Tuesday, November 8, 2011

Facebook's Endless Conversation Threads Are Creepy

Yesterday I went to send congratulations over Facebook to an ex-girlfriend who just had her first child. When I landed on the messaging page I had a rather awkward experience. Since Facebook shows your entire messaging history in one column, and since we only used Facebook to communicate at the beginning of our relationship, I was presented with a string of intimate messages from another era that were, let's just say, grossly inappropriate to my current heartfelt message to wish her the best in her new motherhood and her life with her husband. It was as if Facebook had sent me back in time and was denying that my life had different phases and that while I might know the same people across them, I might want to start the conversation afresh.

Monday, November 7, 2011

Is Becoming a Nation of App Builders a Bad Thing?

The New York Times Magazine launched a new column this weekend called "It's the Economy," by Adam Davidson, designed to "demystify complicated economic issues." Davidson knows a little about this, as the cofounder of Planet Money, "a podcast, blog, and radio series heard on NPR’s Morning Edition, All Things Considered and on This American Life." His first post was a provocative article called "Can Anyone Really Create Jobs?" The thesis was that only a broad improvement in the economy could create jobs, and there was nothing that CEOs, Governors, nor even Presidents could do to create them directly (except potentially for stimulus on a scale that is politically unfeasible).

Most provocatively - at least to the circles in which I run - was his assertion that:
We don’t need to become a nation of app designers. An economic downturn is a great time to learn things — carpentry, say, or aerospace engineering — that others will eventually pay for
In other words, tech is being driven by a force that Davidson fundamentally believes to be unsustainable: the rise in apps, mobile and web, that are in turn driving the consumer web boom. This is interesting to consider given that tech is one of the few sectors that is not just hiring but can't do so fast enough, and because of its implications for the "are we in a bubble" debate.

I'm not sure if I agree but I'm not sure if I disagree either. It comes down to whether a startup is just an app or a real business. Apps are a powerful technology like the Internet is a powerful technology, but just as with the Internet the sustainable companies will mostly be businesses that leverage apps, rather than app businesses.

Thursday, November 3, 2011

VC, Like Every Other Industry, Gets Disrupted but Survives

I don't usually like to repost whole articles, but sometimes something comes along that I like enough to do so anyways. I remember the "conventional wisdom" Pascal writes about as being like gospel from 2007-2009, when I was in business school, yet the startup world keeps evolving in ways that even the "professional" visionaries never quite see coming. It should be interesting to see how long the current "barbell" model lasts.
"For a while, the conventional wisdom on venture capital was fairly straightforward: because of the dotcom bubble, VCs had grown too fat and raised too much money. This wasn't apparent because funds are typically raised for 10 years, but now was the time of reckoning, when VCs would start dropping like flies and even the top of the industry would have to slim down.
Then, two funny things happened:
  • Plenty of small funds ($20-$50 million) started popping up,
  • in Silicon Valley and elsewhere;
  • Some funds have taken to raising huge funds, sometimes in the billions of dollars.
What's going on? 
VC is not just slimming down (though it is, as the chart above shows), it is completely reconfiguring. 
On the side of the small VC funds (the so-called "superangels"), they are largely happening for two reasons:
  • Web businesses are incredibly capital efficient and so smaller fund sizes make sense (the demand side);
  • Through sheer math, smaller funds have a better time delivering ROI to their investors (the supply side). 
On the side of the mega funds, here's what's going on: there is a "flight to quality" for LPs (Limited Partners, the institutional investors who invest in venture firms) who have gotten battered by low VC returns over the past decade (not just in tech--biotech and cleantech have been disappointments as well). Even though they are cutting their allocation for venture firms overall, that's still a very large pie, and more of that remaining pie is going to the very top funds.  
So instead of getting a VC industry that looks much the same except a lot smaller, we're getting a VC industry that's smaller but also very different, with a bunch of very small funds on one hand, and a handful of very, very large funds on the other hand.
Stuck in the middle with them, some VC funds that are sticking to the traditional model, like Union Square Ventures and Sequoia Capital, are thriving. (And others dying.)
From The Way Companies Are Getting Financed Is Completely Changing
Pascal-Emmanuel Gobry