last thing you want to worry about? Having an office in which to work and all that entails (stocking the frige, answering the email and phones, paying the bills). Got a way to bring those services to a number of startups for less than anyone else? (I saw such an operation working in a house on Sand Hill Road) Then you’ll be sought after.

5) Venture deep technical help. Let’s be honest. The skills to get a prototype service up and working are far different than making it work for 10 million users. Building UI’s in Ruby on Rails is a lot easier than building a server farm that can handle exponentially-growing loads. So, can you build a network where you share one tech team among a group of startups? Then you’ll add value to the whole network and be sought after. I saw just this happening at startups in Silicon Valley where one deeply-skilled tech guy was shared among three or four startups.

6) Venture marketing. Hey, every entrepreneur needs a logo, business cards, stickers and swag to hand out at shows, and other things. But, you don’t need a full-time graphic artist. So, the new Venture capitalist who has a graphic designer shared among his or her network will add value and be sought after. At Microsoft I’m really a “venture marketer.” Every team doesn’t need a guy who can get 100,000 views on a video shot with a camcorder. So, I’m shared among many teams. Same skill is gonna be needed at every startup (but only an hour at a time).

7) Venture ideas. I’ve hung around the industry now to realize that there are a few people who generate far better and far more ideas than anyone else. Microsoft has one of those guys. His name is Eric Horvitz. He owns the most patents at Microsoft and I believe he has about twice the number of the person who is in the #2 spot. Now, you probably couldn’t afford him full time (I’m sure that other multi-billion-dollar companies even regularly bid against us for his time) but you might be able to, say, rent Dave Winer or Steve Wozniak or, even, Matt Mullenweg, to come out and give you some ideas for a day. So, “venture IG’s” (Idea Generators) will be sought after.

8) Venture PR. I remember the days when startups would need to hire a PR company for something like $15,000 per month (and that was for a low-cost set of services, some services would run many times higher than that and often required handing over some of your equity to get really great services). But, in today’s world of blogs the skills needed aren’t as big. You need someone who can deal with the new PR (even the big companies are realizing this, Nokia has a program to send phones out to bloggers so they can try them out). Get a new set of PR skills which can help you build an audience fast and you’ll be sought after.

9) Venture testers. You just spent four years at Carnegie Mellon coming up with a great robotic or speech recognition idea. But now you need testers and other people to help you finish off your project. The network that can help you with those will be sought after.

10) Venture management. You’re two kids from Stanford. You’ve built a team of 20 geeks. Some in SF, some in London or Cork, some in China. But just keeping 20 people working together is not your core skill and it’s making you unhappy. So, you need some really great managers to help you out. The network that can help you will be sought after.

11) Venture evangelists. Hey, I’ll be honest, when I see something that excites me I want to have a piece of the company. It makes me even more evangelistic if I know my own bucks are on the line. Ahh, sorry, Dave Winer already made that point. So, I guess I should have stopped at 10 “ventures” that are needed.

You got any others? If you’re an entrepreneur, which ones are you willing to give up some equity to get?

44 thoughts on “The “ventures” we need…

  1. PR seems like it's changed significantly since this was written. In fact, PR in general seems to be moving more towards a new phase of “interactive” PR vs. the standard idea of PR over say the last 20 years.

  2. Dave Winer is a smart guy, and when it comes to Web 2.0 he’s been smart a lot longer than I have — but when it comes to investing and the stock market and venture capital, I think he might be a little out of his depth. I wouldn’t tel…

  3. Dave Winer is a smart guy, and when it comes to Web 2.0 he’s been smart a lot longer than I have — but when it comes to investing and the stock market and venture capital, I think he might be a little out of his depth. I wouldn’t tel…

  4. Having been around long enough to see a couple of bubbles come and go, alternative venture financing is a compelling notion. Still, you need people to execute good ideas to make them better and to get those people working on a project demands a degree of selectiveness. It’s not all just random.

    What’s needed is a kind of trinity of excellence — good capital; good ideas; good execution. WIthout all of those things it doesn’t work. That’s why the Toronto VC scene is struggling. We’ve got great ideas but we’re missing some critical element in Porter’s cluster view of economics.

  5. Having been around long enough to see a couple of bubbles come and go, alternative venture financing is a compelling notion. Still, you need people to execute good ideas to make them better and to get those people working on a project demands a degree of selectiveness. It’s not all just random.

    What’s needed is a kind of trinity of excellence — good capital; good ideas; good execution. WIthout all of those things it doesn’t work. That’s why the Toronto VC scene is struggling. We’ve got great ideas but we’re missing some critical element in Porter’s cluster view of economics.

  6. *** But today’s world isn’t money constrained. You don’t need much money to build software or services. ***

    I think it is one of the stupidest statements I read ever. During 1996-2001 I was a founder and CTO of a startup company, got 11 million venture money and after the crash sold the company’s assets to a large company. I know startup finances reasonably well to see the naiveness of this statement. The problem is: all points 1-11 require money, sometimes a lot of money. For example, if you are working on a vertical market selling high-price goods or services to large companies (like Electronic Design Automation (EDA)), you cannot do all sales through the web. You have to have experienced very high-paid salesmen who know the connections inside the companies you are selling to. You have to pay them salaries and commisions (stock options are not enough) and in order to do this you need venture money. You need to have an experienced executive team. This cost money too. I am not even talking about marketing expenses or R&D. To start a new company in most of software fields you need several million dollars anyway and you usually cannot get them from friends and family.

  7. *** But today’s world isn’t money constrained. You don’t need much money to build software or services. ***

    I think it is one of the stupidest statements I read ever. During 1996-2001 I was a founder and CTO of a startup company, got 11 million venture money and after the crash sold the company’s assets to a large company. I know startup finances reasonably well to see the naiveness of this statement. The problem is: all points 1-11 require money, sometimes a lot of money. For example, if you are working on a vertical market selling high-price goods or services to large companies (like Electronic Design Automation (EDA)), you cannot do all sales through the web. You have to have experienced very high-paid salesmen who know the connections inside the companies you are selling to. You have to pay them salaries and commisions (stock options are not enough) and in order to do this you need venture money. You need to have an experienced executive team. This cost money too. I am not even talking about marketing expenses or R&D. To start a new company in most of software fields you need several million dollars anyway and you usually cannot get them from friends and family.

  8. Pingback: Life With Alacrity
  9. Pingback: Junto Boyz
  10. Venture Middlemen – to help Entrepreneurs to connect to and leverage an associates existing Infrastructure. If anything can, being too slow to reach your target market can kill you. If someone could help me realise ideas on how to (re)mould my product to quickly reach a target audience, I am sure strategic investment would then be an obvious side-effect.

  11. Venture Middlemen – to help Entrepreneurs to connect to and leverage an associates existing Infrastructure. If anything can, being too slow to reach your target market can kill you. If someone could help me realise ideas on how to (re)mould my product to quickly reach a target audience, I am sure strategic investment would then be an obvious side-effect.

  12. That costs money, nothing in the world is free.

    Christopher, I was right with you until Robert called you on your post and you came back with that (um, rather lame) cop-out. How about a real reply? Huh?

    For myself, I think VCs are very pragmatic. They want ROI, and over the last 25 years dealing with VCs I’ve met a lot of good people with good ideas trying to do their best to arrive at a formula for picking winners. It’s an age old game and I’m just sure the game is broken. I think it’s the cards themselves.

    In the tech sector, how do you pick a winner? For every stunning success that smart people predicted, I can pick 20 that those same smart people said “This could be a winner!” and died. It’s already complicated enough predicting business success, but if add to that the terribly misunderstood “science of software”, and the new online economy which DOES behave differently than the offline one… it’s like playing with a card deck that might be all aces and you don’t know until you get to the 52nd card.

    I think the failing here is in not developing a “tech-sector language of analysis” that VCs (and other stakeholders) in tech businesses can use. The truth is, more stays the same than changes, so any techspeak dominated by claims that “everything is different, everything is new” is suspect immediately. Tech predictors need to be more reasonable and less full of hype. Maybe it’s not the VCs at all. Maybe it’s who they’ve been listening to!

    Umair is on the right track with well thought-out concepts like “Edge Competencies”. We need more of that kind of thinking to develop a reliable language of internet business analysis.

    That’s my “postive” pitch that I hope balances my critical one earlier.

  13. That costs money, nothing in the world is free.

    Christopher, I was right with you until Robert called you on your post and you came back with that (um, rather lame) cop-out. How about a real reply? Huh?

    For myself, I think VCs are very pragmatic. They want ROI, and over the last 25 years dealing with VCs I’ve met a lot of good people with good ideas trying to do their best to arrive at a formula for picking winners. It’s an age old game and I’m just sure the game is broken. I think it’s the cards themselves.

    In the tech sector, how do you pick a winner? For every stunning success that smart people predicted, I can pick 20 that those same smart people said “This could be a winner!” and died. It’s already complicated enough predicting business success, but if add to that the terribly misunderstood “science of software”, and the new online economy which DOES behave differently than the offline one… it’s like playing with a card deck that might be all aces and you don’t know until you get to the 52nd card.

    I think the failing here is in not developing a “tech-sector language of analysis” that VCs (and other stakeholders) in tech businesses can use. The truth is, more stays the same than changes, so any techspeak dominated by claims that “everything is different, everything is new” is suspect immediately. Tech predictors need to be more reasonable and less full of hype. Maybe it’s not the VCs at all. Maybe it’s who they’ve been listening to!

    Umair is on the right track with well thought-out concepts like “Edge Competencies”. We need more of that kind of thinking to develop a reliable language of internet business analysis.

    That’s my “postive” pitch that I hope balances my critical one earlier.

  14. You never put any of your own on the table.

    That costs money, nothing in the world is free. I don’t write scripts for the fun of it. I don’t do treatments as a hobby. I don’t do research reports for blogs. Microsoft may have conned people into holding expensive conferences where you can give THEM feedback, and working 24/7 for a mere title and freebies, say the MVP program, but for real info, real ideas, ummm show lottsa folding green stuff. True of anything worthwhile. Besides if I had a golden market-busting plan, I am not gonna “share” it with anyone, until all rights are reserved in my name. :)

  15. You never put any of your own on the table.

    That costs money, nothing in the world is free. I don’t write scripts for the fun of it. I don’t do treatments as a hobby. I don’t do research reports for blogs. Microsoft may have conned people into holding expensive conferences where you can give THEM feedback, and working 24/7 for a mere title and freebies, say the MVP program, but for real info, real ideas, ummm show lottsa folding green stuff. True of anything worthwhile. Besides if I had a golden market-busting plan, I am not gonna “share” it with anyone, until all rights are reserved in my name. :)

  16. Christopher: I notice a common theme in your rantings (both in person with me when I had dinner with you, and here on the blog).

    You only can tear down ideas. You never put any of your own on the table.

    Why is that?

  17. Christopher: I notice a common theme in your rantings (both in person with me when I had dinner with you, and here on the blog).

    You only can tear down ideas. You never put any of your own on the table.

    Why is that?

  18. But today’s world isn’t money constrained.

    Oh geesh, ‘click vs. brick’ New Economy talk all over again. Haven’t you learnt a darned thing from the crash? And, before you go nuts, some Web 2.0 service fool’s-gold selling-out to Yahoo for a quick buck, doesn’t mean the world is now less money constrained. And even software needs expert developers, massive testing, efficient distribution, strategic integration, extra value-adds, heavy marketing and partnerships and extensive End User training. None of that is cheap.

    That “money constrained” comment has to be the most economically idiotic comment of the year, and it’s only January.

  19. But today’s world isn’t money constrained.

    Oh geesh, ‘click vs. brick’ New Economy talk all over again. Haven’t you learnt a darned thing from the crash? And, before you go nuts, some Web 2.0 service fool’s-gold selling-out to Yahoo for a quick buck, doesn’t mean the world is now less money constrained. And even software needs expert developers, massive testing, efficient distribution, strategic integration, extra value-adds, heavy marketing and partnerships and extensive End User training. None of that is cheap.

    That “money constrained” comment has to be the most economically idiotic comment of the year, and it’s only January.

  20. 1) Venture Users – So? All the users in the world makes not for a business plan, that’s 1999 eyeballs accounting. Esp. when said audience is used to getting it for free. You that empty-headed up there?
    2) Venture Search Juicers – Oh brother, plotting a company on SEO and Click Frauddy tricks is not the way to go. Not that search placement is not important, but start with the building a better mousetrap, not blogger Google tricks.
    3) Venture advertising – Geee really? Advertise and will be sought after? Wow, great thinking there. But Madison Ave. figured this out around 1800, and made itself into an Empire.
    4) Venture offices and IT – Gee, maybe the Real-Estate section in the local paper would do? Or going to a Realtor? Or a IT service company? You think? I guess maybe they don’t have enough supply of Aeron chairs?
    5) Venture deep technical help – Knock, knock, anyone home? It’s called a Consultant, standard biz practice since the dawn of time. And consultancy comes with it’s own benefits and pitfalls.
    6) Venture marketing – You don’t NEED a graphic artist on board, you can contract out WHEN you need it.
    7) Venture ideas – Oh just great, more spacey Esther Dyson’s and self-appointed blogger egos to spit and shine the vaporware and generate new bubbles. And you already have this, it’s called conference speakers. And they don’t really care about YOUR ideas, they just tickle your ego enough, listen long enough, to keep you in the loop with THEIR ideas. It’s marketing, geeesh, obvious as all out. Look past your ego, and be street smart for once.
    8) Venture PR – Ummm, comparing an full-service Ad Agency to snot-nosed bloggers is not a good or even valid comparison. So then have Microsoft fire Wagged and McCann.
    9) Venture testers – You mean like a beta test? People will VOLUNTEER here, and if need serious in-depth help, hire a SME. The REAL trick is management of the feedback data.
    10) Venture management – There’s a name for this already, it’s called OUTSOURCING. Maybe you have heard of that? Yes?
    11) Venture evangelists – Translation: pay-off us A-Lister bloggers to hype up your product.

  21. 1) Venture Users – So? All the users in the world makes not for a business plan, that’s 1999 eyeballs accounting. Esp. when said audience is used to getting it for free. You that empty-headed up there?
    2) Venture Search Juicers – Oh brother, plotting a company on SEO and Click Frauddy tricks is not the way to go. Not that search placement is not important, but start with the building a better mousetrap, not blogger Google tricks.
    3) Venture advertising – Geee really? Advertise and will be sought after? Wow, great thinking there. But Madison Ave. figured this out around 1800, and made itself into an Empire.
    4) Venture offices and IT – Gee, maybe the Real-Estate section in the local paper would do? Or going to a Realtor? Or a IT service company? You think? I guess maybe they don’t have enough supply of Aeron chairs?
    5) Venture deep technical help – Knock, knock, anyone home? It’s called a Consultant, standard biz practice since the dawn of time. And consultancy comes with it’s own benefits and pitfalls.
    6) Venture marketing – You don’t NEED a graphic artist on board, you can contract out WHEN you need it.
    7) Venture ideas – Oh just great, more spacey Esther Dyson’s and self-appointed blogger egos to spit and shine the vaporware and generate new bubbles. And you already have this, it’s called conference speakers. And they don’t really care about YOUR ideas, they just tickle your ego enough, listen long enough, to keep you in the loop with THEIR ideas. It’s marketing, geeesh, obvious as all out. Look past your ego, and be street smart for once.
    8) Venture PR – Ummm, comparing an full-service Ad Agency to snot-nosed bloggers is not a good or even valid comparison. So then have Microsoft fire Wagged and McCann.
    9) Venture testers – You mean like a beta test? People will VOLUNTEER here, and if need serious in-depth help, hire a SME. The REAL trick is management of the feedback data.
    10) Venture management – There’s a name for this already, it’s called OUTSOURCING. Maybe you have heard of that? Yes?
    11) Venture evangelists – Translation: pay-off us A-Lister bloggers to hype up your product.

  22. Great post Robert. Why wait for all the trivia that you’ve just described to weed out potentially successful companies before funding them.

    Why wait until you’ve a tiny set to chose from and then knock them down with $3M when you could have spent that $3M seed funding 20 great companies in the type of incubator you describe.

    It’s great to see this discussion building.

  23. Great post Robert. Why wait for all the trivia that you’ve just described to weed out potentially successful companies before funding them.

    Why wait until you’ve a tiny set to chose from and then knock them down with $3M when you could have spent that $3M seed funding 20 great companies in the type of incubator you describe.

    It’s great to see this discussion building.

  24. “But today’s world isn’t money constrained. You don’t need much money to build software or services…
    Today’s world is mostly an audience aggregation one. At least that’s where the money is.”

    This view of “today’s world” is pretty narrow, isn’t it?? Yet it’s being discussed here as if it’s a total broad brush view of business in general. Whose world is it that isn’t money constrained? I bet many would find the idea preposterous. Lots of capital is needed for industries which produce hard goods, food, move things from one place to the other, clean up oil spills, repair our livers. Those same industries are being transformed by the online world, and many of the most promising Internet opportunites involve stepping beyond the info-tech products and into larger markets which touch more lives in different ways.

    If we’re talking about the VC perspective only as it applies to companies who write software for services that proliferate publication in the info-economy, then maybe all this is OK. But, let’s not talk in generalities as if we’re referring to the whole world of capital and business ideas when really the discussion is aiming only at a miniscule part of the economy.

    Also, I really agree totally with John: “Ideas are not the hard part”. His post is spot-on. I can’t tell you how many people believe that ideas and businesses are the same thing. That also goes for a lot of the other “contributing factors” you list. If you haven’t, read “Will and Vision” by Tellis/Golder. It gives a pretty good perspective on how the majority of the great ideas of our time were not turned into successes by the idea-makers, but by those who could execute, were persistent, and understood market economics.

  25. “But today’s world isn’t money constrained. You don’t need much money to build software or services…
    Today’s world is mostly an audience aggregation one. At least that’s where the money is.”

    This view of “today’s world” is pretty narrow, isn’t it?? Yet it’s being discussed here as if it’s a total broad brush view of business in general. Whose world is it that isn’t money constrained? I bet many would find the idea preposterous. Lots of capital is needed for industries which produce hard goods, food, move things from one place to the other, clean up oil spills, repair our livers. Those same industries are being transformed by the online world, and many of the most promising Internet opportunites involve stepping beyond the info-tech products and into larger markets which touch more lives in different ways.

    If we’re talking about the VC perspective only as it applies to companies who write software for services that proliferate publication in the info-economy, then maybe all this is OK. But, let’s not talk in generalities as if we’re referring to the whole world of capital and business ideas when really the discussion is aiming only at a miniscule part of the economy.

    Also, I really agree totally with John: “Ideas are not the hard part”. His post is spot-on. I can’t tell you how many people believe that ideas and businesses are the same thing. That also goes for a lot of the other “contributing factors” you list. If you haven’t, read “Will and Vision” by Tellis/Golder. It gives a pretty good perspective on how the majority of the great ideas of our time were not turned into successes by the idea-makers, but by those who could execute, were persistent, and understood market economics.

  26. Great post Robert, I really enjoyed the read. I would have to say I need a mix of a few, most notably 6,8, and 10. However, I’m finding it really hard to find people to bounce ideas of off (people I could really trust). Explain an idea, and ask do you think it’ll work, without them scratching thier head after, and looking at you like your from some other world. Technical people. So the barrier is not technical.

  27. Great post Robert, I really enjoyed the read. I would have to say I need a mix of a few, most notably 6,8, and 10. However, I’m finding it really hard to find people to bounce ideas of off (people I could really trust). Explain an idea, and ask do you think it’ll work, without them scratching thier head after, and looking at you like your from some other world. Technical people. So the barrier is not technical.

  28. I really think the ‘technical talent’ cannot be underestimated, even with the whole Ruby promise etc. The best technical talent to “disrupt” costs – Money, equity, the whole she-bang. So all the marketing, audience, and evangelism points are totally valid, but in order of importance, like say they in Venture Capital 101 “People, People, People” – says the Aussie non engineer ;) currently spending every cent on technical talent. There are also unavoidable costs in setting up a company, getting business cards, protecting inventions if necessary. In effect “being serious” so you can attract customers, employees, buzz etc. You dont get a free house to rent in Atherton etc. It’s a good discussion this one. I would think $100K cash seed investments per company plus additional tech resources, plus business/office infrastructure, plus evangelism/audience/beta testers… plus some bridging/VC intelligence once you are past prototype stage… says the entrepreneur in exactly that position… The key is to provide the most important resources when they are least available. Venture Incubators came and went because they provided “commodity like” value. Lets not let that happen again. I mean imagine having Scoble and Winer on your Advisory Board !

  29. I really think the ‘technical talent’ cannot be underestimated, even with the whole Ruby promise etc. The best technical talent to “disrupt” costs – Money, equity, the whole she-bang. So all the marketing, audience, and evangelism points are totally valid, but in order of importance, like say they in Venture Capital 101 “People, People, People” – says the Aussie non engineer ;) currently spending every cent on technical talent. There are also unavoidable costs in setting up a company, getting business cards, protecting inventions if necessary. In effect “being serious” so you can attract customers, employees, buzz etc. You dont get a free house to rent in Atherton etc. It’s a good discussion this one. I would think $100K cash seed investments per company plus additional tech resources, plus business/office infrastructure, plus evangelism/audience/beta testers… plus some bridging/VC intelligence once you are past prototype stage… says the entrepreneur in exactly that position… The key is to provide the most important resources when they are least available. Venture Incubators came and went because they provided “commodity like” value. Lets not let that happen again. I mean imagine having Scoble and Winer on your Advisory Board !

Comments are closed.