Supernova 2007 - Innovation In, On and Through the Network

Moderator: Robert Massoudi, Cisco
On the panel: Craig Forman, Earthlink; Jason Gaedtke, Comcast; David Young; Verizon; Michael Katz, Berkeley

Community/Entertainment - how the community is generating and consuming content.
Video is complicating the issue quite a bit.
1080p - cost of distribution of a HD, 1 hour video = $5

Need to address the capacity issue - could bring down the network
What are the key capabilities that the networks can bring that could create long-term value in the value chain?

Question: what are the actionable opportunities that can be created with this group?
Question: what are the unique capabilities and value that each player can bring to the capabilities?

Robert: "Please avoid the issue of net neutrality - want to discuss collaboration versus the issue of net neutrality."

Craig: we view ourselves as a non-facilities based Internet dial-tones (24 brands) with 50% narrowband and 50% broadband. Already working/collaborating with many of these people. Are fdoing facilities with the Muni Wireless play. He runs the access business and the applications that run on the network.

No one owes us a living. We do not own some franchise agreement - highly competitive market place. Need to look hard for where you can provide value to the customers.

Earthlink: for product bundles, the question is are offering saving money, time and delight

Jason: what is Comcast Interactive Media? Over ten years, offering interactive, digital download, digital dialtone - gone very far from being a utility video player. As they move into the high-speed dataspace, running into satellite broadband and other players. In digital voice, running into telcos and VoIP players. CIM is an "enabler" of the technology.

CIM "winds of change are continuing to blow and increasing" - concerned about emerging content and how users use the content. Established Interactive Media on how they could work with users needs in the community aspects. Competition leads to collaboration.

David: Instead of content and network - there is a tense relationship between the broadband network and the content players. There is a very symbiotic relationship. Verizon/networks need to understand the use of the bandwidth - so you can access content and applications specific to the device.

Why aren't apps across the phones? Verizon has created an ecosystem on the services around delivery and development. Not the same on the wireline side - only the wireless play.

Mike Katz: Berkeley has an unusual model - teaches to build fundamental technology.
Complimentary products and firms on interactions with the other players. Either fight amoungst each other, capture the value OR create a cooperative environment. How can you create an opportunity to work together. At one point, the thought was vertical integration - but taught that it did not work out. What do you do with thousands of applications with tens of platforms? Can not have the tail wagging the dog.

Will have to have a banding together of relationships - for example, Yahoo! representing a band of applications to the platform players. Or the platform/infrastructure sees the need of the applications. Look at how the console players and the

Pricing, pricing, pricing - micropayments!!! Can make a big difference for a number of reasons. Stimulate customer behaviours, application development and better relationships between players in the ecosystem. Web is still in its infancy in it's pricing models - see the power of google. The real genius, much more sophisticated in pricing models in advertising. We will see the improved pricing of bandwidth.

Are the costs of message transmission significant? One way, they say no. Other way, they say yes. We might need to move toward traffic sensitive pricing. If we assume that the technology on offering bandwidth will be ahead of the technology for using the bandwidth, then no problem with pricing.

Throwing bandwidth at the problem - bad solution, not very scalable. Need to solve the delivery/distribution economics.

Impedence mismatch - between the service providers and

Contextual information - behaviour around the information around activities. Wireline/wireless integration - can switch from one to the other space.

David: where is the bottleneck - with copper, it was at the Central Office. Moving to fiber to home, becomes a virtual unlimited solution. Building out the infrastructure to provide wireline to the home. Wireless - spectrum is the constraining factor. CDMA is squeezed - there is a need for more bandwidth. At universities - traffic management is handled at the uplink side - avoiding the transit costs.

Question from Kaliya: why is bandwidth a problem here? Other parts of the world, no problem. Solving broadcast into the future, broadcast is dying into the future. What are you doing on a practical, process level for collaborative forums. How are you handling the trust issues?

Supernova 2007 - Connected Innovators

adap.tv
Israeli company that offers scalable scanning with intelligence that offers contextual, adaptive, scalable, blah, blah, blah... (I think I saw this with scanscout.com). Can insert appropriate ads into the viewer. Question: does it offer the ability to go into ANY Flash viewer?

Adaptive Blue
Personalization technologies - puts the intelligence in the browser. We focus on people - people and everyday things, people and shortcuts, people and personalization. This is their vision of the solution to the semantic web.

• BlueOrganizer: personalized smart browsing - BlueMenu.
• SmartLinks - smart browsing for everyone. reminds me of snap.com

AggregateKnowledge
Personalization/recommendation/discovery engine - similar to the Amazon recommendation engine. Finding the unexpected, serendipitous content.

Why don't we do the implicit matching concept on a massive scale. World's largest "implicit social network". They are launching a solution for Overstock which is using the implicit information and interests from the prior users and powering targetted ads/product suggestions.

CastTV
Web-wide video search - videos that they want to search online.
Demonstrates search compared to google and YouTube search.
Reminds me of a mashup with blinkx and dabble. (Disclosure - I am an investor in dabble).

Developed indexing side - index sites themselves. Powering the online video guide for TV Guide(?). Again, allows users to find videos, discover and play. DFJ funded - looking for staff.

CriticalMetrics
Music discovery/recommendations/search field - compared to HypeMachine, myStrands, etc. Other services do not keep you informed with "everything". Very few categories of product with such variety. Need some kind of solution to narrow down solution. "THE ULTIMATE MIXTAPE MACHINE" - tag line from their website.

jangl
Manages social communications via the phone. Many profiles on social networks - where is the phone? Need to de-silo phone from social networks. Key is privacy for briding relationships online to the phone.

Pando Networks
Helps deliver sharing large files. Link people together providing a peer-to-peer network (BitTorrent) - now becoming a large P2P media delivery platform. Allows Pando to manage, deliver or remove media content from the network.

Pando coexists with the CDN to work with both the CDN and the Pando P2P network (my assumption is they are using the Pando client to pull from all networks. Pando (I believe) is now the largest BitTorrent client in the world. Pando Publisher - this is what Robert Scoble needs (from our conversation in the Open Space session).

SodaHead
Polling across your social network (waitaminute - wasn't this the Poll option in eGroups?) Aggregate data and individual perspective. Reminds me of bix. "Best Polling Widget on the Planet" - tagline.

SPOCK
People search engine - discovery engine for information - drawing connections. Exposing the relevant information associated around the individuals or definitions on individuals.
One of the funniest people on the presentation.

wize
Change the "what to buy" effort - online product research is where the action is. Simplify the product research effort - so they can find the best product for their constraints. Trolling information across the web and other content, mix in some proprietary analysis tools to help answer the questions for making a purchase decision.

Two features: wizerank - metric on prediction of product success based on recommender and sales success (similar to a Wine Spectator Score) and user reviews.

ZapMeals
"Shortest distance between good food and your tummy" - tagline. "eBay for takeout orders" Looks like a chance for people to resell their cooking skills to others nearby (Hey Shannon - here is an idea...) Matching customers, food preparers and delivery people.

ZenZui
Consumer-centric services + Power of Sync + Focus on Design = ZenZui (the fastest speaking presenter in the West). Seems like it is prepped for iPhone and also works with phone interface (nine phone number buttons). Z key - zooming user interface - 16 tile heatspace. Zooms into/out of space.

Zing
Backend provider of solution - required to connect with a personal computer - Zing provides the connectivity. Untethering the application solutions (e.g. and leveraging wireless IP to provide entertainment onto devices.

Feedback from the panelists: avoid pure webplays, pure destination plays are not very successful. While AJAX exists, user interface is not happening as fast. Need to have simplification and power.

Supernova 2007 - Research and Relationships

Moderator from Max Kalhoff, BuzzMetrics
Panel: Aaron Coldiron, Microsoft; Ellen Konar, google; Amy Guggenheim, McKinsey

Perspective - market information business (mostly startups) - market intelligence, market information, innovation. Digital transformation - impacts on these areas.
How marketers create their understanding of customers and prospects - built on a foundation of active participation with the customers and consumers. e.g traditional survey research - challenges of elusive consumers, attention erosion. Traditional market research - interception, interruption, coersion.

Interesting value proposition - much more difficult to do true market research - but with these issues, new opportunities coming up with solutions.

Landscape: Major Powerpoint slide with LOTS of dots - brand association map. Mapped out the major words and maps it out with the most relevant association. Breakdown via competitors, products, related concepts, brand attributes. Nice visualization once you take the time to understand this.

Ten Major Disruptions in Measurement

1. Rise in Online and Digital - percentage of adults online over 70%
2. Attention Erosion, Research Adversion - engagement - increasingly becoming an anomoly
3. Speed of measurement increases
4. Data commoditizing and democratizing - blogpulse, google Analytics
5. Passive Behavior and Attention Measurement - hitwise, comscore
6. Measurement and Analysis of Unstructured Data
7. Consumer-centric Measurement and Planning - now migrating toward more targeted distinctions (qualitative factors)
8. Qualitative Comeback/Feedback
   
9. Data Integration Comes of Age
   
10. Attention-Data Ownership - attentiontrust.org - data following consumers around - trail exists into perpetuity. What becomes the relationship between the marketer and the people formally known as the research subjects?

Question: What do you do? Why are you here?
Ellen: comes from google - started in org research, moved into market research (at the time, was with IBM) - thrilled with getting involved with customers, businesses, etc. Worked at Intel in "traditional" market research - got increasing frustrated with the effectiveness of market research. Fits very well with google's perspective - let customers define the products. Launch products in a "beta phase" and watch their verbal and behavioural feedback.

Amy: McKinsey's Digital Marketing Practice on the West Coast - developing McK perspective on digital marketing and issues around that as well as clients and teams in regard to ecommerce/digital marketing strategies. Everyone is trying to figure out what is next.

Eric: work at Microsoft - word-of-mouth marketing - entering conversations online, listening to customers discussions online and how do we figure out ROI online. How do we quantify how the marketing effect how products are bought and/or used.

Question: now, we live in a digital world with a trail of meta data followings - breadcrumbs of insight is everywhere, but we are not using them. What is the gap in where we should go and where we are?
Ellen: on research side, makes the job easier and harder - we used to spend so much time trying to generate data. Did some focus groups to generate data. Now, the data is a lot of noise though cheaper. Can not design a nice little study out of the databases. Datasources are a "hell of a lot harder" - but on the flip side, as a recipient of data - much more fulfilling. Now, not small portions, but by large groupings of data. now it is not hypothetical - it is now directly accessible. It is from the real customer base.

Amy: we are talking about consumers are more and more engaged with companies brands - input to you - how can you evolve your marketing model? Now we are creating "participatory marketing". How can we use users to evolve how we do PR? Customer service? Marketing with a HUGH CAPITAL M. Example of NetFlix - running a contest to improve their movie recommendation algorithm - more than likely someone in company wanted to improve the algorithm and realized he/she could have the crowd develop a better algorithm and give the winner a $1MM since it will be a very effective way to evolve your product. Lots of press and LOTS of engagement. Very organic marketing success. How do you make it programmatic? Need to focus on your "brand promise" - what your brand delivers against that. E.g. Kryptonite video - 15 second video - always used this Kryptonite lock, showed the pen - and became a huge impact. The rumor had been around for years and year, and now - with YouTube and other video distributors - the impact was a heck of a lot more impactful.

Eric: we are all just "getting started" - how is media controllable. The brand is "out of your hand". It is in the digital ether into perpetuity. Difficult to force a particular brand - need to engage the customer on how to establish the brand.

Question from the audience: how do you systemitize it and/or control it - what do you lose when you do this? Amy: some things can be systemitized, make programmatic - salesforce.com opens up the product roadmap.
Eric: when you connect the engineers to the brand - a lot better in developing better products.

Supernova 2007 - State of Investing

On the panel: Ron Conway, Band of Angels; Flip Gianos; Jeff Clavie; Alex Gove, Waldon VC

Markets have changed for investing - people are taking elss money, taking money later - what does that mean in the investment community. What does this mean in return on investment? Greentech takes a lot longer than three to five years.

Question: where do you see the world of investing, from the angel POV
Ron: from 30K in Silicon Valley is the best it has ever been (even better than 98 and 99) - multiple monetization paths forbecoming viable businesses. Cost of company is a lot lower - before $1MM for Oracle DB, $1MM or Sun machines. Now, entrepreneurs can test out the product after it is out there - and can raise products now. Ron and Jeff invest in mainly Web 2.0 companies.
Flip: 600M fund investing in life sciences. Venture business is expanding - growth in life sciences and you can get a lot of money.
Jeff: "I agree with Ron." Capital efficiency plays on this scale now - money can create a lot more companies. Last three years, there is capital efficiency and monetization that we could bring companies to the next level of the market. e.g. Dogster is reaching profitability on 100k in investment. And now, angel invests are now receiving better valuations and angels now can be rewarded much better. VCs are not doing small investments (<100k to couple million), so opportunity for angels.
Alex: agrees with everything that has been said. Similar focus as Jeff and Ron. Points that are really important:

• looking to invest earlier (from past funds) - Series A deals
• more cooperation with angels (post boom, angels got the short end of the stick)
• cheaper to start companies, want to help nuture the companies
• VCs now need to prove themselves more - now VCs are unable to drag entrepreneurs, entrepreneurs are looking for real action from VCs

Question: what mistakes are you seeing this go around?
Ron: spending too much money, too soon - not enough to show after investment. Need to be frugal and accomplish something with each round of fundraising - something tangible. Last 18 months, no companies go out of business until this month. Now, four companies are going out of business. Attribute it to entrepreneurs that said, "give me $2M and I will accomplish X" - then if they did not, they could not get more. If you can not deliver, find a way to give the money back - and then the investor will look more kindly on that.

Question to Flip: what are the changes/evolutions to the investment?
Broadly, there is a lot of angel/web 2.0 services - people are investing smaller amounts but expecting more tangible progress. The mistake they are making, people do not have a very clear idea of what they are starting. If you have to go through a long, arduous process - the ones that get funded are the ones that have a focused targeted effort. Good news: iterative development. All about tangible progress.
Jeff: point out that in this market: the cost of failure is very low. With $25-50K of investment can determine viability. A plan that is not well-defined could still get funded, if there is a good team.
Flip: but if you do not deliver quickly, you are eliminated very quickly. Advertising is a spiggot - it can be turned on very easily, but turning from a small company to a big company is a challenge for most. Big VC want money opportunities that have BIG returns.
Jeff: entrepreneuers without doing their homework - who are the investors, who are the right guys to talk to, where is the ecosystem. Do the research - find the five firm, five angels so you can refine your pitch.

How does an entrepreneur do this?
Jeff: Look what are the names in the people that are invested in - surf the web
Alex: Need to come in with a warm intro. All money is not created equal - angels/VCs are aligned with particular areas. Not everyone competing in the global space. List of names that have done deals in this space - the whole notion of just blast is not the right way it works.
Alex: if you can raise cheap money from angels, go for it.

Question from audience: smarter investors are interested in more "real things" - she sees an ecosystem that is interested in the "unreal" than the "real". More important to see the "unreal" than "real". She is not a PT Barnum - how do we move forward? How do we compete?
Flip: put your head down and get the work done. The financial markets respond to things that are outside of the control of entrepreneurs. In the long term, building a real business with real users and real revenue, that is the way to go.

Ron: Angels are partners for the long run - only 2% of the cases does the investor get cashed out before the major event.
Jeff: there is an open market - control: term sheets are trying to be flexible and reasonable. Angels take a huge amount of risk with a bet on the fact that they will beat the odds - but will have casualties.

Question: what is your success rate - now? Early stage - 50% failing is fine. Ron has had 1%/2% casualty, Jeff has not. Flip: varies by marketplace (med devices: more than 50%, biotech: about 50%, semiconductors: 40% successful, software/services - failure rate is 80%) - produce more than 3x the money.

Question from audience: how do you now evaluate outsourcing?
Ron: if the CTO and he VP of Eng are employed by the company and proven track record, no problem. If all outsourced - run away. Phenominal outsourcing company (PhoDeath???).
Flip: outsourcing is good for later - not so early.

Question from audience: what is your ballpark figure of multiple on return from companies?
Ron: If I invest in 100 companies - 1/3 will die, 1/3 will get 1-2x return, 15% will get 5-10x, 15-20% will give me 15-30x, the remainder will get 50x.
Jeff: Personal hurdle is 10x in X percent of companies in his portfolio then applies a decision analysis effort on the metrics.

Question from Owen Davis: how do you look at an investment decision?
Jeff: when I invest in a company, there is a shot at a 10x return - but it is not in the documents.
Ron: pro-rata investment rights
Flip: couple of different circumstances - it is more common these days, if a small amount goes in ($200-400K) and they have to raise later, a lot of times this is done with notes or warrants. Setting a price at that point is really hard. If you are putting $1-3M, then much more sense to put structured financing.

Question from audience: what is your time frame nowadays?
Jeff: can not plan on when you will have a liquidity event. Ron: usually there is a wave of companies getting acquired quickly - five recently, then 3 to 5 years later.

Question from audience: how has the liquidity events changes and how does it change (e.g. 144 markets)
Ron: facebook and Zappos will more than likely IPO, but all the others are about M&A. The goal is about acquiring by bigger firms. I am constantly presenting companies that are ready for M&A. It is all about M&A.

Question: how does that fly in the face in the product versus feature companies?
Ron: i like them to focus on the metrics and then M&A will play later.

Question from ustream person: where can angels help?
Ron: If a company gets valued at a reasonable valuation, the M&A transaction is just fine. Just do not get reckless with valuation so that investors want to come back when you start a company.

Metrics: I asked - need to get the details from the video - but general answer - relevant to the marketplace.

Question: what is the reasonable exit ballpark?
Alex: bio-tech, nanotech is a longer terms investment, others 3-5 years.
Ron: 3-5 years is the norm. TellMe just sold - after 12 years.
Flip: we are in the money management business - do a 20% return over 25 years. This requires
Question: syndicate of investors - can you talk about the "kind" of money. How do you communicate the opportunity to non-sophisticated angels? Relationship with other investors?
Jeff: does not work with unsophisticated angels. Can not rely on the money to come back at some point. A) never get non-qualified investors in these deals. B) network of co-investors that you have invested with in the past.

Question: when to seek angel versus VC? Benefits in raising angel?
Ron: if you need $1.5M or more, go to VCs. Try this from angels, not easy.
Flip: think of this as project finance - if a small amount of money can get you users and revenue, then go for angels. Map out the milestones, and that will help determine your metrics.
Jeff: cost of capital from angels is higher than VCs, the angels and VCs work together
Alex: talk to VCs early since they can refer entrepreneurs to the "right" kind of angels. Good karma will pay off in the long run. All angels (like VCs) are not created equal.

Question: how do you approach valuation? How much art/science?
Ron: I do not spend a lot of time on valuations - this market $2-5M. Series A - $5-10M. If an entrepreneur is negotiating too much, leave the deal. Chemistry with the entrepreneur is the #1 characteristic that determines the deal.
Jeff: completely agree with Ron - their are parameters. There is an opportunity, could be risky, is the valuation appropriate. If going to take too much of the company, will not play. Maybe go find friends and family money.
Flip: hard question to answer - needs to be specific to the issue. Irrespective to this conversation, the company will have to raise more money, and it will be another issue later. Some point, the company will have to determine a market price within the greater world.

Question: convertable debt - good or bad?
Ron, Jeff: prefer to invest at a set valuation, rather than a bridge loan
Jeff: remember - you can start choosing from different sources of capital

Question: semiconductor companies - different time frames? Differences?
Flip: semicondutor cos are far more capital intensive. More complete team, business plan, tangible product - very challenging - and has a longer time horizon, large capital investment. We are talking here about quick-start processes.
What kind of multipliers? Time frame? 5 years

Question: Patent applications - reasonable to finance patents via angels?
Ron: used to funding patents.Jeff: trying to build a company to flip it is like playing Russian Roulette

Ron: LA and New York, mostly media - absolutely innovation
Jeff: established friend that goes to Europe, then I will invest. The challenge is finding engineering talent outside of the The Valley. Wall Street is recruiting the good engineers
Ron: Greylock, Vessimer, Cannon; General Catalyst loves to seed invest.
Flip: high touch business - be geographically local. Some people invest vertically - disadvantage is being on the airplanes. Angels are working out of their own pocket. There are ways - find the people that are working in that industry segment.
Alex: look at investments all along the West Coast.

Question: what do you see as the future?
Ron: Silicon Valley's dominance is only going to get better/stronger.
Flip: the 90s was building infrastructure. People are now discovering new business models. People are finding new models for monetizing the infrastructure. Going to look more like applied technologies versus fundamental technologies.
Jeff: Agree with Ron - looking forward to the next 25.
Alex: can never predict the future, looking forward to working with entrepreneurs

Supernova 2007 - First session

Making Computers Smart: A Dumb Idea?

Nova Spivak - talking about DAML, semantic web, agents - has the metaphor disappeared? There is a need for the architecture.

Barney Pell - agents will act on our behalf - people will have a relationship with their agents (Scott Banister) - conversational interfaces - persistence - agents will have desires

What do we mean by "agent"? Barney means one thing, Nova means something else. There are many different types of agents that exist. At the very extreme, they are fully autonomous. As we move the other way, they become more related to the owner. Truly autonomous agents will not happen very soon (a lot longer). The model of the web is a client server model - autonomous agents are "off on their own".

Kaliya: agents that are built from tools that will work on your behalf.

Shannon Clark: semi-autonomous agents are pretty close at the moment - with the rise of webservices and the rise of agents moving around with AJAX and structured object data.

Barney: the next step: all this great content is distributed, if anyone wants to mix up or mashup - we are making creativity happen once again. When the knowledge of what these things mean, then you (as a normal user)

Psyche - a long time, long-term project - build common-sense like an encyclopedia - DOD review of Psyche - lots of good, deep things - when you put it all together, no unifying whole. Big challenge. But, it has had some successes - and they are opening up: ResearchPsyche for people to access the information to the community.

Noah: Wikipedia (commons) versus Psyche (cathedral) - people are now working on trying to automate the extraction of "knowledge" from Wikipedia. Nova has seen a lot of holes in Psyche.

Noah: voice will not be the end-all, be-all
Barney: we will see voice augmenting other issues, where ATMs helped augment banking.

Barney is discussing that managing user-expectations on services - what the system can do, can not do. If you apply to ideal, you will be disappointed. If you apply to current, then you will be much happier.

Nova: people do not mind making mistakes, but do not like when apps make mistakes for you. Tagging, blogging - all about mistakes.

Web is a fileserver, desktop is the fileserver - Oracle wants to be the data structure. Semantic web is trying to forward RDF - RDF is a lot simpler than a relational database structure. Just a list. Nice, simple, light-weight data-structure. WinFS - Microsoft was trying to build a database, they could recover, but not right now. Maybe later. Google is certainly heavily pushing that. Especially in a mobile world - you will need remove accessible services. The question: how relevant is the desktop?

Barney: if we had a U-DB-RI, then yes we could. But until then, no. Paper on the website about this topic.

Describe something that having the WWDB?
Barney: handling travel issues is *very interesting* - complex constraints, interactive is very interesting. Web DB will not work unless...

Nova; a better form of collective intelligence. We are already highly fragments. Organizations have pockets of inteligence, but are also very stupid at times. When we are adding metadata - how reasoning can be published as knowledge is being published. As the knowledge and the expertise become virtualized, we will get higher forms of AI. The combination of large groups of human beings, with large groups of data and reasonings. Entering the era of "groupminds" - groups of people will operate more intelligently. Groups will act more intelligence that is greater than the parts which has an intelligence that is derived from the interactions of the humans and the interface with the applications. We will become more like "social insects" - the whole will have intelligence greater than the parts.

If google is the new Microsoft, will google provide the semantic web for us? How much is google the new Microsoft in your world?

Barney: google is the NEW Microsoft. But we are talking about a whole new architecture of innovation. What will the new players apply their energies to and solve new problems. Challenge to google: attraction to improve advertising revenue versus innovation that could have ahigh-risk, high-beta. Look at how google has changed the interface (not much) whereas Microsft and Ask has. Big companies have difficulties in changing at times, but do not bet against the bug guys.

Nova: google has the $$ and expertise, but culturally - they won't. They are primarily a statistic approach, whereas the semantic web is all about linguistics and meaning.


New technology: Sparkle (RDF) - will take a bit of time (1yr or 2)