WayTooEarly

Techcrunch NY - No bubble yet

Techcrunch and Meetup had their big bash in NY this evening.  Lots of fun, lots of people, but not quite as crazy as last week's Web 2.0 Conference, which Kevin Maney captured best in his USA Today column.
When I left, the doorman's clicker had counted 503 people, quite a bit fewer than the expected 700 or more. Of course, the threat of rain might have dampened some of the enthusiasm.

Still, there were lots of interesting things to see. First, Snap.com launched Snap Preview Anywhere
(this is a shameless plug since I'm on their board).  Fred Walti and Jason Fields of snap were there showing how with just a line of Javascript on your blog or web page, you get previews of any link by just hovering.

Connie Connors was showing her new service, Hittail, which really helps you to do search engine optimization and keyword selection. With the freemium model, anyone can use thisquite handy service to get better placement and lower costs. And Connie thoughtfully provided neat glowstick stirrers for the free drinks.

Compete.com, originally an Idealab company, was showing its new easy to use site statistics.  I find them more accurate for US sites than Alexa, and a lot easier to read. 
Their marketing brought back memories of the techniques used by half.com, putting their pitch in a place that half the audience could not read, but the other half was sure to linger over.

There were lots of other companies there - mulitply.com looked interesting, as did fleck.com.  But it didn't have the hordes of venture capitalists roaming around with open checkbooks the way Web 2.0 did.  Maybe in New York, we're still way too early for another bubble.

Time Warner and TiVo - too early for CableCARDs(TM)?

I have been a fan of TiVo since its earliest days.  As a true way too early adopter, I got a TiVo series 1 (with a lifetime subscription that's still going).  It was the first piece of electronics that my wonderful luddite wife learned to operate (she still won't get her own email). And of course, I quickly had the box hacked to add an Ethernet card and 180GB disk (thanks, Lou), which was big back then. TiVo Series 2 came out just as we were adding a NY apartment, and we put two of them there, no longer needing to hack for the Ethernet access, though USB was not the best connector for it.  And we've been happily using these boxes for several years. 

Then came HD. Time Warner Cable, my NY MSO, provided early Scientific Atlanta HD boxes, which worked quite well. But, of course no recording capability.  Then, we got the word that the SciAtl Explorer HD DVR was coming out. Since my office was around the corner from their NYC facility, we picked up one of the first HD DVRs(Scientific Atlanta 8000HD) and quickly connected it (Self installation is offered for most of TWC's boxes).  While it did record HD, the user interface was mediocre at best. Picking shows took far too many clicks, and it didn't really understand first run vs. later showings, though it professed to.

Imagine my joy when, after pushing Mike Ramsey whenver I saw him over the past few years, I got the VIP invitation for the Series 3 TiVo HD!  I signed up in a flash, and the box was delivered ASAP.  It did say that you needed to get 2 CableCARDs from your MSO.  Since installing a cable card is merely putting a PCMCIA card in a slot. I was a bit surprised to find out that Time Warner did not permit self installs of the cable cards. They actually charge $30.00 to come out and install them. After some discussion with their phone rep, we agreed that they would not charge $60.00 if they put 2 cards in the same TiVo on the same call.

CableCARDs were created by the industry to save money - no set top boxes to inventory, just use the electronics already in the new TV sets. Now they're frustrated with them.  And of course, the current cards are oneway, so services like pay per view don't work (maybe that lack of revenue opportunity is why they're not so eager to get them working ???). Next year we should get two way cards. Maybe then we can self install (as I can with Comcast in my PA home).

I scheduled the first appointment for October 13 (about 3 weeks after my call, since "we don't have any cable card trained installers till then"). Hector showed up, was both friendly and knowledgable. We installed one card, let it do the firmware upgrade it called for, then the second card.  Then we waited for "IT" to send the authorizations to the card.  Never came through, but he said it could take a few hours.  So he left.  By the next day, there was still no authorizations, and the TiVo could thus decode all the unencrypted channels, but none of the premium ones (e.g. CNBC, HBO, dozens of others). I called the trouble line and got the next available appointment, which was 2 weeks later. The appointment was from 10am to 2pm (TWC gives 4 hour blocks).  Enrique arrived at about 4pm, after 2 calls to TWC.  He looked at the problem, tried to call IT, and was told there were some system problems, so he couldn't get the cards working, but hopefully they'd do that from the central office.  But, alas, this was not to be. But I did get the TWC service guarantee - one free month if they miss their appointment.

So I resorted to what my son-in-law had to do to get his Series 3 working.  I filed a complaint with the NYC Cable Franchise group. You can, too at this link. if you're in NYC. Got a quick call from TWC's consumer affairs representative, who did seem to really want to help.  One more appointment was scheduled, which was equally fruitless, since the tech said "nobody told me this was a cable card call."  Finally, a foreman ("white shirt" in their terminology) showed up with a technician in tow. After about an hour - he got it working!  How, I asked Lenny, the foreman. "I waited for the right guy on the other end of the phone."  Apparently there is only one person at TWCs IT center who actually knows how to make cable cards work.

Happiness is a working HD TiVo - maybe now I'm right on time, not too early. 

Fad and Fashion in Venture Capital

Charles River Ventures announced Quickstart- their new effort at doing seed stage deals with modest amounts of money. Bill Tai and George Zachary are seasoned venture capitalists with operating and investment banking experience, and I wish them well.  New structures, however, often have unintended consequences. I think it may be helpful to get some historical perspective on the situation.

Venture capital investing has been subject to fads and fashion for as long as I've been involved. I started in 1982 (egad - it'll be 25 years next April), and have watched many of the fads in investment areas. Been through (and made some money at) enterprise software, PC hardware, PC software, client server, internet bubble - that was fun - Web 1.0, now Web 2.0. There have also been different fashions of investing, from small fund to big fund, late stage, mezzanine and, as evidenced not only by CRV but several other attempts that other excellent long established funds are about to try, seed stage investing.

When I started, funds were much smaller than today, and there was a lot of focus on syndicating deals among many firms. Hence it was important to work collegially and collaboratively on deals, so that you'd be invited to the table on the "better" ones (as if we knew in advance).  There was also a need for several deep pockets around the table - especially when it took tens of millions to establish a new brand and its sales force. This was in a day when $100 million was a large fund.  As the fad migrated from hardware to software, where less money was needed in the development stage, syndicate sizes got smaller.

Also, as we entered the 90s, funds sizes became more disparate (i.e., the rich got richer) and very big money went to the late stages.  When we hit the internet bubble, with quick exits, funds were so successful that they grew way too large (several funds raised a billion dollars), which proved hard to deploy.  The tactics then became one of eliminating syndication, and bidding up the price of startups with "we'll put in all the money you'll ever need - but we want 30%, 40% or more."  Kleiner Perkins, Sequoia, Benchmark and others were pretty successful with this, for a time.

But as the web infrastructure really proved robust, entrepreneurs also got smarter.  Many had made some money in the bubble and could afford to fund their own startups. And during the venture nuclear winter of 2002-3, entrepreneurs had very little choice.  Even though the large firms had the money, they were not willing to invest.  Sometime in early 2004, my partner Josh Kopelman realized that there was a void in this early stage, and that much less capital was required. In setting up First Round Capital, we explicity understood that we would need to spend a lot of time with our investee companies, and that it would only generate the returns we wanted if we could interest other venture groups in joining in later. Our typical initial investment size has remained in the $250,000 range, with lots of hands on in the first few months. Whether or not it will prove successful remains to be seen.

This stage of investing, somewhere between angel and A round, requires strong diversification to succeed, and a high ratio of time to money invested. We expect a lot of money to flow into this stage in the next year, as evidenced by Quick Start. Hopefully the new players will stay smart enough not to push up prices so much that the inefficiencies go away completely.

First Round Capital has been one of the way too early investors in angel/seed stage, but we expect to be here for some time to come and wish the best of luck to the new firms and, we hope, our new coinvestors.

[See my partners reaction to the announcement at redeye.firstround.com]