capitalism

Can a software developer change the world?

I'm sitting on a flight to Boston, with my seat companion, US Senator John Kerry, next to me. He lucked out - I'm the perfect person to sit next to on a flight as I hate to talk on flights (and he was accosted by nearly everyone in the Salt Lake Airport). Must have spent the weekend in Utah skiing. (You mean you didn't?)

But several rows behind me is Jon Karlen of IDG Ventures with his family. (I offered to change seats with him and babysit. He demurred but give him four hours with his children … Read more

Ex-Googlers becoming VCs: More advertising fixation to come?

To the person with a hammer, everything looks like a nail. To the ex-Googler, does everything look like advertising? That's the question I asked myself while reading this New York Times' article on ex-Googlers who want to parlay their wealth into venture capital.

"Google arguably is at the center of the online advertising ecosystem," said Roger Lee, a general partner at Battery Ventures...."If you understand how Google works and how associated business models work, it gives you a great lens to understand other advertising companies."

Maybe. But who cares? That is, unless you're investing in advertising companies (of which there aren't actually that many, and certainly not many in Silicon Valley or Boston, where Battery largely operates). We've already seen a multitude of Google wannabes trying to monetize the web through advertising, and it turns out that advertising is a very blunt tool to apply to the various types of web businesses.… Read more

VC money for open source drying up? Not the smart money

Some who read the headline of this LinuxInsider.com article on venture funding for open source is drying up. That would be the wrong conclusion to take from the article.

It's true that we've largely tapped out the obvious investment categories for open source: CRM, ECM, ERP, etc. But there's always good money for a good business, and increasingly open-source businesses look less and less like 20th Century software companies. Think Digium and OpenAds, companies that are charting new trails in new markets. Open source, in other words, is "scaling horizontally," moving into new territory. It's finding great investors there.

As for investments into the "easy" enterprise categories, there's still money there, too. But the good money understands that open-source investors shouldn't expect a quick exit. David Skok, a premium open-source investor, gets this:

The key, therefore, is to be able to give away a product but also show how you plan to "find some small, or large enough, subset of customers willing to pay for something else," such as support, updates or indemnity to go along with the software.

"This is a big problem with open source," he said. "It's free or low cost and that represents a huge cost for a VC because a VC is in business to make money."… Read more

Facebook and the changing rules of venture funding [Update]

The old world truly is changing. It used to be that entrepreneurs got to cash out of their startups after everyone else (or, at least, at the same time). Not so with Facebook's founder Mark Zuckerberg, as Valleywag reports, who recently cashed in $40 million of his stock. Cha-ching....

But it's not really Facebook that is behind th change. It's Peter Thiel, founder of PayPal and president of Clarium Capital:

From his offices in San Francisco's Presidio, [Peter Thiel has] set about changing the rules of how startups get funding and how founders make their fortunes. … Read more

Where's the money?

Entrepreneurs got some answers Thursday from investment bankers and institutional investors during the AlwaysOn Venture Summit in Half Moon Bay, Calif.

For starters, companies looking to cash in via an IPO, or acquisition, are finding that it's usually through the acquisition route, said Paul Deninger, vice chairman of Jefferies & Co.

Over the past five years, mergers and acquisitions have provided 80 to 90 percent of all equity returned to investors of venture-backed technology companies, compared with 30 to 40 percent in the early 1990s, he noted.

And that trend concerns Deninger, who compared the situation to venture capitalists &… Read more

Saturation point for enterprise open source?

It feels a bit like the enterprise open-source market has slowed. Not the sales aspect of the market, but the number of new players entering the market. We're getting greater breadth but not greater depth.

I hear each week about a new open-source vendor doing X, Y, or Z. Early on, all of the action was in the big categories like CRM, ERP, ECM, and EAI. Now people ping me about companies in the "Web container" space, tech support solutions. Big problems to be solved, to be sure, but big markets? I don't know.

This is good, in a way. It means that the commercial open-source ecosystem gets richer and more diverse. But it also worries me that open source is not providing a deep bench/several alternatives for each particular enterprise need. It's far too early to have the open-source software market consolidated in a few bets/vendors.

On the other hand, maybe it's just a sign that there isn't much room in these old, established markets for many new entrants. Buyers just don't have patience for several new alternatives to BEA Systems, for example: they may just want one good open-source alternative (or two).… Read more

Who will Microsoft buy next?

Menlo Park, Calif.--What does Microsoft look for in its ideal match?

Sparkly eyes and a nice smile don't hurt, but Microsoft is really looking for two other qualities in its acquisition targets: key intellectual property and smart technical leaders who plan to stay with Microsoft.

"At end of day we are buying a company for (its) people and IP," said Mark Wolfram, a managing director in the Microsoft unit that handles acquisitions. Wolfram was part of a breakfast panel Tuesday sponsored by the VC Taskforce.

Asked what is the smallest acquisition he'd consider, Wolfram insisted … Read more

Intel invests $10 million in security company

Intel Capital announced Thursday a $10 million investment in security company Iovation, which targets online fraud and abuse based on the identification and "reputation" of Net-enabled devices.

Device reputation tracks whether a particular machine has a history of negative online behavior attached to it.

Intel, which led the $15 million round, is increasingly tapping into the security market. And the chip giant is not alone. Other hardware vendors from networking giant Cisco Systems, which already has a large footprint in the security market, to storage titan EMC, which acquired RSA in a $2.1 billion deal last year, … Read more

Report: 'Hedgetards' didn't pump cash into Facebook

Remember, right after Microsoft's $240 million stake in Facebook was announced, when a Forbes blogger reported that two New York hedge funds were also contributing $500 million? And how funny was it that Fake Steve Jobs (also known as Dan Lyons, also on the Forbes payroll) proceeded to post the same news, except that he infused it with hilarious FSJ neologisms like "hedgetard?"

At the time, most people seemed to take it as the truth. After all, the $15 billion valuation for Facebook turned out to be true, so Facebook observers were likely in a state where … Read more