Blog Archives

Ed Sim on successful offshoring

Whereas it was a must until a year ago, offshoring developments to India has generated enough of its fair share of operational issues to make startup teams and VCs much more cautious. Beyond local issues – like the difficulty of hiring and keeping talent, and increasing wages – getting the coordination, leadership and motivation aspects are challenging.

Ed Sim’s post comes a propos as he relates to a successful offshoring operated by one of his companies. Some key points:

Offshore interesting and motivating projects Develop local leadership talent Hire, train and manage local staff with a long term view in mind

At the same time, SAP is going to be looking to alternatives to India because of rising costs.

The Circle of Envy

You can read the long version of the story on Jeff Bussgang’s blog, but in short, the “Circle of Envy” in Private Equity is spelled out the following way:

Entrepreneurs envy VCs b/c they get to make a lot of money collecting management fees, and not working too hard to earn their salary. VCs envy Buyout investors, who get to manage much (much) larger funds with similarly large management fees to enjoy, and an even easier life. Buyout investors envy hedge fund managers who get to cash in their carried interest every year, and who enjoy quicker path to liquidity for their investments. Think about it: getting VC-like carry (typically 20%) to play in the public market. Hedgies envy… entrepreneurs – who get to build companies serially every 5/6 years, make a ton of money and can take long breaks in between startups. Entrepreneurs envy… you get it.

An amusing read, with a few real traits. … Read more »

Developing and managing Hotmail

This interview has already been picked up and commented upon (and /.’ed), but if you have not yet taken a look, I recommend reading this ACM piece on Hotmail, and what it means to manage one of the largest services of the web. Hotmail runs on 10,000 servers and involves several petabytes of storage (i.e millions of gigabytes) and serves, according to this Wikipedia article, 221M users who are operating billions of e-mail transactions daily. It is operated by 100 sysadmins, which is not that large a team.

Phil Smoot, the PM in charge of Hotmail product development out of the Microsoft Silicon Valley campus, shares a number of insights – from which I noted the following points regarding automation, versionning, capacity planning, impact analysis and QA:

QA is a challenge in the sense that mimicking Internet loads on our QA lab machines is a hard engineering problem. The production site consists of hundreds of services … Read more »

The enterprise software market is shrinking – and old stars ain’t shining

I am off to CES in less than 3 hours, so I’ll make it quick: Bill Burnham has a series of great posts regarding the Internet and Enterprise software sectors of the public market, particularly:

Software IPOs: 2005 Year In Review Top 10 Worst Performing Software Stocks of 2005 Software Stock Update: 2005 Year In Review The Incredibly Shrinking Software Industry

In a nutshell, and I recommend taking a look at the compilation of data points and analysis work done by Bill: 4 software IPOs in 2005, a lot of Web 1.0 software darlings are in the list of worst performers for 2005, and the aggregate valuation of the Software sector has shrunk  by 10% in 2005 – to compare with a modest 1.4% growth of the Nasdaq and a nice uplift of 14.4% of the Internet sector.

Bill lists five reasons behind this systemic decrease of the sector, which does not look … Read more »

Check these references before making a hiring decision

Buddy Ed Sim just posted a useful note on the Importance of back channel reference checks. The person you are looking at hiring, or take money from, will volunteer contacts who will provide glowing reports about her/him. In order to get a more nuanced view (nobody’s perfect), you do want to find other references in or through your own network. Former colleagues are obviously the most natural sources, and in the case of a senior startup executive, former investors also fit the bill. Services helping with these “investigations” are obviously search engines, specialized databases like Zoominfo (which has an uneven quality of data and coverage) and LinkedIn (that has even developed a specific feature for that purpose).

As Ed states, it is critical to do a thorough job when going through these references, because like software bugs, fixing a mistake costs way more than avoiding one:

A wrong hiring decision for an early … Read more »

Ross Levinsohn interview at the Consumer Technology Ventures Conference

I spent a portion of the day at the Consumer Technology Ventures Conference today, catching the interview of Ross Levinsohn, the President of Fox Interactive Media (“FIM”) by Lee Gomes, from the Wall Street Journal.

NewsCorp’s re-entry in the Internet market was kicked off by Rupert Murdoch after Christmas 2004, and a summit of 85 top executives in February 2005. During this meeting, Murdoch’s team brainstormed about the threats and opportunities of taking a prominent position. Last May was when Ross presented a plan of actions – starting with the acquisition of MySpace and also involved investing in their FMI’s properties.

NewsCorp is focusing on companies built as a mix of content and communities. Ross mentions that Murdoch is "fearless" and ready to make bold moves, especially to enter new spaces in which they are not present. He also explains that he did not initially grasp the power of communities like MySpace, but he eventually came around and … Read more »

Paul Graham on the Venture Capital Squeeze – or will founders be able to get VC funding AND partially cash out ?

Paul Graham has a provocative suggestion in his post, “The Venture Capital Squeeze” [via Kevin Burton]: as they fund the working capital of a startup, VCs should consider acquiring a small portion of Founders’ equity in order to provide them with a (sometimes much needed) bit of cash. Paul’s thesis is that this would make “early take-out” offers from large companies less interesting:

Whatever they say, the reason founders are selling their companies early instead of doing Series A rounds is that they get paid up front. That first million is just worth so much more than the subsequent ones. If founders could sell a little stock early, they’d be happy to take VC money and bet the rest on a bigger outcome.

So why not let the founders have that first million, or at least half million? The VCs would get same number of shares for the money. So what if some of the money would go to … Read more »

Web 2.0: Top 10 Issues ?

Dion Hinchcliffe has posted a thoughtful piece on the issues he perceives with Web 2.0:

Excessive Hype Lack of Simple Definition  Aging Poster Children  Needing A Permaconnection Ajax as the Official Web 2.0 Experience Excessive Attention On The Technology  Really Bad Adherents  Blogging Instead of Doing Not Facing Hard Truths Adopting The Lightweight Creation Model Web 2.0 is too Silicon Valley focused (one commenter added)

Accepting the pragmatic fact that Web 2.0 is the new generation of the Web (the “Furrier definition”), #2 and #7 disappear.#1 and #8 are linked in sort of a virtuous circle. #4 is not an issue, it is good news – we need the next generation of the web to increase the penetration of broadband, as opposed to holding it back – Minitel anyone ? #3 is sort of natural: there are so many new services popping up all over the place that our attention is dispersed and noone service has made it to the … Read more »

David Beisel on Seven Questions Employees Should Ask Before Joining a Startup

David Beisel is bringing to us another great post in his Startups series: Seven Questions Employees Should Ask Before Joining a Startup.

As usual, very relevant and worth a read for anyone considering joining a startup. Amusingly, a friend of mine asked me the same question last night, as she interviewed today with the CEO of a young venture-backed company. I would add:

How is the company positioned in its ecosystem: client/users, partners/channels, competitors ? What are the 3 top reasons for clients/users to buy/use the company’s products/services ? How are our competitors funded ? If there is a major difference in stage or size of funding, enquire about the future financing strategy ? If the position is a senior one, ask to meet the VC/board members – if ever they were not part of the hiring process.

I had the pleasure to meet David face to face … Read more »

My first ZDNet column: Innovation 2.0

Recently, Dan Farber – the Editor in Chief of ZDNet – was kind enough to invite me to contribute to Between the Lines, the excellent ZDNet group blog. My inaugural post is now up: Innovation 2.0: Why Web 2.0 companies might have to flip to avoid being flopped, and I will be back every now and then.

Want the short version on Innovation 2.0 ?

Forget the innovator’s dilemna principle in the Web 2.0 world: established players (Google, Yahoo, Microsoft & al) are bringing in talents by hiring them away or acquiring their companies, and are playing catch up on new features and services at an unprecedented pace. The initial versions of what they produce are not always great and don’t really match startup products or services, but in a relatively short order, they get closer and closer. And since the “elephants in the room” know one thing – scale, they can intercept startups when these start facing scalability issues and … Read more »

Flying Song for the first time

Song is the low cost airline operation of Delta Airlines, sort of an in-house equivalent of Southwest Airlines or JetBlue from what I understand. I discovered the airline when shopping for tickets to fly to NYC for Blogon 2005: $292 for an SFO/JFK.

The airline flies single class Boeing 757 with comfortable leg room. Actually I am seating at an exit row and the leg room is *huge*. There is an entertainment system with 20 TV channels, pay per view movies at $5 a pop, games and a selection of a thousand-plus MP3 files.

You have to pay for the food which actually seems OK, and not too expensive, and only alcohol beverages are charged.

Staff is very friendly, with a jean and a cool flashy t-shirt (that matches the color of the cabin). Recorded safety instructions at the beginning of the flight are spoken by an Irish gal with a very thick local accent and Irish folk music playing in … Read more »

Merc: Silicon Valley losing its appeal ? Me: Nope.

According to this San Jose Mercury News piece, a Silicon Valley Leadership Group report ranks the region last among eight high-tech areas in quality of life.  The report, called “Daring To Compete: A Region-to-Region Reality Check,” will be officially released Wednesday. The leadership group compared Silicon Valley to Raleigh-Durham, N.C.; Fairfax, Va.; Boston; Seattle; Austin; Portland, Ore.; and San Diego.

According to the Merc, in the seven categories examined, Silicon Valley ranked no higher than six. When it came to housing affordability, only San Diego did worse. Some data points:

Raleigh-Durham ranks first among the eight regions overall, thanks to its low cost of housing, easy commutes, good schools, and low unemployment and taxes. While all the tech regions were hit hard by the downturn, Silicon Valley continues to struggle with the highest unemployment rate. While Silicon Valley eighth-grade students have … Read more »