Bringing the Valley to New York

There are many things that I am thankful for this year, but one of the best things that could happen to the New York tech scene is the growth of Google.  Last year Google opened a huge office in Chelsea and moved about 500 employees into the new location.  While I initially thought that most of the staffers would be associated with advertising sales or content business development, through my various visits to the office I was surprised to learn that there were lots of engineers working on some significant projects in New York like Google Maps and Google Mobile Search.  There is an interesting article in today’s New York Times about the the Googleplex in Manhattan and how the Silicon Valley culture is being brought to New York. 

The strategy of keeping employees happy and committed to spending endless hours on campus seems to be working. Richard Burdon, 37, an engineer who joined Google two years ago, has been staying past midnight to prepare for the introduction of a project. (Google’s Manhattan engineers have been responsible for developing Google Maps and are working on some 100 other projects.)

“Google is about as interesting as starting your own startup because you can really follow your own ideas,” said Mr. Burdon, who previously worked for Goldman Sachs, Sony and I.B.M. The only time he could remember leaving the office during the workday was to buy a friend a birthday present.

As a New York-based venture capitalist, this is great news.  While many employees continue to enjoy the meteoric growth of the company, I am quite excited at the prospect of having hundreds of well-trained engineers and product managers in New York who will one day want to start their own company.  New York has always had a talented and core group of technologists, many of whom are working on startup number 2 or 3, but what gets me excited is the idea that many newbies to the startup and web culture will have the opportunity to experience the fast-paced, engineering driven world of Google.  It is precisely the engineers like Richard Burdon mentioned above who worked at major corporations like Goldman Sachs, Sony, and IBM, who may have never left their jobs for a startup but did so for Google.  It is also many of these engineers, once they get their feet wet in an engineer driven culture, who will eventually want to leave and start their own companies contributing to the continued emergence of New York as a great place to launch a web startup.

Small business startup kit for 2007 – mostly free!

A friend of mine called me the other day to ask for advice on what services (email, voice, apps) he should use to run his business with the caveat being that he wanted to spend as little upfront capital as possible and also have minimal ongoing maintenance headaches.  As I started thinking about his question, I remember what it was like setting up our office in 1998 and the headaches and cost of buying a Nortel phone system and phones and hiring a Microsoft networking expert to get our office set up for file sharing, back up, and email.  What a nightmare!  What was even worse was that we had to have this guy come in at least once a month for general maintenance.  So when we moved in the beginning of 2004, I vowed to outsource as much as possible.  In the end, here is what we did:

1. Exchange server – – pay monthly based on number of mailboxes and mailbox size and eliminates the headache of ongoing maintenance and backup.  also can add mobile devices like Blackberry, Good-enabled, etc. and easily provision without cap x.
2. Voice-outsourced VOIP, we have a direct pipe to a local provider, we leased some Cisco phones, and once again no upfront cap x and lots of great functionality, we pay a base monthly fee for unlimited calling.
3. Security – we bought some Cisco gear but have a small IT firm as our managed service provider remotely monitoring and updating the software with the latest patches and release.
4. Connectivity = We are networked internally on Windows and have a shared drive where we can access files.  In addition, we have a VPN for remote access to this share drive.
5. Productivity – Microsoft Office

Going back to my friend’s question, if I could set up my office now, here is what I would do:

1. Exchange server – I hate exchange and I would bail on this as soon as I can.  Instead, I would get all of my email and calendaring functionality through Google Apps for your domain – it is free and provides 2 gb of email, integrated calendaring with your email, chat and simple voice chat, and an ability to create simple web pages.  Yes this is basic but it is easy.  In addition, I expect a lot more to be offered once Jotspot is integrated along with some of the other basic Google Office apps such as word processing and spreadsheet functionality.  My one big beef which is holding me back right now is the lack of simple syncing with wireless devices.  There are some apps you can plug in to sync Google calendar but they still need some work.
2. Voice – if I want something more robust I would get a Fonality PBXtra for $995.  If you choose to go the really simple route, the PC-only VOIP providers of today have come a long way since 2004. I am partial to Gizmo Project (wait for our new version which will be accessible through a browser – also, full disclosure, I am on the board) but Skype and other services can once again offer you pretty decent voice communications and functionality like the ability to buy your own phone number, call forwarding, and dual ringing on your computer or cell phone.
3. Security – not as important if your files are hosted offline and backed up remotely (try xdrive which is free for 5 gb or (free for 1gb). 
4. Connectivity – a simple wifi network in the office can get you simple file sharing without an IT professional’s help.  If you want to collaborate with remote workers, you can use a wiki like Jotspot  or Socialtext or some of the shared storage services I mention above.  As far as remote acccess, no VPN is needed as a simple GoToMyPc account ($19.95 per pc per month) or LogMeIn (free for base functionality) can get you the access that you need without the headaches and upfront cost of a VPN.
5. Productivity-Microsoft Office but the online apps are getting better and in fact for collaboration or sharing would consider Google Office apps like spreadsheets and writely

What is amazing to me is how far and how fast we have come during the last 2 years.  The big difference is that the functionality is even better and so is the price – mostly free!  Given this, I wonder what we will be looking at 2 years from now?  Yes, one problem is that all of the solutions I list above are dependent on having an Internet connection.  What if I am not online and need access to my calendar or some office documents?  Since this is a pretty clear problem, my prediction for 2007 is that online apps get better offline client like functionality.  Maybe it will be the new Adobe Apollo platform that makes it happen for us?  What is clear is that one of the benefits of SAAS for developers is that they don’t have to code in multiple platforms.  Once you start diving into the murky world of multiple operating systems and developing clients for Windows, Mac, and Linux, it can quickly become quite messy and resource intensive.  That is why I also see 2007 as the year that offline apps become big as the Apollo platform is released and allows web developers to build an application on one platform that can be deployed cross operating system.  Also keep an eye out for Microsoft’s WPF/e (windows presentation framework everywhere see an earlier post for more info on wpf).  This is a big deal and will help SAAS-based apps continue its upward trajectory and spread from consumers to SMBs and even further into enterprises.  As an example, take a look at Jeff Nolan’s recent post about how frustrated he is with Exchange and how GMail provides a nice alternative.  With the ability to get my whole office set up with a few clicks, it is no wonder that Microsoft is running scared and embracing SAAS rather than fighting it.

The future of television advertising (continued)

In my last post on television advertising, I mentioned that while video advertising on the web will grow rapidly over the next few years, the $60 billion currently spent on television advertising per year will not go away overnight.  What is needed for the industry is a way to make television commercials more relevant, targeted, and dynamic.  In other words, some of the best practices and technology from Internet advertising should be brought to television advertising.  Well, it is beginning to happen starting with big brands like Wendy’s International.  An article in today’s New York Times highlights the new television advertising campaign from Wendy’s where the ad will dynamically update based on what is happening on the football games aired on Fox. While most viewers may not actually get it on the first airing, Wendy’s campaign is definitely a big deal for the industry. 

The Wendy’s commercials, to be broadcast nationally on Fox Sports this weekend, are one of the earliest national examples of an emerging TV technology that allows advertisers to vary their message at the last minute. The Wendy’s ads will reflect events in the football games, creating what ad executives call a reverse product placement of sorts. Instead of putting Frostys or Wendy’s fries into a TV program, the company will incorporate a show’s content in its commercials.

TV advertisers are also now able to vary their spots based on audience demographics, changes in weather, sales goals or the campaigns of competitors. Borrowing a trick or two from the Internet, where ads are finely aimed at Web surfers, technology companies are working with consumer brand companies to move away from the one-message-fits-all approach.

“This is where the future’s going,” said Chris Boothe, president of Starcom USA, a media-buying agency that is part of the  Publicis Groupe. “We think that everything’s going toward more customization. It’s making sure that the message to the consumer is happening at exactly the time it is relevant.”

Congratulations to portfolio company Visible World for helping Wendy’s and Fox, sticking with its vision over the years, and helping the television industry take advantage of new technology to bring Internet-like dynamicism to an aging platform.

The similarities between venture capitalists and social workers

I had an interesting call this morning with an entrepreneur who had been up until the wee hours of the morning reviewing legal documents for a big strategic partnership.   He apologized about his state of mind which wasn’t exactly calm and cool, and we proceeded to discuss the issues and parse out the major ones from the minor details.  As I reminded him of a conversation I had with my wife several years ago, we all had a good laugh.  When my wife and I first met, she asked me what a venture capitalist does.  Sure, there was the usual answer of we look for great people building great companies, invest in them, and help them through strategic discussions and introductions.  However, there was a subtler more nuanced answer in that a big part of being a venture capitalist was similar to being a social worker.  Our business is a people business and part of that means not only knowing who we are dealing with but also understanding what makes them tick and helping them through both the good and tough times.  We are part coach, part mentor, and part social worker.  We need to understand the psychological state of the entrepreneurs we work with and the management teams they build.  When an entrepreneur is on the ledge, looking down, and ready to jump, our job as a VC is to pull them off and help calm them down.  When an entrepreneur is too cocky or overconfident, we show them the ledge, have them look down, and then pull them off.  So in many ways, being a good venture capitalist is dependent on our ability to understand what drives the people we work with, how to constantly challenge them and motivate them, pat them on the back when they need it, and push them harder if they are slowing down.  For that matter, these are some of the more nuanced and subtle traits that entrepreneurs need to exhibit when dealing with their employees, constantly taking the pulse of the company and key individuals, and massaging the various personalities and egos to help them stay hungry and excited to perform at their best.  As much as some would like to think that being a VC is about the technology or numbers, it is all about the people.  Anyway, at the end of the call my colleague and I were able to walk our CEO off the ledge and help get him prepared for his next battle.  He never thought of us as also playing the role of social worker in our frequent interactions, but he certainly agreed as he thought more about it.

UPDATE-there are lots of different types of social workers but in this context think counselor or sounding board.  My comparison with social workers was not meant to make all entrepreneurs sound like they have serious issues-the point is that sometimes the daily bump and grind of operating a business can get to you and having a VC who knows your business and who is part counselor/part sounding board can be an invaluable resource.

Set my music free – thank you EMI

Thank you EMI for releasing music singles without any DRM protection on it.  While I continue my love/hate relationship with the IPod, I do believe that my music needs to be portable and free. I recently bought the new Treo 680 for my wife and was in the process of loading music on her device when I remembered that my selection was limited.  I also have the same issue with the new Blackberry Pearl I just bought for myself.  Why is this the case?  It is because the hardware and technology vendors want to lock consumers into their ecosystems.  It is because the music companies are afraid of piracy.  In this case, it is because any music I bought from ITunes over the last few years requires me to have a device (iPod, iTunes, or  music phone) that can play ITunes or AAC encoded tracks.  Sure I could go convert the files to a wav format and then reconvert them to MP3 but who has the time or desire to do so.  The same goes for any device using Microsoft technology – your new device has to support WMA DRM.  In the end, I buy my music but it can’t go anywhere with me which is quite frustrating.  As we all know, this will become a bigger problem in the future as more and more devices support music like the Treo and new Blackberry Pearl.  As a consumer, I don’t necessarily want to be locked into one vendor forever and want to be able to easily port my songs between different devices.  There are forward thinking individuals in the industry like Michael Robertson (full disclosure, Michael is also the founder of portfolio company Sipphone) who wants to store your music in the cloud and allow you to access it from any device – wireless, Tivo, any PC, but at the end of the day the problem is that I still need to have iTunes if I want to play the music I bought from them.  This has to end!  So EMI is releasing a Norah Jones single through Yahoo Music with no DRM.  This is a baby step but a big one.  Maybe the fear of Apple’s dominance in the music industry is outweighing the industry’s concern for piracy? Either way, this is a welcome step for consumers.  I still may go back to the stone age and buy CDs and rip them myself as I want my music to be free, free of all DRM so I can use it how I want and on what device I want.

Setting unattainable goals can hurt your company

It is near the end of the year and I would hope by now that most companies have been through a revision or two of their strategic plan and budget for 2007.  While strategic planning and budgeting is a task that some may find quite onerous or even useless, it is an imperative process and one that will help align your team and continue driving the growth of your business.  Rather than go into a step-by-step walkthrough of this process, I thought it would be more helpful if I share with you the number one mistake I see made year in and year out – companies putting together plans and revenue targets which are unattainable. Look, we all want our companies to excel and stretch to reach their goals but at the same time setting a bar in the clouds can be detrimental to you and your company’s health.

Why is this a problem?  First, creating a plan that is too ambitious only sets you and the company up for failure.  People don’t like to fail and you and your employees can get demoralized after repeatedly missing targets by a significant amount and especially if your compensation is tied to a plan that will never be realized.  Secondly, in trying to hit an unattainable plan, management teams typically make another huge mistake – overhiring too early or frontloading all of their hires to spend their way to success.  What this does is speed up cash burn without delivering the desired results.  In an earlier post, I mentioned how hiring too far in advance of your market can lead to ruin:

"Do more with less and be careful of ramping up sales until you have a repeatable selling model.  In other words do not hire too many sales people and send them on a wild goose chase until you have built the right product, honed the value proposition, identified a few target markets with pain, and can easily replicate the sales process and model from some of your customer wins."

So just do yourself a favor when you build your strategic plan for next year – get input from all of the key stakeholders (sales, marketing, engineering), get them to buy off on the plan, and put together goals that force the company to perform at its best while at the same time being grounded in reality.  A good possible solution is for your company to lay out 2 plans – a baseline growth plan which the board approves and an upside plan that has a higher benchmark which the employees use as their goal.  What this does is allow companies to manage to a certain burn rate (baseline) but at the same time continue to push its teams to excel and deliver results.  If the company exceeds the baseline plan in a certain quarter, companies can always add a few more people to maintain the upside growth.