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I have my inaugural post up there today
The web has ben abuzz for the past 24 hours about a new start up called Lytro – which has come up with a technology to capture light fields instead of a plane of light.
Put simply, it is a new form of camera that allows for almost infinite depth of field and focus after the fact – it is like image capture for the human eye.
Very cool looking
So why is it worth yet another post? Why does Lytro matter?
the answer lies in the state of the venture world today:
Go back a few years and access to capital was of paramount importance – today, capital is plentiful and fungible
Technology used to be a very big key differentiator – now most tech is derivative (and I admit I’m not a tech guy and couldn’t build any of these products or services – but most of the tech is being built using off the shelf parts, Rails etc…)
Ideas are important – but given the lack of tech differentiation, most ideas can be knocked off quickly and iterated on once use cases have come to the fore.
The key – as it always has been for some time – is the strategy and execution that a company ultimately brings to the table. Never has this been more true – and never have companies had less leeway in terms of their strategy and execution given the first 3 comments.
Why Lytro is so important is that they seem to have come up with a radically new technology.
You look at what they are doing and a few round the clock hack sessions is not going to duplicate it.
What is so important about this is the fact that Lytro, while still having to strategize and execute, will have a heck of a lot more time to do this – given their technological headstart.
This is a luxury that few companies have today
And that’s why Lytro matters.
If you are just starting out – how are you going to give yourself more leeway in the execution of your plan?
Yesterday I attended the TechStars Demo Day in NYC.
11 companies vying for start-up capital after an intensive incubation period – mentored by some of the best and brightest NYC has to offer.
Now over the years I’ve gone to many investment conferences and you can tell by the crowd where and when you want to be investing.
The 11 companies yesterday were looking to raise roughly $8M between the lot of them – and there were perhaps 400 people in the audience representing well over $1B in capital committments – perhaps a lot more.
Reminded me of a distressed debt conference I went to a few years ago toward the end of the cycle in 09 – too many people chasing too few great ideas.
When this happens – your best bet is to hunker down and sit on your hands – or fish in an entirely different pool.
One might argue that Techstars and other Demo Days are to some degree a celebration of the vibrant start-up community in NYC – and a great networking event – and bothy statements would be true. However, the bare fact of it is that everyone on the floor at Webster Hall yesterday was sitting there thinking about some angle, some strategy, some insight that would make each of the 11 companies the next big winner.
There have been lots of debates as to whether we are in a venture bubble or not. The companies demoing yesterday certainly weren’t asking for an outlandish amount of money – and the valuations for the ideas did not seem crazy (assuming they work!). What is difficult is the execution of such plans, when any engineer with an idea can get funded – rather than work to build a company for someone else. Why be employee #10 with a 2% stake and a salary, when you can give it a shot with a 33% stake.
It is pretty self limiting – because different investors are always going to find different things to like.
The things I liked might be things that other people hated – that’s what makes a market.
Supply and demand is a pretty easy equation.
Given the economics, it’s a lot better to have been on the stage than in the audience!
Brad Feld has a truly frightening post up today
Go read it (and all the comments) here.
It got me thinking about Foursquare and the location based movement that has arisen over the past year – and the debate over privacy most recently espoused by Chris Poole in talks at SXSW.
The question in my mind is this: what is the benefit of location based services as they exist with foursquare, Gowalla, Facebook Places etc… Is it a shout out to the crowd – a digital “Hey I’m here, anybody else around?” or is it more of a message to friends – “Here I am, come and join me” or is it more of a digital roadmap to your life.
Obviously foursquare and other services have real applicability to retail establishments – allowing for deals as well as loyalty to be measured and rewarded – but as Brad’s post points out – there are downsides (stalking, Facebook has been used to target people who are out of homes etc…)
Also with the new breed of group text systems – GroupMe, Text Free, Tiger Text, etc…. you can send the digital shout out to the people who are going to really matter to you at the time. Yes you may lose some serendipity, but you gain a lot of control and more immediacy, as everyone has their cellphone on – but not everyone is checking in on Twitter, Foursquare, Facebook, etc… at all times.
So is privacy the be all and end all? Or should we be living out lives out in public?
Seems like we are going to be public – but perhaps there will be a leaning toward keeping some anonymity in the system.
Perhaps foursquare can embargo check-ins for an hour if you so choose. Maybe there are looser affiliations in the group text world – some people connected all the time like an AIM chat and others getting the text a little later.
Who knows which way it is going – but it seems to me that the first shots in the LBS war have been fired, and group text is answering back. It’s early days. Guess who really has all the power and data in the equation – its the cellphone operators – talk about a treasure trove of location based data. Soon it may just be “No only can I hear you now, but I know exactly where you are standing and who you are chatting with!”
Now that’s real Location Based Stalking.
Really sick – as in I have a cold for perhaps the first time in 2-3 years (not bad with 2 kids in the house)
and like most guys – I don’t do well sick – give me pain, but leave off the misery of congestion and poor sleep.
And it reminded me this morning that when you are sick you realize how much you take health for granted – and how when times are good – you just coast along and assume they will always be that way.
And it got back to a conversation I had with a friend over dinner Wednesday night – when things are bad and there is seemingly no way out – it is very hard to motivate people to do their best work – as there may be no real light at the end of the tunnel (or another train coming at you). It is when things are at their best when you need to show discipline in your business. Discipline in cash burn, in hiring, in your work – because you never know when you will wake up one morning with that sore throat.
Last night I was meeting with a few friends and one of them put forth the supposition that political campaigns were like VC backed start-ups.
His logic was as follows:
The candidate has an idea and starts doing research about whether or not he or she should run for office. This is the proverbial guy in a garage – or sitting at his job wondering how to get out.
He starts to talk to other people about the idea – and some of them are enthusiastic – enough to form an exploratory committee – i.e. Angel financing.
The exploration leads to a decision to enter the primary – more backing is needed, but there is social proof and users(supports) are climbing. This is early stage venture.
You win the primary, but there are others in the category (i.e. you have a well financed competitor). This is round B financing which hopefully will get you to the election.
Looks like the election is a close one and you are running low on cash (how many times have people either heard or claimed that this is the last round of financing). Another round comes in for a final push. Series C? Bridge Round?
Election day comes and the market decides – do you live or die? Do you gain wide acceptance – or do you go down in flames?
Are you Facebook or Friendster?
Interestingly, there are second acts in politics just as in VC. Ronald Regan lost his share of elections – but learned every time and kept coming back. same with Bill Clinton and just about every other politician of note. Founders do the same – dust themselves off and live to fight another day.
Not a bad analogy.
Two weeks ago I moved from a job moonlighting as a VC to the full blown title – and so far, it’s been like drinking from a firehose.
And the primary taste I get is that of game companies.
Clearly, the success of Zynga has not been lost on anybody – and competitors are popping out of the woodwork to take them on.
The pitches seem somewhat similar: a group of smart guys with some game experience would like to take on Zynga – if only you would invest $5M for the development and marketing of their new games. Game development is not all that expensive – but marketing to players is – and cutting through the clutter is getting more and more expensive.
Inevitably the conversation turns to two basic facts: 1. Zynga has bought up just about anybody with traction and will likely continue to do so and 2. there’s no accounting for taste: Angry Birds cost something like $100K to make (maybe less) and has taken in tens of millions.
Truth is – unless you have an already huge audience in place and you are serving up a great game – you are likely to get lost – and predicting who is going to make a splash is anything but easy.
Add to this the distribution platforms like Facebook (who will force you to use FB Credits and take a 20% fee) or Apple with its new 30% vig on distribution and the margins get leaner still. So where to turn and what to do – how do you make this business successful for the developers and the investors.
My thought is in the title – in game marketing.
Every time I see my kids playing Webkinz – they are flipping burgers or making pizzas – or their characters are running around a track or trying on great fashions. Is there some reason why those burgers are not sponsored by McDonald’s or Burger King – or the pizzas are not skinned by Dominos or Pizza Hut. Why aren’t the shoes Nike’s or Adidas? Heck I have a paid of Adidas Barricade III shoes that my kids refer to as Webkinz shoes. Farmville is an absolute sensation. But why aren’t the seeds sponsored by Burpee or the tractors a John Deere? Why isn’t all of Cafe Society sponsored? And why aren’t those sponsorships leading to more engagement in the real world?
What has consistently amazed me is the average time spent playing these games. Sessions can last from 20 minutes to well over an hour – and that is game play with complete immersion – complete engagement with the world you are inhabiting. Only a few % of people are generating all of the revenue buying up items to increase their game play – so why not try and mine the other 99%?
Why not monetize the attention of the majority? Why not let people buy virtual goods and opt out of the advertising if necessary? My guess is that companies like Zynga are so profitable right now – it makes no sense to change things up – but in the social gaming world, my guess is that we are in the 2nd inning – and yeah Zynga scored like 25 runs in the first inning and most people feel like the mercy rule should be invoked – but there is a lot of games yet to be played.
We’ve seen some innovation – but there is a heck of a long way to go.
The following quote comes from Reed Hastings, (here) CEO of Netflix to Whitney Tilson of T2 Partners – who has been short Netflix stock – and has recently become both open and vocal (here) about his heretofore losing position:
“Another competitive threat is TV Everywhere. If MVPDs (multichannel video programming distributors) are successful at getting their subscribers (which is practically everyone) to use TV Everywhere, which is free, instead of Netflix, for streaming video, then the market opportunity for supplemental services like Netflix and Hulu Plus will be much smaller. There is no additional profit for MVPDs in TV Everywhere, but they are motivated to slow the growth of supplemental services because of the fear that someday the combination of ESPN3, Netflix, CNN.com, Hulu, YouTube, and others could be an effective MVPD substitute over the internet. The TV Everywhere threat will grow over time, but is unlikely to bite in 2011 in a short-satisfying manner.”
Let’s face it – Netflix competes directly with any existing video service out there – and does so at a very affordable price. Content creators doing deals with Netflix have generally taken their money, under some sort of restriction, but ultimately given them their valuable content on the assumption that Netflix is a long tailed service – and is really additive to the overall video pie – and not competitive with it. Thus, any payments from Netflix were simply margin enhancing and represented a whole new front in content monetization.
Recently, you have started to hear the drumbeats from people who are in the position to know. Jeff Bewkes has come out against Netflix and their streaming service (here) – probably realizing that $8 per month for tons of long tailed content (and some more recent stuff) is a pretty good deal relative to HBO – which charges consumers $10 per month for very little current content (and if you are willing to watch DVD’s – older content). You are essentially paying $10 per month for HBO’s original programming – which may or may not appeal to you. Time Warner has seen HBO subs decline for 2 years running – and there just might be something to the argument that cutting off HBO to add Netflix is a pretty good deal – unless you absolutely need to watch HBO original programming the night it airs. After all, as soon as the DVD’s come out – you can watch them on Netflix anyway.
All of the major content creators have their own dog in the fight – and none of them seem to agree. CBS isn’t on Hulu. Fox and CBS are blocking Google TV. Different content guys give Netflix different windows for streaming – and different windows for DVD rentals. Ask 6 studios what their deal with Redbox is, and you will get 6 different answers. What content is available on Hulu? On Hulu Plus? And in what window? The truth is that no one knows.
So here’s a solution for the media world:
Adopt TV Everywhere. With a twist.
Jeff Bewkes is absolutely right in his viewpoint here. But he doesn’t go far enough.
What the cable and content guys should do is exactly what they have always done – which is to protect their existing business model. Sure they fight over retrans, and sure they argue over the value of some content – but all in all they are trading nickels around the edge.
Also, the consumer has spoken fairly clearly in that they want the 4 any’s as Glenn Britt of Time Warner Cable puts it: any content, any time, any place, and on any device. That’s what a winning service should look like.
So – here’s what I would do.
I would absolutely get everyone on board with TV Everywhere. If you pay a cable or satellite company for delivery to your house – you get the access to the same programming on any IP device you want. In addition, you get it anywhere you have internet service – and based on the programming – time shifting of one sort or another should be enabled.
But I wouldn’t stop there.
The cable business particularly, is filled with tremendously bad UI experiences – and while the new Comcast (check out what Brian Roberts thinks of Netflix here) , Time Warner Cable and Directv UI’s on the iPad look great – I would make it simpler for the industry.
I would do a deal with Hulu and adopt it as the standard for TV everywhere. If you have a cable subscription, you would have a Hulu subscription. Consumers have already voted and like the Hulu experience – so why not make it easy for the consumer.
But I wouldn’t end there.
Right now, the cable operators are the number one customers for Time Warner and Disney etc… and could easily replicate the NEtflix experience online. So that’s exactly what I would do – and I would call it Hulu Plus (simple eh, it already exists). Hulu Plus would go from a reasonable programming service to a Netflix killer – allowing consumers to access all sorts of long tailed programming that is not being well monetized currently – except by guys like Netflix.
That’s it plain and simple.
You continue to keep the economics of the existing model – you give consumers what they want – and you offer consumers more of what they would like – and you head off a competitor.
Why these guys can’t see this is beyond me – but hey – this is what they get paid the big bucks for.
Sure they might goose earnings by $0.01 by breaking ranks and taking a little more from Netflix – but in the long run Reed Hastings has almost 20M subscribers by giving consumers what they want. He’s a pretty smart guy – so why not take his advice. It’s working fine for him!
It all comes down to this: Netflix is in the aggregation of content and distribution business – just like the cable MSO’s. Unlike them, however, they have no physical plant (and to add insult to injury they deliver their content increasingly over the infrastructure of the guys they are competing with) and unlike them they are growing rapidly. Content guys need to realize this and treat them the same as any other MSO. If they want a specific window – they should be charged similarly. Thus, Neflix should be able to get ESPN – at $4.50 per sub per month!
Posted in Uncategorized | Tags: Bob Iger, Brian Roberts, cable, cbs, Chase Carey, CMCSK, cord cutting, DIS, disney, ESPN, FCC broadband debate, Glenn Britt, HBO, Hulu, Hulu Plus, Jeff Bewkes, Les Moonves, NFLX, NWS, Over the top, Reed Hastings, tv everywhere, TWC, video competition, Whitney Tilson