The Latest from TechCrunch |  |
- Is Late Stage the New Early? Behind the Staggering Return of the $1B Venture Fund
- Why Women Rule The Internet
- Confirmed: Facebook Acquires Snaptu (For An Estimated $60 – $70 Million)
- Gillmor Gang 3.19.11 (TCTV)
- Wanita Power: What Women in the US Could Learn from Indonesians
- OMG/JK: Storming The Paywall
- Another Netflix Content Idea: Saving Cancelled Cult Hits
- Fly or Die: The Nintendo 3DS, Rockmelt, And Mobile Wallets
- Yearly Leaf: “It’s A Coffee Table Book Meets A Moleskine For The Facebook Set!”
- RIP Digg.
| Is Late Stage the New Early? Behind the Staggering Return of the $1B Venture Fund Posted: 20 Mar 2011 09:10 AM PDT In Silicon Valley it’s not just who you invest in that matters– it’s also when you invest in them. The earlier the investment, the riskier the bet. But the more jawdropping the returns if the company hits it big. It’s so lopsided, that typically just 5% of those unsure, early bets create some 95% of the entire venture industry’s returns. Miss one of them, and it haunts you for years. Snag it, and you can brag for even longer. This simple reality is precisely what makes the venture business hard, and the justification for why partners make such huge fees. So what’s up with the surge of the strongest early stage firms jumping so heavily into late stage mega-deal fray? Have the Valley’s superstars lost sight of these rules or are the rules changing? Earlier this year, we wrote a lot about the shift in power at the early stages with the rise of super angels, but you could argue there are far greater ripple effects to this new late stage frenzy. That’s not only true for the Valley, it’s true for Wall Street. And you could argue, those ripple effects are less well-understood. Super angels move small chunks of money, hedged across thousands of startups. Worst case, they all go belly up. More likely, the bulk of them barely return capital and a few do really well. Either way, plenty of angels will make bad bets and stop being angels, but the financial damage is otherwise pretty limited. There are plenty of jobs awaiting even the most outrageously failed entrepreneurs. But the billions of dollars in late stage deals being invested by the top firms in Silicon Valley are another matter. First of all, we’re talking about far bigger chunks of cash, mostly from pension funds and endowments. And these firms are making investments in the handful of sure $1 billion-plus winners that Wall Street and the Valley have spent more than a decade of sub-market returns waiting on to mature. Each deal represents dozens or even hundreds of people cashing out, while others take on a greater risk. And each deal represents another delay in companies like Facebook or Zynga going public. And quietly there’s plenty of grousing going on about the trend. Some of it is pure player-hating, and some of it raises good points. For example, the vast majority of VC firms who can’t raise a $1 billion expansion fund cry that these new mega-funds aren’t real venture capital investing, they are firms acting like hedge funds. Some allege they are even abusing their positions as the current darlings of the venture world to make huge trades in well-baked companies without any board obligations, but still get paid like VCs with huge management fees on these mega funds. Within the elite Sand Hill Road club, VCs snipe about who is still adding value and draw distinctions between a negotiated late-stage deal and a pure secondary stock purchase. And, those who were smart enough to get in early on a giant like Zynga, Twitter or Facebook, chafe when a VC that’s thrown money at a rich secondary valuation now proudly lists those companies as core companies in their portfolios. And then there are early stage companies hoping to disrupt giants like Zynga and Groupon and wonder if they should take money from a firm who is placing a much bigger bet on the well-funded giant. You could argue a firm staying out of the late-stage fray entirely may have a marketing advantage with them. And, as always, in the press there’s the page-view grabbing panic over whether the multi-billion dollar valuations are a sign of another bubble. There’s even plenty of moaning about the deals on the east coast: At the Securities & Exchange Commission alarm bells are going off about whether these massive trades are just clever routes to skirt disclosure of a public stock. New York investment banks are furious that these deals allow anticipated IPOs in companies like Facebook to be put off as long as the company wants– robbing them of those lucrative banking fees. If they want a piece of the pie, they’re relegated to selling limited shares under huge restrictions, ala Goldman Sachs, or cozying up to an industry insider like JP Morgan did with Chris Sacca. It seems the only ones who unabashedly love the trend are the handful of companies who now have free money whenever they want it at seemingly any price, without any of the downsides of going public. Over the next few weeks, we’re going to do a couple articles digging deeper into this trend, the most important players and what it represents for the startup world and the tech markets at large. First, we wanted to pierce the marketing spin and shine a light on who has done what– and when they did it. What’s unique about this trend is how huge the amounts of cash and valuations are, yet how small the number of players are. Only a small portion of firms can raise this kind of money and have the right connections to get into the best deals. Likewise as the Valley has become more polarized between huge winners– who raise hundreds of millions of dollars and employ thousands of people– and the small lean startups– who are built to flip– there are only so many deals that can justify these sums of cash and these valuations. But that doesn’t mean companies that probably shouldn’t get funded at these prices won’t. The several-billion-dollar-question worrying many limited partners is how speculative this trend will get. Below is a graph of arguably the top Valley VCs, which of the big Internet companies they invested in, at what price they invested and whether or not they took a board seat in that round (a sign they’re investing time in the company, not just money). Green boxes denote an investment that’s all but certain to return capital; red boxes show investments that are at or near the last professional negotiated valuations and could still prove too heady. Current company valuations are based on negotiated deals with accredited investors or potential acquisitors, not secondary market speculation. Most of the numbers were from published reports or inside sources. (Click to enlarge.) While most of these deals and prices had been reported before, a few things jumped out at me once I collected the data in one place. It’s clear the quality of deals is slipping. When DST pioneered this category, the firm was adroitly responding to a gaping market need. These companies needed huge amounts of cash to scale to the unprecedented 1 billion person online market potential, but the IPO market was closed. That’s no longer the case. “Oh, how it’s no longer the case! Please, dear God, call me!” some poor banker is no-doubt lamenting, reading this post. Today, the best companies of the last ten years have all raised late stage money, and the prices are no longer a bargain. There’s only so fast that pipeline can fill back up. While I could argue $50 billion is a fair market price for Facebook, I find it hard to argue that Twitter is worthy the same or more than cash-generating Groupon or Zynga, given Twitter has gone through three CEOs in its young life, has no clear product visionary, and still isn’t making much revenue. Far more egregious: The idea that Spotify, which hasn’t been able to launch in the US despite more than a year of trying, is valued at the same price as soon-to-be-public Pandora. We’re seeing a clear move away from no-brainer bets towards more late-stage speculation. History has never shown that strategy to produce venture-style returns, said several top limited partners on the condition of anonymity. But more remarkable is what this chart tells us about the fortunes of Silicon Valley’s top venture firms. For all the headlines that late stage is simply something “everyone is doing,” this chart shows a dramatically different story. Behind these red and green boxes lurks the same kind entrepreneurial drama that usually goes on in the companies VCs back. While dozens of venture firms are quietly going out of business for the first time in more than a decade, this chart represents the haves. And yet, there’s still plenty of drama as they grapple for position in this new venture reality. This chart shows dramatic comebacks. In the wake of the dot com crash, limited partners privately told me that Accel Partners was one of two major firms that would never raise a fund again. When I mentioned this to Jim Breyer in 2006, he didn’t deny it. But he almost single handedly pulled the firm back from the brink. Accel missed Twitter and Zynga and others, but who cares? If you do the math, Accel is all but certain to have the best returns of the lot based on that $100 million bet on Facebook alone that seemed crazy at the time. The price the firm payed for Groupon is the icing on a massive Web 2.0 cake. Similarly, Greylock had virtually no presence on the West Coast and no brand in consumer Internet. An early investment in LinkedIn and comparatively early investment in Facebook catapulted the firm into being one of the top names. And aside from Groupon, Greylock’s late stage bets haven’t been as valuation-aggressive as those done by other firms. If Pandora’s IPO prices where analysts expect, that $150 million valuation will look like a bargain. On the other side of the chart– literally and figuratively– are Kleiner Perkins and Andreessen Horowitz, the two most aggressive at the late stage game, but utterly different stories are behind the common strategy. Andreessen Horowitz was formed after most of these companies, so getting in early stage rounds was impossible. But that doesn’t mean the firm’s partners were late to the Web 2.0 movement. The graph doesn’t include Marc Andreessen’s personal angel investments in Twitter and LinkedIn, nor does it include his position as one of Facebook’s few board members, because it happened well before he invested. For Andreessen Horowitz, the emphasis on late stage deals doesn’t represent any sort of shift. The firm was founded explicitly to invest in the best companies whenever the partners could get in. This was clearly telegraphed by the firm’s first deal: A beyond-late-stage investment in the already-acquired Skype. Kleiner Perkins has been a different story. This is a firm that largely missed the early days of the Web 2.0 movement and has jumped back into it aggressively in the last year. The centerpiece of the strategy was a relatively early investment in Zynga. To be fair, this chart doesn’t show the early stage bets they’ve also been making in companies like Shopkick, Path and Klout. The success Kleiner has had reclaiming Web relevancy has been a testament to the lasting power of brand in the startup world. Few firms could have pulled it off. But plenty of people have questioned the prices they’ve paid to get back in the game– especially at the later stages. In both the cases of Andreessen Horowitz and Kleiner Perkins there’s plenty of industry eye-rolling when the firms rattle off investments in these very late stage deals as sample portfolio deals. Give them credit for getting shares in these scorchingly hot companies even at these prices, but its important for entrepreneurs and the press to realize when they invested. That leads us to Sequoia and Benchmark– the two firms that are the most absent when it comes to these companies. Not reflected in this chart are Benchmark Partner Matt Cohler’s personal stakes as one of the earliest employees of LinkedIn and Facebook. Indeed, while Benchmark has resisted buying Facebook shares, Cohler has funded some of the most exciting companies to spin out of the Facebook mafia including Asana and Quora. The real surprise is Sequoia — a firm that was known in the 1990s for flawlessly picking nearly every consumer Web giant. While this chart doesn’t count the stellar return from YouTube or promising recent investments like Square, LinkedIn is the only sure-winner it has a large stake in. I wanted to keep this graphic focused on the top traditional Valley firms, but there are two obvious omissions. One is DST, which started this trend with its aggressive investments in Facebook that now seem boringly reasonable by comparison to recent deals. We’ll have more on DST’s impact in a future post. In nearly 15 years reporting in Silicon Valley, I can’t think of another outsider who has so dramatically beat the Sand Hill Road establishment at its own game– not to mention redefining that game for them. No easy feat in a Valley awash in too much cash to begin with. The other omission is a Valley outsider too: Fred Wilson’s Union Square Ventures, the earliest investor in Zynga and Twitter. There are no signs of Union Square getting into this late stage frenzy; indeed the firm has been known to voluntarily give up its pro-rata in later rounds. In terms of returns, we hear that Union Square has sold enough of its Zynga and Twitter stakes to repay both funds and still leave it with plenty of upside. In terms of bragging rights, Union Square has bested these Valley insiders at the early stage game with at least two of our billion-dollar winners.        
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| Posted: 20 Mar 2011 07:26 AM PDT
Editor's note: This guest post is written by Aileen Lee, Partner at Kleiner Perkins Caufield & Byers. Aileen focuses on investing in early stage consumer internet ventures and previously worked at Gap, Odwalla, The Northface and Morgan Stanley. She was also founding CEO of KP-backed RMG Networks. Full disclosure: some of the companies mentioned below are KP-backed companies. You can read more about Aileen at KPCB.com and follow her on twitter at @aileenlee. It feels like we're in a Golden Age of the web, led by consumer internet services and e-commerce. Just consider these stats: Facebook—over 600 million users. Twitter—25 billion tweets last year. Tumblr—1 billion page views a week. Zynga—100 million users on Cityville in just 6 weeks. We're witnessing a generation of consumer web companies growing at an unprecedented rate in terms of both user adoption and revenue. But here’s a little secret that’s gone unnoticed by most. It's women. Female users are the unsung heroines behind the most engaging, fastest growing, and most valuable consumer internet and e-commerce companies. Especially when it comes to social and shopping, women rule the Internet. Consider some more data. Comscore, Nielsen, MediaMetrix and Quantcast studies all show women are the driving force of the most important net trend of the decade, the social web. Comscore says women are the majority of users of social networking sites and spend 30% more time on these sites than men; mobile social network usage is 55% female according to Nielsen. In e-commerce, female purchasing power is also pretty clear. Sites like Zappos (>$1 billion in revenue last year), Groupon ($760m last year), Gilt Groupe ($500m projected revenue this year), Etsy (over $300m in GMV last year), and Diapers ($300m estimated revenue last year) are all driven by a majority of female customers. According to Gilt Groupe, women are 70% of the customer base and they drive 74% of revenue. And 77% of Groupon's customers are female according to their site. Women even shop more onChegg, which offers textbook rentals on college campuses across the country. Males and females attend college at an almost even rate. Renting would seem an equal opportunity money saver, plus it's better for the planet. But according to Chegg, females are 65% of renters. Why? Renting requires a little more advanced planning. Chegg's research shows women are more inclined to plan ahead than men. And, they seem to care more about saving money, and are more likely to be influenced by a friend's recommendation. It's no accident Amazon.com launched a program called "Amazon Mom" last year, or that they bought both Zappos and Quidsi (parent company of Diapers.com, Beauty.com and Soap.com) for almost $1.8 billion in total. According to the US Census Bureau, women oversee over 80% of consumer spending, or about $5 trillion dollars annually. Women control the purse strings when it comes to disposable income. That’s long been the case. But what’s different now is that there is an exciting new crop of e-commerce companies building real revenue and real community, really fast, by purposefully harnessing the power of female consumers. One Kings Lane, Plum District, Stella & Dot, Rent the Runway, Modcloth, BirchBox, Shoedazzle, Zazzle, Callaway Digital Arts, and Shopkick are just a few examples of companies leveraging “girl power.” The majority of these companies were also founded by women, which is also an exciting trend. And take a look at four of the new "horsemen" of the consumer web—Facebook, Zynga, Groupon and Twitter. This may surprise you, the majority of all four properties' users are female. Make that "horsewomen". Sheryl Sandberg, COO of Facebook, has talked about how women are not only the majority of its users, but drive 62% of activity in terms of messages, updates and comments, and 71% of the daily fan activity. Women have 8% more Facebook friends on average than men, and spend more time on the site. According to an early Facebook team member, women played a key role in the early days by adopting three core activities—posting to walls, adding photos and joining groups—at a much higher rate than males. If females had not adopted in the early days, I wonder if Facebook would be what it is today. (Why do you think all the guys showed up?) How about gaming, seemingly a bastion of men in their man caves? The titan of social gaming, Zynga, says 60% of players are female. And a survey by PopCap shows females are the majority of social and casual game players. In fact, they note the average social gamer is likely a 43-year-old woman. And more women use Twitter, which has a reputation for being a techie insider's (i.e., male) product. Women follow more people, tweet more, and have more followers on average than men, according to bloggers Dan Zarella and Darmesh Shaw's analyses. Brian Solis's analysis shows females are the majority of visitors on the following sites, which he calls "matriarchys": Twitter, Facebook, Deli.ci.ous, Docstoc, Flickr, Myspace, Ning, Upcoming.org, uStream, Classmates.com, Bebo and Yelp. The one "patriarchy" site he notes, where males > females: Digg. Yes, women also rock sites like Opentable and Yelp. According to Yelp, while half of their traffic is male, the majority of contributors and ecommerce purchasers are female. And according to OpenTable, the majority of bookings are overwhelmingly made by females. Why? Likely because women drive most decisions about where to go and where to eat. Perhaps none of this is surprising. Women are thought to be more social, more interested in relationships and connections, better at multi-tasking. There is also anthropological research to back this up. Dave Morin of Path introduced me to Dunbar's Number, proposed by the anthropologist Robin Dunbar. The number is the theoretical limit of how many people with whom one can maintain stable relationships (thought to be 150). But Dunbar's most recent research shows there are different numbers for women than men—that women are able to maintain quantitatively more relationships within every ring of closeness than men. Knowing that is an important factor if you want to build and stoke social network effects. More female users will likely help your company grow faster. So, if you're at a consumer web company, how can this insight help you. Would you like to lower your cost of customer acquisition? Or grow revenue faster? Take a look at your product, your marketing, your customer base. Maybe you would benefit from having a larger base of female customers. If so, what would you change to make your product/service more attractive to female customers? Do you do enough product and user interface testing with female users? Have you figured out how to truly unleash the shopping and social power of women? You could also take a look at your team. Do you have women in key positions? If you're planning on targeting female customers, I can't imagine why you wouldn't want to have great women on your team. If you are already targeting female customers, have great women working in your company, and are seeing strong commerce and social network effects, congratulations. You are likely trying to figure out how to handle hypergrowth right now. Plus your office probably smells pretty good. Women are the routers and amplifiers of the social web. And they are the rocket fuel of ecommerce. The ongoing debate about women in tech has been missing a key insight. If you figure out how to harness the power of female customers, you can rock the world.        
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| Confirmed: Facebook Acquires Snaptu (For An Estimated $60 – $70 Million) Posted: 20 Mar 2011 03:44 AM PDT
According to several Israeli business newspapers (TheMarker, Calcalist) Facebook has acquired Snaptu for an estimated $60 – $70 million, although some reports peg the price lower, at around $40 million. Update: a Snaptu executive has confirmed the acquisition to our friend Orli Yakuel, but declined to discuss the purchase price or other terms of the deal. Update 2: and the confirmation is up on Snaptu’s blog. The acquisition is apparently expected to close within a few weeks:
Snaptu provides a solution for developing, deploying and maintaining online services, particularly on mobile phones. Just a few months ago, Facebook partnered with the company to launch a rich application specifically for feature phones. The startup was also just in the news for striking a similar deal with professional social networking service LinkedIn. Other supported services include Twitter, Picasa and more. Snaptu was founded in 2007 and is based in London, with offices in Tel Aviv and Silicon Valley. The company raised over $6 million in venture capital funding from Carmel Ventures and Sequoia Capital. This marks the (Thanks to Roi, Orli and Ayelet for the tips)
       
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| Posted: 19 Mar 2011 06:38 PM PDT The Gillmor Gang — John Taschek, Danny Sullivan, Robert Scoble, Kevin Marks, and Steve Gillmor — or at lest 4/5ths of them were decked out with iPad 2s. That didn’t prevent the usual argument from breaking out about the New York Times’ pay wall. The Grey Lady announced a social plus subscription model, and @dannysullivan was having none of it. It’s 2011 but the battle lines continue to be drawn over publishing v. the Web. Many believe the subscription wall will destroy what’s left of the print business model without replacing it with an iPad alternative. Others (me) think the Times has got it just about right, leaving a gaping hole through social media (Facebook and Twitter) to consume the newspaper as before while creating a pool of found money around the iPad version. As social @mentioners create an authoritative stream of Times citations that do not trigger a sub request, the resulting high-value audience will migrate to a reasonable iPad based environment where those social signals can be harnessed through realtime chat, video, and other engaged value adds and attendant revenue opportunities. Whether it will take 15 years or is already a formidable tipping point will be left to the viewer to decide.        
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| Wanita Power: What Women in the US Could Learn from Indonesians Posted: 19 Mar 2011 06:00 PM PDT
Maybe it’s the added surreal layer that this time, I’m flying around between seven far-flung cities in the world’s largest Muslim country talking about the importance of more Indonesian women starting companies. Most people know the topic of “WHY AREN’T THERE MORE WOMEN IN SILICON VALLEY?” isn’t my favorite. Far too often the debate degenerates into grandstanding, whining and pointing fingers at all those evil male gatekeepers like, you know, TechCrunch. Never mind our company is run by a woman, our editorial group reports to another woman and more than half our senior staff are women. But even worse, the debate has degenerated into pure linkbait. I rarely read anything new or thought-provoking on it. People glorify the need to RAISE AWARENESS, but who isn’t aware? Do you have eyes, and have you ever been to a tech conference? Then you’re plenty aware. We all are. Still hasn’t fixed the problem. So while a lot of the women I’m talking to are expecting the fancy US expert to come in and tell them all how we’ve figured it out and what they should learn from us– I’m doing the opposite. I’m telling them how messed up it is in the world’s great meritocracy of Silicon Valley. I’m telling them that only about 20% of tech workers are women, despite more women graduating with math and science degrees than ever before. I’m telling them that only 15 Fortune500 companies have woman CEOs despite there being gender parity in terms of management jobs in the US, according to the World Economic Forum. I’m telling them that even though 40% of small businesses are women owned, only 8% of the venture funded startups are. And then I’m telling them that for all the talk and handwringing about it, the smartest people I know can’t for the life of them figure out why that is. We have no idea why immigrants in Silicon Valley can do so much better in our country than American women can, and we have less of an idea how to fix it. I tell them all the reasons people come up with and ask them if they face those things here in Indonesia. I tell them why I think some of those reasons are cop-outs and why some– like work-life balance– are legitimate issues that do keep women from starting businesses. I tell them how many professional women– me included–get trapped in feeling like pregnancy is a disability, rather than proof of how strong we are. And we talk Most of all, I’m telling them the easiest way to break a glass ceiling is to never create one, and urging groups to work hard to include women in Indonesia’s burgeoning private sector and entrepreneurial ecosystem now, while it’s just getting started. It’s surreal for me, an American woman, to be telling audience after audience of women dressed in traditional Muslim headscarves that we don’t have gender equality figured out. But it’s more surreal for them to hear it. More than a few women have told me they were shocked. That they’d assumed women could do whatever they wanted in the US. A few have said that after my talk, they think starting a company sounds easier in Indonesia. Sure, a few times a male in the audience has gone there. One fervently disagreed with my entire keynote saying that it was morally wrong for women to be out of the home and that if the government did anything to advocate this, it would be a nightmare for Indonesian society, birth rates would go into free-fall and all hell would break loose. It was a long diatribe, and my translator clearly gave me the nice version of his comments. Whether it was stated or not, the implication was there: What the hell are you doing out of the house half way around the world, crazy American lady? What’s wrong with your husband? Another time, a man suggested that the US statistics proved that women shouldn’t start businesses. Turning my argument on its head, he suggested that the US economy doesn’t seem to be missing the participation of more women, and that it’d clearly been a positive for us. I pointed out that studies have shown that women-owned businesses become profitable faster and generate more revenue, and that the US economy isn’t exactly a global role model these days. There’s also the obvious retort– we have no idea what the opportunity cost from more women not participating in Silicon Valley’s economy has been. “Sorry, pal, but the facts just aren’t on your side,” I said, and the predominantly female audience laughed. These are obviously viewpoints too un-PC to voice in the US, even if many people still believe them. But when each guy made these arguments, the women in the audience didn’t seem cowed or even too concerned. There was definitely some knowing-looks and eye rolling exchanged. “Oh there he goes again talking about how we need to stay in the house…” The attitude wasn’t preventing women from attending these events or the entrepreneurship colleges I’ve spoken at, where more than half of the audience have typically been women. I’ve known from my previous trips to this country that Muslim Indonesians are very moderate and not at all like the stereotype many Americans would expect, particularly in more cosmopolitan urban areas. But during this trip, I’ve frequently been speaking at Muslim schools in more remote cities. My first talk was in a school so known for demonstrations that last week several classrooms were set on fire. And yet, even there the women don’t fit the meek-and-submissive stereotype as much as a few of the men would clearly like them to. The brutality of Indonesian life– whether it’s 350 years of colonial domination, dictators, poverty or a never-ending assault of natural disasters– have forged these women into pure steel. Friends in the US have remarked at how intense it is that I’m here traveling city-to-city, lugging suitcases up and down jetway stairs in the tropical heat, delivering keynotes for more than three hours per day. Indeed, for an American pregnant woman, it is a pretty intense schedule. My ankles have morphed into thick, bloated stumps. Last week a clerk at a maternity store refused to let me carry a small bag of clothes to my car, I haven’t washed a dirty dish or stitch of laundry since my husband found out the news, and Paul Carr regularly takes my backpack from me when I try to leave the TechCrunch offices every night. And yet, I met a woman the other day who runs a company delivering goods and services to remote villages. She has seven kids. When she was nine-months pregnant with number seven she was loading up her motorbike with supplies and winding around Indonesia’s crazy highways and dirt roads to continue her work. That, ladies and gentlemen, is intense. Is that woman going to be stopped by a man telling her she’s not strong enough to run a company? The idea made her laugh. She was sitting in the front row of one of my keynotes, and I don’t think I’ve ever seen a woman so confident and self-possessed. She was not only badass, she was well aware of just how badass she was. Unlike shrill women advocates in the US, these women don’t care whether male gatekeepers try to keep them down; it doesn’t seem to affect them. They shrug and go after what they want anyway. That’s stunning because generally Indonesia is a culture that looks to the government to solve I spent the afternoon in Jakarta the other day with a group called IWAPI– which translated stands for the Indonesian Businesswoman’s Association. The woman who runs it commanded the room with intense features, a bright red headscarf and an elaborate green silk dress. (She’s center in the picture to the left.) Throughout the meeting she snapped at her assistant– a man– to bring the water, fetch her bag, bring more chairs. My male state department guide looked a little scared. Before I could say anything she started to grill me on my qualifications. I knew one thing immediately: I never want this woman on my bad side. But she uses that intensity to create opportunities for the 40,000 members of this organization that was started the year I was born. For instance, while some entrepreneurs in the country are complaining that new Asian trade agreements will flood the domestic market with cheaper Chinese goods, IWAPI is organizing its own collective trade missions to surrounding South East Asian countries, looking for new markets to offset the risk. The woman in green told me what she tells young women in Indonesia: The literal translation for the Bahasa word for entrepreneur is “a person who makes things happen.” “If you want things to be done for you, you’re not an entrepreneur,” she said. “You work for the entrepreneur.” Many of the women I’ve met– including those at IWAPI– appear to do a much better job at the thing we fail at most: Women helping lift one another up. Last week, I visited a co-op in Surabaya, where women jointly run a hotel, a grocery store (below) and a sort of local Indonesian street vendor food court. They pool that money– and money from outside investors– to grant more than $1 billion rupiahs (or more than $100,000) in It was a hub of activity– women working at the various businesses, women helping watch one another’s kids, women in the computer lab learning how the Internet could help fuel their businesses, women in line to make payments on their loans. No one is worrying too much about work-life balance, because it’s a given many of them will have half-a-softball-team of kids. If they want to work, those issues are just reality. One of the many challenges of Indonesian life. One woman (pictured at the top of the post, waiting to make her monthly loan payment) had been a member for 20 years. She owns her own businesses and has seven kids and was welling up in tears telling me about the impact the co-op had made. That without it, she simply wouldn’t have been able to start a company. With it, her business had thrived and she’d never missed a payment. The co-op’s board member opened my talk with a cross between a cheer and call-and-response prayer. Roughly it translated to:
How are your businesses doing? “AWESOME!” The women yelled back raising fists in the air. Are you paying your loans back? “YOU BETTER BELIEVE IT!” they yelled. Are you going to default? “NO WAY!” they yelled, together dismissing the thought physically with an emphatic wave of their hands. As each of them told me their stories, the women clapped at every success milestone– nevermind they’d heard these stories all before. Back at IWAPI, four of the women told me that not only were their husbands supportive of their companies– they’d done so well that their husbands had quit their jobs and were now working on the wives’ entrepreneurial dreams. Even my Indonesian state department translator was stunned to hear it. “There are two types of IWAPI husbands,” the uber-intense woman in green told me. “Those who are silent partners and support their wives, and those who become actual partners in the business.” Another woman in the group was living the harsh flipside of this statement. Her husband left her a single mother, because she refused to give up her fashion design company and sit at home while he worked. Her life isn’t easy, but she has no doubt she made the right choice. I don’t mean to paint the picture of some gender utopia. In each case, these were women that opted to attend a talk about entrepreneurship, so it may not be a relative sample of the population. And to be sure, questions come up about pressure from society to raise kids and men not taking them seriously; the same issues women talk about in the US. When I’ve brought up some of the issues we face, there’s a lot of head nodding in the audience and commiserating laughter. Some of this is just international, it seems. But the difference among the women I’ve met so far in Indonesia is they just don’t seem to dwell on it. They’ve got more important things to do.        
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| Posted: 19 Mar 2011 03:54 PM PDT
We both just got back from South By Southwest, and we have plenty to say about the promotions, product launches, and other news (or lack thereof) that came out of one of year’s biggest tech events. We also take a look at the new paywall that will soon be implemented by The New York Times — a move that many other publishers are watching closely as they look for new revenue streams. Finally, we talk about Twitter’s move to discourage the development of more third-party Twitter clients, which has led to significant backlash from the developer community. Here are some recent stories relevant to this week’s episode:
       
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| Another Netflix Content Idea: Saving Cancelled Cult Hits Posted: 19 Mar 2011 02:48 PM PDT
Each year, dozens of shows on network and cable television get cancelled. Most of these cancellations are for good reason. But every once in a while the hammer comes down on a show that’s considered to be a cult hit — or one that could turn out to be a real hit, if given more time. The problem, of course, is that these shows often don’t have the massive viewership numbers to sell a large amount of advertising against. But that model doesn’t apply to Netflix. While shows that are called “cult hits” are often thought of as mainstream flops, the reality is that they still have millions of people who watch them. And the “cult” aspect implies that a large percentage of those viewers are insanely loyal to the show. Again, that doesn’t mean much to the networks where more is better (for advertising), but for Netflix, if they could convert a significant percentage of those loyalists in to paying customers, it works. The perfect example of how this could work is probably the old Joss Whedon cult hit, Firefly. Firefly lasted only 11 episodes — not even one full season — in 2002 on Fox. The network cancelled it before all 14 produced episodes were even shown. Why? Low ratings. But in the years following the cancellation, the show has seen new life on SciFi, DVD, and especially the Internet (including Hulu and yes, Netflix). The cult status got so big, so quickly that Universal decided to make a feature film, Serenity, in an attempt to cash in where Fox could not. Of course, that didn’t work out as well as hoped either. But again, it was the wrong idea. A Netflix distribution model would be the right idea. There has been talk for years now of a show revival given the cult status and the fact that Whedon had originally intended the series to run for seven years. But that would still mean dealing with one of the networks once again. Until now. A production company would still need to back and ultimately pay for new episodes, but Netflix could now step in and produce millions of dollars for the first window distribution rights. It would be pretty attractive to all sides — though it may also involve buying rights back from Fox. Would the economics ultimately work out? It’s hard to say for sure. Even the House of Cards bet is still very much a bet for Netflix as well. But I do think that a proven cult hit like Firefly would be much less of a gamble (and could likely be secured for cheaper than House of Cards was). And that’s just one example. Arrested Development. Battlestar Galactica. Twin Peaks. These are all things that could succeed where they failed on television because it’s an entirely different model. You’ll note that many cult hits are often science fiction shows, which are also often the most DVR’d shows on television. This also plays into the low ratings and advertising woes. But again, DVR does not matter in the Netflix universe. Firefly averaged about 4.5 million viewers when it was on the air in 2002. Let’s say that Netflix could convert just 500,000 of those to paying customers (who weren’t previously) in order to continue watching the show. That would be a half million people paying at least $8 a month. That’s $4 million a month in revenue. And $48 million a year. And you can assume most would end up as multi-year subscribers. I smell a comeback. Or several. [image: Fox]        
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| Fly or Die: The Nintendo 3DS, Rockmelt, And Mobile Wallets Posted: 19 Mar 2011 12:30 PM PDT Is the new Nintendo 3DS all that? Does Rockmelt have a chance? Will mobile wallets ever be adopted by real people in real stores? CrunchGear editor John Biggs and I tackle these questions in this week’s edition of Fly or Die. Watch the video to find out who our surprise guest is this time after we give our verdicts on his company’s product. The Nintendo 3DS uses simple stereoscopic 3D graphics that really pop out and combined with a gyroscope effect creates an incredibly immersive experience. You might look like an idiot playing it because you move your whole body around unnecessarily, but it is very addictive. Biggs wrote up his initial impressions here. Remember Rockmelt, the Chromium-based browser startup backed by Marc Andreessen? When it launched in private invite-only beta last November, the press it received was deafening. But by the time it opened up publicly about a week ago with only a few hundred thousand active users, fewer people noticed. Meanwhile, the team has been working away and the social browser is pretty solid. Biggs and I argue whether it can make a comeback. And finally, there’s all the recent hubbub about mobile wallets and how NFC chips in phones will make them a reality. Some Android phones already have NFC chips. Some people think the iPhone 5 will come with an NFC chip and some people don’t. But they should find their way into an iPhone at some point in the future. Does that make NFC-powered mobile wallets the next great feature? I don’t think so and have laid out my thinking on this topic elsewhere. Biggs is ready to toss his fat wallet for wave-and-pay freedom.        
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| Yearly Leaf: “It’s A Coffee Table Book Meets A Moleskine For The Facebook Set!” Posted: 19 Mar 2011 11:20 AM PDT
I swear I’m not just being a lazy blogger because it’s Saturday and it’s a beautiful, sunny day here in Belgium (okay, maybe a little). I mostly just dig the way Mark here explained his new project in a recent email to me. Here it is, in all its unedited glory (with added links):
       
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| Posted: 19 Mar 2011 09:30 AM PDT
Startups in Silicon Valley are like old generals. They don’t die anymore, buoyed on life-rafts of lingering venture capital and modest revenues. They just fade away, eventually purchased for assets that are a shadow of their former promise. It’s pretty clear that Digg is on that path. The company isn’t dead, but it’s been fading away for a while, and its soul is all but gone. The company can spin it however it wants– the final nail in the coffin is news that founder Kevin Rose– long Digg’s greatest asset– is leaving. I’m traveling in Indonesia, so the news will be old by the time you read this, but you’ll have to forgive another sentimental post. Digg has always represented the spirit of the early Web 2.0 movement to me. Facebook has never been the emblematic company of the Web’s mid-2000 resurgence, because it has always been such an outlier from the pack. But Digg– like Delicious, Six Apart, Flickr, YouTube and others– was one of those messy, risky companies founded at a time when no one was ready to believe in the Web again. The scars from the 2000 bust were too deep. These companies weren’t celebrated like Web startups today– they were mocked. People thought the founders were delusional. The entrepreneurs were the exact opposite of the kids today seduced by the promises of Y Combinator, easy cash of super angels and lure of TechCrunch headlines. They were doing something that still stank of broken dreams and evaporated billions. And they were doing it for one simple reason: they couldn’t stop themselves. And Digg was one of the first to prove you could take advantage of a decade of open source development to start a company for dirt cheap, one of the first to prove you didn’t have to be a technical genius to build a great product, and one of the first to prove a rabid community could make a site explode very, very quickly. Digg was never the biggest company of the movement, but it was bigger than many, and it stood for something. It was the everyman. This is why I put Kevin Rose on the cover of BusinessWeek in 2006. It was his first cover, my first cover, and one of the first national magazine covers about the Web 2.0 movement, period. That cover– with provocative cover language cooked up by my wily New York editors to move copies– sparked a lot of hatred. It was my first brush with controversy, and one of BusinessWeek’s first big blog scandals as well. But that cover also sparked inspiration, and the credit for that doesn’t go to BusinessWeek or me, it goes to Digg, Jay Adelson and Rose. It was the first time I saw young people reading BusinessWeek around San Francisco. On magazine racks it wasn’t put back with business publications, it was put back next to copies of FHM and Maxim. And recently BleacherReport founder Bryan Goldberg told me that when he read that cover back in 2006 he felt something he’d never felt reading a business magazine or even watching athletes and rockstars–sheer, consuming envy. If this kid– not a genius like Bill Gates, just a kid with an idea– could build Digg, why couldn’t he build what would later become BleacherReport? It was something that pushed him to quit his job and follow his own dream. Fair disclosure: That cover probably helped me more than anyone. It landed me a book deal that changed my career. And I first met Michael Arrington right after it ran. He introduced himself to me just outside the Web 2.0 conference, and said he liked the story. That friendship changed my career too, and it was the first of many times he’d defend me against haters. What Arrington got that others didn’t was that these companies and the Web 2.0 movement were only getting started. Among the article’s “outrageously overstated claims” was that YouTube could sell for $500 million. It sold for three times that a month or so later. The article argued Facebook could be worth more than MySpace. Again, that soon proved understated too. And Digg? Well we got Digg exactly right. We said it could sell for between $150 million and $200 million, and over the next few months and years there were several negotiations and at least one solid offer in that exact range. But Digg — unlike peers like Flickr and Delicious– said no, and its best days seemed ahead of it. So what happened? In my view, Digg had a lot of things right. More than a million people loved its product– rabidly loved it. They loved it in a way we’d rarely seen until that point. Digg had top investors. And it had the vision part, too. Rose’s mission has played out. Digg helped transform how we consume media. While media properties balked at the idea in 2006, share buttons litter the Web today. We no longer rely on media gatekeepers for news. No one tells us what the front page should be– we create our own with the help of our friends. Unfortunately Twitter is the one that’s pulled the bulk of his vision off, not Digg. It’s another example of what I’ve argued before– that it’s frequently not the company that comes up with something first that nails the execution. (And it might explain why Rose spends so much time on Twitter.) The lesson from Digg is crucial as Silicon Valley’s ecosystem has made it easier and easier to start a company. It’s that a great product is necessary but not nearly enough. Building a real company is harder, and it takes execution and leadership. Things like a New York-based CEO and a sometimes-distracted co-founder took a toll on Digg in its most pivotal days. As I wrote in my book a year after that cover, startups reflect their founders’ personalities. Back then, Slide was characterized by silent intensity, Facebook was like a messy, pizza-stained dorm room, and Digg? Well, Digg’s offices were empty most evenings. I have no doubt that Rose and Adelson are stronger after Digg than they were before. After all, few people remember that before Zynga, Mark Pincus’ Tribe didn’t live up to high expectations either. Like Pincus, I believe they both Rose and Adelson still have their biggest successes ahead of them. Adelson has already moved on with SimpleGeo, and Rose is moving on with a new mystery project. There will be haters on this post. And that’s fine. But the people who write checks in the Valley have respect for what Digg built, whether the founders fell short or not. Smart people will always want to back these guys– as Mike Maples said on Ask a VC last week– and people like Arrington and me will root for them again. That’s what makes the Valley such a unique place. (Photo by Thomas Hawk.)        
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Yesterday, I laid out why the new 
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