I just returned from DLD (Digital-Life-Design) Munich, a conference that brings together social leaders, scientists, entrepreneurs, investors, artists and creatives from around the world. The theme of this year’s conference was “big data”.

Interestingly, most of the speakers were not only from the US, but actually live in California (so much for . . . → Read More: THE “SMALL” WORLD OF “BIG” DATA]]> By Sumant Mandal

I just returned from DLD (Digital-Life-Design) Munich, a conference that brings together social leaders, scientists, entrepreneurs, investors, artists and creatives from around the world. The theme of this year’s conference was “big data”.

Interestingly, most of the speakers were not only from the US, but actually live in California (so much for global themes!). Some of the highlights of the great line-up were Yahoo’s new COO Henrique De Castro, PayPal alumni Peter Thiel and Max Levchin, “big data” experts DJ Patil and Padmashree Warrior, and Verner Wogels from Amazon. For me, some interesting conversations were about trends in global E-commerce, personalization and media companies that face issues in accessing a digital audience.

But most intriguing for me were the informal talks and exploration of data.
The Hive, my new incubator with T.M. Ravi, is anchored on the observation that every foreseeable application that lives on top of data will eventually need to filter vast amounts of data into decipherable and practical information.

The analogy most often used in big data today is about “teenage sex” — everyone thinks everyone else is doing it, yet no one really knows how to do it. While data-storing and -processing open source technology is available, creating the “stack” is harder than it seems. If the rules engines and algorithms come up with the right cohorts, matches and recommendations, and the “stack” gets to work, the real value in big data will be with the companies that know “the right question to ask”. Applications that are built to ask the right questions will create successful executions and win.

With The Hive, we will co-create, incubate and invest in these applications. Our incubation and investment philosophy is anchored around our three I’s of big data – infrastructure, intelligence and invention.

The infrastructure opportunities are pretty self-explanatory.Companies like Cloudera, MapR, and Hortonworks are positioned to bring hardened, enterprise-class open source solutions to customers who want to build a Hadoop stack for their in-house needs. The primary use case is a platform that allows large customers to use the stack to create their applications on top of big data. Analytics companies would fit under this category. Cetas, a company that we incubated and sold to VMware, was an initial success that gave us insight into the opportunity in this market.

We see opportunities to create versions of the stack that are either optimized for real time, streaming data, etc. This blog post by T.M. Ravi and Dhruba, key players at The Hive, explores new areas of innovation in this part of the stack quite well.

The second bucket of innovation, intelligence, is where the action is today.
The world of online advertising, shopping and gaming are all generating tons of data in the form of log files. The adoption of mobile apps for smart phones is exaggerating the amount of data being collected so there is no alternative than to create intelligence stacks on top of Hadoop-like infrastructures.

At the same time, new approaches for security, marketing, CRM and better ways to access and use customer data, like enterprise applications, are all being re-written, renovated or adapted to include signals that come from “big data”. We are very active in exploring, creating and launching companies that create these technologies. For us, this is the “new wine in old bottle” type of innovation. Target buyers, budgets and needs are clearly defined.

Recently, I’ve been thinking about a new bucket of data driven apps that I am calling “inventive” (for lack of a better word). Part of this thought is coming from conversations with exciting entrepreneurs and other investors. It’s also driven by what I am hearing and inferring at panel discussions at DLD and other conferences.

There is a whole host of new sets of data that never existed before: data that is being generated by machines, or humans that have seamless access to machines. This gives rise to a set of applications that could not have existed before the ability to capture this data, and then create a value proposition on top of it.

For example, the car service company Uber allows drivers in cars to share their availability in real time. Recalling the “intelligence” of our three I’s, the company creates a map overlay with real time feeds and allows consumer demand to be served through a simple web app. It is a new application that takes a “new” data source and creates efficiency in the world of transportation. A host of other companies like Airbnb fit the “collaborative consumption” area too. I believe there are many such other opportunities where “new wine in new bottle” kinds of innovation can be created.

Here’s a challenge to the followers of The Hive.

Where do you think we should create a company that fits the third bucket?

If the idea is good, we will help create and fund it.

“A lot of times [law firms] see startups before venture investors do, so we have to make the decision: Is this worth our . . . → Read More: Bill Elkus part of expert panel, “California Venture Capital,” hosted by the USC Business Law Society]]> In the volatile world of venture capital, it isn’t just the financiers who take on risk. Lawyers also make a calculated gamble, given that about 75 percent of venture capital-backed companies fail.

“A lot of times [law firms] see startups before venture investors do, so we have to make the decision: Is this worth our time? Is it worth deploying resources, associate hours, and incurring costs?” said Nathaniel P. Gallon, a partner in Wilson Sonsini’s Palo Alto, Calif., office. “In some sense, we are making the same kinds of bets that venture capitalists are, but in smaller dollar amounts, namely legal fees.”

Bill Elkus and Chris Shoff

Gallon was part of an expert panel, “California Venture Capital,” hosted Sept. 21 by the USC Business Law Society. He was joined by three other speakers representing different parties that might be involved in a venture capital deal: Bill Elkus, founder and managing director of Clearstone Venture Partners, with offices in Santa Monica and Palo Alto, Calif.; Chris Shoff, a founding partner of Cooley LLP’s Los Angeles office; and Andy Wilson, founder and CEO of Graphight and three other companies that have gone public. The event was moderated by USC Gould Prof. Donald Scotten.

Venture capital firms are financial intermediaries, gathering funds from one group of people, investing them in another group and trying to help grow the companies they invest in, said Elkus, who has a J.D. and an MBA.

“Typically, the investors in venture capital funds are institutional investors that can afford to take a great deal of risk,” he said, pointing to university endowments, state pension plans, sovereign wealth funds and some wealthy families. “They usually invest less than 5 percent of their total assets in venture as an asset class.”

Venture capital firms make their money by charging a management fee and securing a share of the profits, usually about 20 percent.

Companies pursuing venture capital generally do so after they’ve gotten “seed stage” funds from family, friends, and possibly angel investors.

“There are fairly well-known rules of thumb” for what Elkus’s firm looks for when deciding whether to invest in a company, he said. “We certainly look for a product or service that’s transformational, groundbreaking; you look for a market that’s growing; you look for entrepreneurs who have prior success, or at least prior experience; you do diligence on the individuals.”

This round of funding is known as “Series A,” when a professional investor gets behind the fledgling company — which typically has zero sales at this point. Series B and other rounds follow, in which the price increases, but risk and stake in the company decrease.

“The end of the game is that the company has an exit,” Elkus said. “Exit” can be an IPO (to monetize the value of the stock), purchase by another company, or a merger and acquisition.

Lawyers work with entrepreneurs from the very beginning of the process, Shoff said.

“We help get the company formed, working out the details of who’s going to own what percentage of the company, and get their IP protected,” Shoff said. “The goal is to make sure that the documents and the company [are] formed in a way that will make it easy to find investment, whether it’s angel investment or friends and family investment.”

Andy Wilson and Nathaniel Gallon

When launching a business and securing financing, entrepreneurs must carefully discern who will provide their legal representation, Wilson said.

“There’s one thing that’s always true about entrepreneurs: You never have as many resources as you’d like; the last place you want to spend money is on lawyers,” Wilson said. Good lawyers will understand this and determine the “necessary amount of lawyering you want to do to make sure not that it’s perfect, but that it’s not wrong.”

A lawyer’s experience can also make a huge difference for an entrepreneur when it comes time to negotiate.

“If … you have someone who hasn’t done venture representing on the other side, the negotiation process can be very protracted, because not only [is the lawyer] educating the entrepreneur, but [the lawyer is] educating the other side,” Wilson said. “The effectiveness of lawyers, and part of the value … in having good counsel is them having experience and good relationships with other lawyers who can kind of work things quickly — because remember, as the entrepreneur, you’re paying for this stuff. So getting to the right answer quickly is usually valued.”

Wilson’s advice dovetailed with that from Dean Robert K. Rasmussen, who opened the event.

“The thing you have to learn first as a lawyer is, we work for other people,” Rasmussen said. “We have to provide value. We have to get in their heads; we have to know, first of all, the process they’re involved in, the structure of their industry, and what counts as success.”

“And you’re actually paying for both sides,” Shoff added, noting that the company will pay for its own lawyer and for the investors’ lawyers.

Wilson said working in a technology-focused law firm allows him to spend a lot of time on non-legal issues with startup clients, such as cleaning up their business plans, helping them with their pitches, and making introductions to potential investors.

One thing attorneys must keep in mind is the distinction between entrepreneur as client and company as client, Gallon said. They may mean the same thing at first, when there is little to the company aside from the founder’s sweat equity, funds and technology. When negotiating a term sheet on behalf of the company, a lawyer also is effectively advising the founder about protecting his or her employment, compensation, equity, and control rights.

“In the initial state, what you’re doing is in essence representing the founder as the company, as the single board member, versus the institutional investor who is putting in money to take a minority investment but is going to have veto rights over key decisions and fundamental changes in the company’s business,” he said. “What happens after the money comes in is the switch flips and all of a sudden you are counsel to the board, and you are not counsel to the founder.”

Courtesy of Lori Craig,  USC Gould School of Law

I had the good fortune of being alone last weekend. That meant, of course, the opportunity to bathe on a regular basis AND watch for the second and third times, some of the documentaries that we’ve screened at Clearstone’s Storyteller Series. I’ve been lucky to have been mostly “present at the creation” . . . → Read More: Make Grit Happen: A Filmaker’s Advice For Startups And Entrepreneurs]]> by David Stern

I had the good fortune of being alone last weekend. That meant, of course, the opportunity to bathe on a regular basis AND watch for the second and third times, some of the documentaries that we’ve screened at Clearstone’s Storyteller Series.  I’ve been lucky to have been mostly “present at the creation” of many of these films, and have seen most of them go from ideation, to financing, to sale, to the first screens. I have also been present at the creation of some great companies. So after watching “Resolved”, “New York Doll”, and “King of Kong” one more time, I reached out to Greg Whiteley, one of the filmmakers, wondering what lessons he had learned along the way that might apply to our business of building great startups from creation to exit. Here’s one.

There is an old Chinese proverb that goes something like “The temptation to quit will be greatest just before you are about to succeed”. I had just watched “Resolved”, which I HIGHLY recommend, so I reached out to Greg. “Every single project I’ve done has had a moment where I’ve said, either to myself or to my wife, well, this was a bad idea. I think it might be easier to quit and start another movie”.

When I asked Greg to elaborate, he told the stories of EVERY movie he has ever made—that at some point, in every movie, he felt like he had wasted man-years of time, money, and emotional capital without foreseeable payoff. “For Resolved, it came after a screening in which every friend in the room seemed bored out of their skulls. The problem we were having was trying to explain the complex nature of debate and how it had become that way. The section was long and boring. To remove the section left the audience confused. My fear was I had made the mistake of making a movie about a subject that even it’s participants felt pretty dry.”

When I asked him how he overcame those issues in “Resolved” and the four other films (including the sort of titled “Mitt Movie”), Greg commented that every great endeavor has a “trial of faith” attached to it that must be overcome, by whatever method you choose:  Regarding “Resolved”, “There were a few days in which I’d come into our edit bay in Santa Monica and I would just stare at the computer screen.  Sometimes that would become too much and I would lie down on the carpet.  I was renting an office from a law firm and it had a glass door.  The lawyers would walk by, shaking their heads at this kid who appeared to be using their office to take long, open-eyed naps.  Eventually, however, a kernel of an idea came to me.  I honestly think I simply won a staring contest with my footage in which I outlasted its refusal to yield its story to me.”

When we were capturing footage at a debate tournament early on in the process (and if you watch it, look for my “cameo”), I remember asking Greg in real time, how in the heck he planned on making the most esoteric subject matter, debate, accessible to a broad audience. What turned out, is pretty powerful.

“It took a month or so to execute but the idea ultimately led to both an efficient and entertaining way to explain the history of debate.  That section, which gave us so much trouble, became one of the great strengths of the movie. “

We are very much in an era in startup land where it is increasingly common to see young, talented teams panic at the first sign of not trending towards escape velocity and run to the perception of “greener” pastures, most often for the wrong reasons, and by “wrong”, I don’t mean no plan, no money!  I’ve heard some people argue that this is but a product of our times–easy access to massive amounts of cheap capital, aggressive acqui-hiring companies, Tim Ferris, or even at the extremes, something ingrained increasingly in us out of a broader sense of American exceptionalism and entitlement. Whatever the reasons, it is a disturbing trend for many investors to be sure.

We work in a startup universe where there seemingly is increasingly an over indexing of IQ and a seemingly decreasingly under indexing of GRIT. We work in a startup universe where the average IQ is not close to average and advanced degrees from Stanford, M.I.T., IIT, Cornell (shameless plug) and Cal Tech are as common as a Charlie Sheen drinking binge. You want to stand out? You want to develop a differentiator in your personal brand that will transcend markets and time? MAKE GRIT HAPPEN!

In a subsequent post, I’ll lay out my “GRIT” index, a tool to assess whether entrepreneurs older than 2 would have eaten the marshmallow or not.

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No wonder, because Setty, a Sunnyvale, California-based entrepreneur is involved with nine companies. Some of these, like iCharts and Jiffle, create web or mobile . . . → Read More: Parallel entrepreneurs: Indians simultaneously investing money in different ventures in Silicon Valley]]> SAN FRANCISCO: “For me, everyday is like a movie in which all the characters and scenes are different. And I’m jumping from scene to scene, character to character,” says Rajesh Setty.

No wonder, because Setty, a Sunnyvale, California-based entrepreneur is involved with nine companies. Some of these, like iCharts and Jiffle, create web or mobile applications. Others, like Thinkaha and Foresight Plus, revolve around his passion for publishing (Setty, by the way, has also authored 11 books) and corporate speaking.

Setty is part of a growing number of Indians in Silicon Valley, who are becoming parallel entrepreneurs. Unlike serial entrepreneurs who churn out one company after another, parallel entrepreneurs are involved entrepreneurially in more than one company simultaneously.

“Right now is an especially great opportunity to create multiple companies at the same time, with deep strategic and operational involvement rather than involvement only at the advisory level,” says TM Ravi.

As co-founder of The Hive, an incubator-focused on big data, Ravi has come up with a unique model for parallel entrepreneurship.

Under one banner he wants to create multiple companies, all leveraging data analytics in various fields. He has co-founded three such companies, all of which are in stealth mode right now.

One claims to get better return on investments for mobile ads. Another, a security company, looks for deviant user behaviour patterns to predict security breaches. And the third hopes to reduce retail and e-commerce spamming and provide more effective multi-channel marketing.

Big data is a goldmine that will impact everything and mobile and Web 2.0 are what hi-tech companies are targetting. So, these ventures make for easier simultaneous entrepreneurship. But the consumerisation of IT itself is a factor.

“Earlier, you’d spend $7-8 million and 7-8 years before you could get your product out and validated in the market. Today, the process takes less than one year and below $1million,” says Ravi.

The reason includes lower infrastructure costs too: Cloud computing means storage costs come down to as little as just a few thousand dollars. And open source software mean that cashstrapped entrepreneurs don’t have to cut huge cheques to IT companies like Oracle and Microsoft for software.

Markets too move faster with models like the Freemium model — wherein your product, like Dropbox, is initially free and then goes viral getting early adoption.

Or like the popular apps models wherein you let users test out new features and capabilities and the product grows dynamically in real time.

VC apathy is a marked reason too. “VCs sitting on large funds are getting conservative showing a preference for larger scale companies. They’d rather make big bets, $10 million or more, for mature companies so that they can scale rapidly,” says Ravi.

But for another breed of entrepreneurs, parallel entrepreneurship is purely about following their heart. For example for Naveen Jain, who is involved in Singularity University and the XPrize Foundation. Lessons learn about exponentially growing technologies and their entrepreneurial deployment led him to found the World Innovation Institute.

They also led to one of his futuristic ventures, Moon Express, a moon mining startup apart from a rethinking at his public records company Intellius.

Intellius turned to what he calls the ‘ Information Genome’ and was renamed inome. “XPrize inspired me to start iPrize, our own in-house prize for employees with breakthrough ideas,” says Jain.

“Creating multiple enterprises allows you to experiment with how to go about solving a problem in two or three or more ways,” says Jain.

“If you can build a good team of entrepreneurs rather than employees, there is no reason why you cannot work on multiple ideas at once. The important thing is to know to delegate and not get involved in the day-to-day operations everywhere so that you can hold on to the larger perspective.” That includes giving employees the room to experiment and fail like entrepreneurs.

Similarly, Pleasanton-based Sridhar Vembu too believes that delegating to the experts enables him to pursue his passions through multiple companies.

Along with Zoho — the enterprise web apps firm that he is most well-known for — Vembu is involved in two startups.

One makes affordable infusion pumps for releasing drug flow very slowly and accurately for disorders like those of the immune system. The other is a semiconductor company.

“It will be incredibly difficult to run all these companies together so delegating is crucial. Unlike at Zoho, I won’t be involved in day-to-day engineering decisions or product development in these companies, but in more later stage decisions such as what would work in the Indian market,” says Vembu.

But Vembu’s most uncanny venture is Tenkasi, a town located several hundred kilometers from Chennai, that Vembu has unofficially adopted. He wants to move at least 10% of Zoho’s R&D there, for which he’d add about 50-100 people this year itself, most of which would be local talent.

But for that, the little town would need training centres, recreation centers, schools and hospitals for the employees’ families, and so on.

Over the next two years Vembu plans to put Rs. 10 crore, and then more as necessary, into this unique initiative. “It is important to understand that some ventures will work and some won’t. But we need to try to find out, ” he says. And he is trying out concurrently.

courtesy of Economic Times of India

The Mountain View, Calif.-based financial services start-up raised $4.8 million in Series A funding this week led by Yahoo Inc. co-founder Jerry Yang, with former Yahoo Chief Executive Terry Semel and several other . . . → Read More: Clearstone invests in OpenBucks]]> Individual angel investors generally don’t take leading roles in providing new institutional funding rounds for start-ups, but OpenBucks broke that tradition.

The Mountain View, Calif.-based financial services start-up raised $4.8 million in Series A funding this week led by Yahoo Inc. co-founder Jerry Yang, with former Yahoo Chief Executive Terry Semel and several other individuals and venture capital firms participating.

OpenBucks has come up with a new way to solve a persistent problem for e-commerce, moving cash from the physical to the digital world by allowing users to use physical gift cards from leading brands to pay for unrelated online services and stores.

So far, Subway, CVS Pharmacy, Burger King, Circle-K and CITGO are participating in the OpenBucks Gift Card Payment Network, and more merchants are expected to join. A gift card from Subway, for instance, can be used for more than 500 online games, although more uses for the gift cards and ultimately more payment methods are being developed.

OpenBucks Chief Executive Marc Rochman said he had term sheets for the Series A round from several venture capital firms and expects to raise money from VCs in the future. But the type of help that an experienced entrepreneur like Yang can offer him at this stage outweighs what most VC firms can give.

“It’s invaluable for me to be able to pick up the phone and speak with an investor who’s been in my shoes before…who knows payment inside and out and has access to the right people. That’s something that’s much more difficult to get from pure VCs,” Rochman said.

Venture capitalists tended to expect higher overhead-some wanted a five-person board instead of OpenBucks’ three-person board, and they wanted more dilution than Rochman was willing to give.

Some also expected five-year forecasts on the business, “but it’s so speculative to think what the business will do in one year or two years,” he said. “It might be that a lot of what we’re doing in one year, we’ve not even thought about now.”

Rochman said he hopes to serve the billions of people around the world who live off cash rather than credit cards, and he understands that he has to move fast. Relocating his start-up from the East Coast to Silicon Valley helped, he said, because the pace of business is accelerated in Silicon Valley and he was able to meet people like Yang.

“We know we have a strong, big idea here,” he said. “Everybody is trying to bridge the gap between online and offline…but how do you make money move to the digital side? That’s what OpenBucks wants to resolve.”

Investors in addition to Yang and Semel include Greycroft Partners, BV Capital, Clearstone Ventures, Morado Venture Partners (a current investor that has Yang as a limited partner), Novel TMT Ventures, Inspiration Ventures, CrunchFund, SV Angel and TiE Angels.

Whether Yang will join OpenBucks’ board is undecided.

By Deborah Gage courtesy of http://blogs.wsj.com 

LOS ANGELES–(BUSINESS WIRE)–Rubicon Project, the #1 independent digital advertising technology platform for the comScore 500, has been ranked second in scale (measured by unique visitors) only to Google in the comScore Media Metrix monthly ranking of Ad Focus properties for May . . . → Read More: comScore’s Ad Focus Ranking Confirms Rubicon Project, Ranked #2 in US Audience after Google, as the Largest Independent Display Ad Technology Platform for comScore 500 Publishers]]>

Rubicon Project U.S. Internet audience in May estimated at 200 million unique visitors

One of our entrepreneurs, Alok Kejriwal, has had his most recent game, Parking Frenzy, go to the #1 app in the apple app store.

Here he shares some tips on how he did this…

So, what were the key lessons that Games2win learnt as it achieved this significant milestone?

1. What . . . → Read More: Lessons from Alok Kejriwal]]> by Jim Armstrong

One of our entrepreneurs, Alok Kejriwal, has had his most recent game, Parking Frenzy, go to the #1 app in the apple app store.

Here he shares some tips on how he did this…

So, what were the key lessons that Games2win learnt as it achieved this significant milestone?

1. What works on the Web, works on Mobile.

Games2win has a massive library of over 600 casual, flash games. These games are played by more than 15 million unique users every month (as per comScore). The one genré that always stood out and outperformed the others was the genré of ‘Parking Games.’

Once we had perfected this game genré and witnessed long-term engagement (time spent*returning users), we began converting our select titles to Mobile (iOs and Android games).

Lesson – if you have a site or a game or anything that works well with consumers, there are high chances it will work well with Mobile users also

2. More than the ‘art and look’, ‘game play’ matters.

Let’s face it. The art of “Parking Frenzy” looks like it’s out of the 70s.

That’s partially because it is one of the first games we made early in the Games2win business cycle.

Having said so, out of the 300+ reviews on the iTunes stores about the game, less than 5 have to do with the art.

The shining feedback is that players find the game play ‘interesting’. It’s a unique concept that has been presented to them in a game!

Great Game play combined with Great Art makes a Great Game. But starting with good game play has worked for Games2win.

Lesson – focus on game play first. Game art can be used to package Game play

3. There is no need to spend money on advertising and promotions.

Parking Frenzy has reached its position across global markets without even US$ 1.00 being spent on advertising, marketing, promotions and all that jazz.

Despite what you have read and heard and what they tell you, let this game prove beyond the shadow of doubt that if you have even ‘something’ interesting out there, the world WILL download your app or game.

Good, funny, unique, interesting, entertaining content doesn’t need ‘ads’ to sell itself. The content markets itself rather well.

Also, there is no Abracadabra or magic to this. The reason why games fly off the shelf is because of ‘viral’ marketing!

Lesson – let your consumers market your game. Make them your marketing managers and your advertising agency.

4. Boys and Girls BOTH play Car Games!

Games2win always assumed that boys played Car Games and especially Parking Games.

How wrong we were!

Both Boys AND Girls are playing Parking Frenzy and the ratio is almost even:

Lesson – Don’t segment your audience until downloads and usage data tell you who is really playing!

5. Be practical about correcting mistakes and act like lightning

When we first launched the game on the 1st of June, it had a loader screen that featured

our website logo. This logo remained glued to the screen, while the game loaded.

Unfortunately, this non-animated, static screen was mistaken to be a ‘defect’ and consumers began to review the game saying ‘the game is stuck, before it even starts’.

We quickly realized our mistake and thought of a few solutions:

a. Change the loader screen to show a loading bar
b. Show random messages like ‘Please wait’, ‘Car loading’, ‘Parking ticket being issued’ etc., etc. that rotate under the game logo, while the game loads.

We realized that these changes would take a bit of art and programming time while delaying the rectification of the problem.

We therefore decided to simply add a static text below the logo that tried to communicate the same message.

We made this change in less than 1 hour and updated the app. Then we made a fervent request to Apple to push this update in express time.

Apple responded and our app was updated in less than 4 hours of submission!

When version 1.1 started getting downloaded, this complaint had disappeared!

Lesson – be nimble and practical in solving issues, rather than trying to be perfect. And move like lightning!

We hope that these lessons will help you too.