46 posts from July 2008
I've been thinking about this question for the past six months as we have been eagerly awaiting the launch of the iPhone app store and with it, the iPhone app ecosystem.
iPhone apps have been out there since the emergence of jailbreak but its clear the the launch of the app store legitamizes this market.
We've made one investment in the Facebook app ecosystem, Zynga, which is the largest network of gaming apps on Facebook and the other large US-focused social nets. And we've made one investment in the iPhone app ecosystem with Pinch Media which provides free analytics and advertising system to monetize free iPhone apps.
So as we've watched Pinch launch its services to the iPhone developer market, I've been wondering what will be similar between these two ecosystems and what will be different?
At first blush, it seems that the iPhone has attracted a broader base of developers and at least to my eye, a number of more 'serious' (ie productivity/business apps). But its also going to be true that gaming is likely to be the most popular category in both ecosystems. Just look at the app store right now and you'll see games all over the most popular lists.
On Facebook, Zynga and a few others developers have come to dominate the games category. Will it play out that way on the iPhone too? Hard to say but its clear that we'll all be playing Super Monkey Ball on our iPhones the way we play Brickbreaker on our Blackberries.
The biggest question on my mind is how big will the first mover advantage be in the iPhone app ecosystem? On Facebook, the few who got their first, like Slide, RockYou, Zynga, iLike, Flixster, have come to dominate the ecosystem. That has a lot to do with the rules of the game that existed when Facebook launched the app platform and how they've tightened them down since. And Facebook is a viral social system. Is the iPhone? My gut says yes, but I am not sure its virality is as baked in right now as it will be over time.
If first mover means as much on the iPhone as it did on Facebook, then the early stars like Loopt/Yelp, Super Monkey, Twitterific, and others will have an advantage.
The design of the app store front page is also important. Will Apple favor paid apps where they get a cut over free aps where they don't? Right now, the front page looks pretty balanced between most popular, staff picks, recently popular, free/paid, etc. But it's certainly been true in the music store and the podcast page that being popular is self reinforcing and I suspect that will be true with iPhone apps as well.
I am sure some of the answers to these questions I've been asking are already known. And I am sure that all of you have been thinking of and asking the same questions. So comment away and educate all of us on this important question.
For the past six months, there’s been a noticeable increase in the number of german investors and entrepreneurs stopping in to see me at my office in New York. Every time I ask them, how did you hear of us? And each time, they’ve said, “Lukasz told us to see you”. But the couple times Lucasz was in NYC, I was out of town. So when I made plans to spend time in Europe this summer, I made sure to hunt down this guy Lukasz and figure out what he was up to. I am glad I did.
Lukasz’ full name is Lukasz Gadowski, he was born in Poland, spent most of his childhood in Germany, started a successful german online t-shirt company called Spreadshirt, helped start StudioVZ, the largest social net in germany, and now he’s an investor in something like 60 startups, mostly in germany, but a few in the US, France, and Poland.
I met him at his office this morning, spent time with two companies he is invested in and shares offices with and then we headed out to meet a bunch more startups. I was thinking we’d be driving around town in his car. But happily that was not the case. When we got outside, he turned to me and said, “the best way to get around Berlin is to bike”. So we grabbed his bike and a rental bike from a company called Call-A-Bike and headed out. This is what a Call-A-Bile looks like.
We proceeded to meet three companies at the Hotel de Rome where we also had lunch and I saw his partner Oliver. Then we saw three more startups around the Mitte neighborhood where apparently the Berlin startup scene is focused.
As much as I love riding my bike around NYC and as much as we’ve come to rely on the Velib system in Paris, I honestly have never spent a day anywhere in the word bicycling from startup to startup. Now I have and I am surely going to do it again. It really works to see a lot of people and a city at the same time.
It’s been 25 years since I’ve been to Berlin and it’s changed a lot, for obvious reasons. It’s a modern city with a vibrant tech startup scene. Lucasz and his partner Oliver are invested in over 50 german startups. Some are in Hamburg, Munich, and elsewhere, but most are in Berlin. There are a few other local german early stage investors, including the European Founders Fund (aka the Samwer brothers), and publishing companies like Burda (a coinvestor of ours in Etsy), and Hotzbrinck Ventures.
But I got the distinct feeling today in Berlin that there is a mismatch between the number of high energy/high quality tech startups and the capital to fund all of them. It feels like New York ten years ago.
I’ll do the same thing that I did in my post about the “speed dating” in Paris, which is categorize the eight startups I saw today.
Online health community - 1
Private sales – 2 (apparel and travel)
Browser based games – 1
Peer to peer lending – 1
Videochat for social nets – 1
E-commerce – 1
Handmade goods market – 1
While the overlap between the companies I saw today our current deal flow in the states was not quite as tight as the companies I saw in Paris yesterday, it was still quite strong.
Again, I will say with conviction that Europe doesn’t lag the US by much, if at all these days. When an idea occurs to an entrepreneur in NYC or silicon valley, you can be pretty sure that the same idea is occurring to an entrepreneur in Paris, Berlin, Stockholm, London, or most anywhere in the world. That’s because they all read the same blogs, use the same technology, and talk to each other at conferences and online. Though the physical distances may be great, the intellectual distances are minute.
And in some areas, the europeans are inventing business models. Take the “private sale” model. It was first executed by a French company called Vente Privee which is now an very big business. I don’t have any access to information to confirm this, but I’ve heard that Vente Privee does over 500mm euros in annual turnover (as they call revenue over here). And at very high margins for a retailing business.
I saw two similar businesses in Berlin today and it’s clear to me that the europeans are ahead of the US in executing this business model. We have several companies doing this in the states now, like Gilt Group and at least one other. But the US are followers, not the innovators, in this category.
There’s nothing wrong with the follower approach, but it’s still worth noting that the US isn’t inventing every good online business model. The Koreans pretty much innovated on the user pay model in gaming if you want another example.
But back to Berlin. For a long time, the Germans have been known as good fast followers, copying business models in the US and building local franchises. And about half of the companies I saw today will probably stay in Germany or at best roll out across the continent. But the other half are gunning for a global business and eager to compete in the states and elsewhere. That’s similar to what I found in Paris yesterday.
So my take on Berlin is similar to my take on Paris. I think the economy and social issues are a bit better in Germany and it seems like it’s a bit easier to be an entrepreneur in Berlin than Paris. But I also think both cities have a larger supply of quality deals than early stage and expansion stage capital. And from someone who has played that game in NY for the past dozen years, that smells like opportunity to me.
And best of all, you can bike to board meetings.
Last week I attended Open Coffee in Paris where I met a bunch of interesting entrepreneurs. I also met the people who run a PR firm in Paris called Ballou PR. They asked me to do a full day “speed dating” session and a Pont Party during my time in Paris. After explaining the details of both, I said yes. I am not sure which is more fun, meeting 16 entrepreneurs in one day or drinking wine in the early evening on a bridge over the Seine, but honestly they both sounded good to me.
The Pont Party is next week, the 17th to be exact, at 18:30 on Passerelle Solferino. I posted the details last night. If you are in Paris and want to meet entrepreneurs, you should come by.
I did the “speed dating” event yesterday and I mentioned it briefly in a post last night. I want to add some more color, give my high level impressions, and talk about a few specific companies that have live services you all might want to check out.
Again, I’d like to thank Marc Brandsma of Chausson Finance and Ken and Colette from Ballou for putting it together. I linked to their online coordinates in the post last night.
Marc, Ken, and Colette work with Parisian startups every day and I was able to get a few minutes alone with them over breakfast and lunch to talk about the overall state of the startup market in France, but specifically Paris. Since we don’t invest in biotech, cleantech, or hardware or communications, my comments are going to be limited to web technology, mobile, and gaming applications.
In some ways, being an entrepreneur in Paris is like being an entrepreneur anywhere. The odds are against you, nothing comes easily, and most people think you are crazy. It’s harder to be an entrepreneur in Paris than it is in Silicon Valley. It also seems harder than NYC or many cities in the US. And I suspect it’s harder than London as well.
Entrepreneurship is a French word and modern day venture capital was invented by a Frenchman named George Doriot. If you don’t know about Doriot, you haven’t been reading this blog recently. But even though the French have a historical connection to entrepreneurship and venture capital, the French economy and society doesn’t seem to be particularly supportive of entrepreneurship.
It starts with the economics of being an entrepreneur. The tax situation in France is such that if you make it big with a startup, you’ll probably move to Belgium or Luxembourg so you can keep most of the fruits of your labor. That’s a big deal because, as we know, it’s the past successes and the people who have had them that seed the next successes.
But it’s also true that the French society doesn’t value risk taking in quite the same way that the US does. I heard yesterday about a tax break that the government recently passed that allows wealthy people invest in startups instead of paying windfall taxes to the government. Sounds great, right? But tax and financial advisors quickly came up with schemes to route those tax breaks into super safe investments that simply capture the tax breaks but take no risks. Maybe that would happen in the US too, but somehow I think our culture in the US values likes to play higher up on the risk/reward curve.
Being an entrepreneur in Paris is a bit like being one in NYC. It’s not like Silicon Valley where everyone seems to be starting a company, working in a startup, or investing in a startup. In NYC and Paris, most people work in big companies and don’t read Techmeme and Valleywag. So when you are an entrepreneur in NYC or Paris, you are the nutty one, not the mainstream.
But all that said, the entrepreneurs I met yesterday were very typical of the people I meet every day in our business. And they are working on exactly the same problems/opportunities that startups in the US are working on.
Here a list of the general areas that the sixteen startups I met with yesterday are working on, along with the number of companies I saw working in that area, and a comment about whether our firm had looked at a similar opportunity in the past three months (noted as “current”):
Entertainment ratings/reviews – one company – current
Mobile banking – one company – current
P2P lending – one company – current
Interactive/Internet TV – two companies – current
Sentiment analysis/tracking – one company – current
Stock footage – one company – current
Mobile gaming – two companies – current
Mobile RSS – one company – current
iPhone apps – one company - current
Prediction markets – one company – current
Virtual worlds – one company – current
Video ad creation – one company – current
Mobile/web integration – one company – current
Career/Jobs web service – one company - current
What that list tells me is that Parisian entrepreneurs are as up to speed on where the current opportunities as much as anyone in silicon valley, NYC, or anywhere else in the world. I’ve talked a lot about this lately, but globalization means that the word travels fast. Don’t think that the most interesting mobile games or iPhone apps will be built in Silcon Valley or even the US. Some will. Many won’t be.
And I thought that the quality of the technologists I met (some of the presenters were the technical founders, some were not) was very high. And most of the development teams were local, built from the ground up in France. That is different from what we are seeing more and more of in the US.
I often hear that European startups often get focused on the regional or even country specific opportunities and as such the upside of investing in Europe startups is not as high as US startups. The sixteen companies I looked at broke out like this:
France focus: 3
Europe focus: 2
Europe/Asia focus: 1
Global focus: 10
So, it’s true that some French startups do focus locally or regionally, but most of the companies I met with are thinking globally day one. I don’t know if that’s a recent change in orientation or something else, but I see that as very positive.
So that’s it for the color commentary and high level impressions. Here are a few interesting web services I learned about yesterday. Check them out and let me know what you think.
ulik.com – social service for entertainment focused on ratings
wixi.com – invite only service for sharing music and video
twitrss – a mobile RSS reader in early alpha that uses twitter for sms alerts
yoowalk – a virtual world built entirely in flash available via a web browser
mypronostic.com - prediction marketplace
French only, soon to be available in additional languages/countries:
From 9am to 7pm today, I was in back to back meetings with not a minute of free time. I managed to meet with sixteen parisian entrepreneurs in back to back 30 minute sessions, with time out for breakfast and lunch. It was stimulating, enlightening, and only a bit exhausting.
I am headed to Berlin tomorrow to do a similar thing and hope to be able to blog about today's meetings a bit more on the flight to Berlin tomorrow. There were some great meetings.
And I want to let everyone know that Ballou PR is doing one of their "Pont Parties" next Thursday night, July 17th. I am going to be there from the start at 6:30pm to around 8:30pm. If you are in Paris next Thursday and want to meet up with other people working in the startup scene, this looks to be a great event. Here's the details:
Time: 18h30 (weather permitting, but it looks very promising)
Where: Passerelle Solferino, 4th & 5th bench on south side, facing west
Metro: Solferino, Tuileries, RER: Musee d’Orsay
Who: You, bring friends!
What to bring: you know the drill; each invitee brings a bottle of wine
Image by cucumber! via Flickr
As I've been exploring the startup scene in europe this month, I've made my home base in Paris with my family. And I've been blogging and twittering a bit about Paris. Yesterday I got this twitter message from Arthur:
Why the Expats Left Paris (from Saturday's WSJ) http://snurl.com/2uhnf thought you'd be interested
It's an interesting piece penned by a writer named Dinaw Mengestu who is currently living and working in Paris. In it Dinaw explains that the Paris of the 50s and the 60s is long gone:
It's hard if not inevitable now to think of that previous generation of writers and not romanticize them and their lives here a bit: to think of yourself sitting under a bright light at a table in the back of the elegant Café de Flore, in shouting distance of Sartre or Simone de Beauvoir, or to have been on the terrace at the neighboring Les Deux Magots when James Baldwin and Richard Wright reportedly had a heated argument about an essay Baldwin had written excoriating Wright's "Native Son." Such events and conversations seem to belong exclusively to another era, one that was measured in francs instead of euros, when there wasn't an American Apparel store to be found just on the other side of the Boulevard St. Germain.
The essay goes on to explain that the artists aren't coming to Paris anymore because Paris has lost its unique flavor, becoming more like the rest of the world. Or maybe the rest of the world has become more like Paris. Dinaw suggests that artists might be going to Berlin or Buenos Aires instead.
There is something to say for the "easy life" of Paris or BA. I am headed to Berlin on Thursday so I'll let you know after my trip about that city. But I think something way more profound is going on than one city becoming the preferred place for artists to congregate, work, and discuss and debate their work.
I believe the Internet is slowly taking the place of the cafe as the congregation point. It is drawing more and more artists to it as the place to showcase the work, to debate its merits, and to meet and colloborate with other artists.
I am writing this less than three blocks from Cafe de Flore and Les Deux Magots and I can assure you that the Internet cannot recreate the vibe of sitting on the street with a friend and a cup of expresso discussing and debating your passions.
But the idea of a physical place that we "must be" doesn't have the same impact anymore. Right now, I can engage in a debate with friends in Australia, China, Japan, India, Israel, Italy, France, England, NYC, San Francisco, Los Angeles, and Chicago at the same time. Or we can post our thoughts to each other (and the world) over the course of a day, a week, or a month, and share our passions with each other and learn from each other.
Our Cafe de Flore is Techmeme or Tech Newsjunk or Twitter or FriendFeed or Tumblr or Flickr or something else. And we are just getting started. It will be interesting to see if the new cafe society produces the kind of work that the traditional ones did.
I love the line about lies; "there are lies, damned lies, and statistics". You can use numbers to tell any story you want.
In the realm of web statistics, there are three numbers that are great to use if you want to tell lies. They are:
- RSS subscriber numbers
- Facebook app install numbers
- Follower numbers on Twitter, Friendfeed, Tumblr, or some other social media service
I tell you this because there is a discussion brewing on Techmeme this morning about how to get a lot of followers on FriendFeed. And I am telling you that the number of followers you have may be relevant early on in the life of a service, but it really doesn't matter in the long run.
Let's start with RSS subscribers. This blog has, according to FeedBurner, 133,000 RSS subscribers. That's a big number. But the number of people who read this blog via the feed every day averages less than 4,000. Why is that? Well for one, that subscriber number has grown every day and never goes down. It includes people who stopped reading a long time ago, people who subscribed in multiple readers but now only use one reader, people who read once a month or once a year, etc, etc. Bottom line is the 133,000 number is basically useless.
Now lets look at Facebook app installs. Let's look at the Social Gaming Network (SGN). Their Facebook apps have been installed almost 46 million times. And yet all the games together average about 650,000 daily users. Why is that? Well for mostly the same reasons. Some people install Free Gifts once, but rarely use it after that. I don't mean to pick on SGN. It's true for every Facebook app company. Our portfolio company Zynga has had 51 million of their apps installed and averages 1.7mm daily users. That's the way it is in the Facebook app economy.
And the same is true with followers on Twitter, FriendFeed, and Tumblr. I have 5,152 followers on Twitter, 4,482 followers on FriendFeed, and 877 followers on Tumblr. I don't know of any way to calculate the number of people who actually visit my updates on Twitter or FriendFeed, but I do know that my tumblog gets on average 250 visits per day. I suspect the radio of daily users/viewers to followers on Twitter and FriendFeed are much lower than Tumblr, maybe approaching the 3% number of feed readers to feed subscribers number.
Social media is no different from all media. The number of people who at one point were interested in your content or service is not that meaningful. What matters is the number of people who engage with your content or service on a daily basis and how engaged they are. And RSS subscribers, Facebook app installs, and follower numbers don't measure that.
Some of my friends who were big Obama supporters in the primaries are fretting that he's lost his way. They've taken to sending around Arianna Huffington posts urging Obama not to remake himself for the fall race.
I don't take much stock in what Arianna says. She has remade herself too. And very nicely I might add.
Every presidential candidate retools their message for the fall race. McCain is doing it too.
And there are some things that are changing, like the situation in Iraq, that demand new rhetoric, maybe even new policy. I know that many Iraq haters just want our troops out of there and don't really care how it happens. They have seen Obama as their best hope and so when he recognizes that the dynamics are changing, they freak out. I for one, want a President who sees the truth and deals with it. The truth is that Obama will get our troops out of Iraq more quickly than McCain, but there's also an opportunity in Iraq for an even better outcome that didn't seem possible a year ago when Obama put together his plan for the primaries.
I think Obama's greatest political asset is his ability to be "what people want to see in him". I liked this quote so much from a recent Salon piece that I reblogged it on my tumblog:
By refusing to define Red Bull, advertisers allowed each slice of its overall market to interpret the beverage for itself. Likewise, the “vagueness” that many flinty political junkies complain of in Obama permits all sorts of disparate people — progressives, independents, intellectuals, young people, minority advocates, renegade Republicans — to see the reflection of their own desires in the self-described “skinny kid with a funny name.
Arianna is complaining that Obama is "staking out newly nuanced positions on FISA, gun control laws, expansion of the death penalty, and NAFTA." Well maybe what he's trying to do is show some of those "disparate people" that he's a lot more like them than they knew.
The guy needs to get >50% of the votes of all americans to win the Presidency. I don't see how pandering to the liberal base of the democratic party gets that job done.
And while we are discussing "moving to the center", one area where I'd suggest Obama seriously retool his thinking is on free trade. He did terribly in Ohio and not a lot better in Pennsylvania. His message for the ravaged former industrial sections of the country like upstate NY, Pennsylvania, Ohio, Michigan, etc is not a strong one right now. Hillary took the traditional democratic positions in those regions and played her hand well. But it's a losing hand once you get the opportunity to govern.
The truth is the manufacturing jobs aren't coming back and to pretend that they are, or that by amending some bad trade agreements will fix the situation, is ignoring the truth. And Obama is smart enough to know the truth, which is that in the global economy that we are in today, those manufacturing jobs are gone.
But the rapid decline of the dollar, the rise of technology that allows for remote workforces, and the reality that our higher education system still turns out well educated kids gives us an opportunity that we must seize. Kids who come out of Ohio State or Penn State or University of Michigan can live and work in their home states for very competitive wages worldwide. We need to look at what Ireland did twenty years ago and do some of those things in the regions of our country where we've lost manufacturing jobs. We need a turnaround plan for those parts of the country, not pandering and lies to make people feel like the good times are coming back.
I suspect that the blue collar workers who have seen their line of work disappear in the past 20 years know that its not coming back. They are resigned to that fact. But what they worry about most is what their kids will do for a living.
That's the opportunity for Obama. Talk about what's possible in the new world we live in. Talk the truth. It won't win him any union points, but I don't think the path to the Presidency flows through the unions anymore.
I don't call that "moving to the center". I call that smart policy and smart politics. And that's what it's going to take for Obama to win this fall.
An entrepreneur pinged me the other day with an idea that was in the groups sector of the web market (yahoo groups, google groups, meetup, facebook groups, etc, etc). I asked him why the web needed another groups service. And at the same time, I asked my friend Charlie O'Donnell who is a member of more groups than anyone I know for his opinion of the web groups market.
Instead of emailing me back, Charlie posted his response on his blog. His assessment is that most of the web groups tools lack the complete feature set that one would want, with the possible exception of Meetup which is the premium (ie paid) service in the market. Charlie also feels that the big social nets (LinkedIn, Facebook, MySpace) are missing a big opportunity in the groups space because their offerings are so limited.
But the big point he makes, and one that I think is really worth focusing on for a minute, is that every group, no matter who they are, wants something that's a little different.
The point is, every group is different, so the idea of one particular group software solving everyone's problem is never going to work.
Which takes me back to my favorite blog post of the past month, by Stan Schroeder at Mashable called "Why Less Is More And How To Unlock The Web". In that post, Stan argues that the more complicated you make your service, the smaller the user base that will find it useful. He says the magic formula is:
Determine a basic need -> Create a service that satisfies it in the simplest way possible -> Open it up
And that sounds right to me in the groups market. Charlie says the least common denominator in the groups market are these three functions:
So using the less is more mantra, someone should build just that, make it drop dead simple, and then build the killer API that lets everyone build on top of that. It may be that the big social nets are in the best spot to do that. Or maybe not.
But I am sure that building yet another groups service is not the answer.
Dave Winer has launched a new tech news site
It is called Tech Newsjunk
Its like techmeme but exclusively focused on products
I like this idea a lot. I wrote recently that I wanted new places to go for inspiration
This is a step in the right direction
Go check it out