Creating the next phase of entrepreneurial capital

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I have written and been quoted many times before on the rise of a new layer of capital markets and the segmentation of venture capital. Venture capital certainly will continue to play an important role in years to come, but many major variations on the current model will emerge. One of the most important drivers of change is the far lower capital-intensity of web and technology businesses. With powerful development platforms, ready access to global talent, and speed to market being of the essence, many ventures can get going with minimal capital. The proliferation of less-capitalized companies has been a feature of the entrepreneurial landscape over the last year, supported by a slow drying up of capital from venture firms.

In today’s New York Times an article titled A New Kind of Venture Capitalist Makes Small Bets on Young Firms focuses on Union Square Ventures and in particular Fred Wilson, the new superstar of web VCs. The piece starts out by describing how Etsy, now the leading crafts marketplace, was delighted in Union Square Ventures to find a VC firm willing to take just a 5 percent stake in the company. Most VC firms demand at least 20%, and usually seek strong or dominant influence on the company’s strategy.

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Now a major trend: Information visualization for everyone

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New York Times has a nice article on the collaborative information visualization tool Many Eyes. I wrote about Many Eyes in a post titled the magic of data visualization for everyone when the site was originally launched in January 2007. My post began:

Every day I am amazed afresh by the transformative power of the Web. Today I have discovered Many Eyes, a site hosted by IBM’s AlphaWorks. It combines open participation with a wonderful set of visualization tools. As such anyone can upload data sets, and then create sophisticated visual representations of those data sets, including scatterplots, tree maps, histograms, bubble diagrams, network maps and far more. Anyone can then either reuse the data sets, create new visualizations, add comments, or blog about the visualizations.

The basic functionality of the site hasn’t changed much since the launch, though it’s great to see not only that it’s being used extensively, but also getting significant attention and being used in new and unexpected ways.

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Want to make sense of the latest political speech? Use the Wordle visualization tool on Many Eyes to pull out the themes, as in the representation above of Sarah Palin’s self-introduction as McCain’s running mate.

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Renai LeMay’s ZDNet blog increasing coverage of Australian start-ups

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The flourishing Australian start-up scene is about to get yet more coverage. Renai LeMay, having returned to CNET (now CBS Interactive) as News Editor from a stint at the Australian Financial Review, has set up Bootstrappr, a blog covering Australian start-ups.

Below I have put his guide to getting coverage on his blog – an extremely rare instance where I respond to a request for coverage, since it’s in a good cause :-)

So far excellent coverage of the Australian start-up scene has been provided by Vishal Sharma’s startup blog. I was one of the judges on his Startups Carnival earlier this year. Vishal has also just announced he is considering writing a book on Australian start-ups, which I think is an excellent idea.

Of course I also compile the annual Top 100 Australian Web 2.0 Applications list, which appeared in BRW this year, and which won’t appear again until around May.

Just the last 3-6 months have seen a real shift in technology entrepreneurship in Australia – there is far more activity and a higher level of sophistication. It’s great to see.

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Four great visual representations of the social media and Web 2.0 landscape

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People often ask me how I keep track of everything that’s going on in Web 2.0 and social media and make sense of it all. The most important single tool for me is creating frameworks. The many frameworks I create (e.g. Future of Media Lifecycle, Future of Media Strategy, Trend Map 2007+ (with Richard Watson) etc. etc.) are all primarily to help me organize in my mind what’s going on. They then allow me to readily understand new developments as they emerge and how they fit into the landscape.

The release of the Conversation Prism last week made me think it’s worth providing a quick review of visual frameworks for the social media landscape.

The Conversation Prism is intended to evolve over time based on changes in both companies andchannels, which is a great idea, given the other landscapes below are static, and my framework in particular is ageing and needs rework. Another cool idea would be to provide animated frameworks that show the development and disappearance of different companies over time.

Recently I have been trying to make sense of some of the recent changes in the landscape, particularly about how the primary platform is shifting from the social network to distributed conversation. Even before the Conversation Prism came out I had decided to work on a new framework that will incorporate my latest thinking on this – hopefully out in the next couple of months!

Here are the four most interesting landscapes of companies in the social media world that I’ve come across.

Conversation Prism (August 2008) – Brian Solis and Jesse Thomas.

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Will venture capital keep flowing and when will new exits appear?

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I visited several venture capital firms in Silicon Valley this week and also met the CEOs of a number of VC-funded companies. Not surprisingly, much of the talk was about the climate and outlook for venture capital, which is the spigot from which much of Silicon Valley drinks.

The MoneyTree Survey of venture capital, summarized in GigaOm , shows that total VC investments in the second quarter were basically flat over the last year or so, however with a slight continuing decline in early-stage investments. One of the key features is that late-stage investments are accumulating as exits become more difficult. IPOs had already dried up before the more recent stockmarket downturn, and now the tighter constraints on capital across the economy mean that trade exits are also falling off.

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Source: MoneyTree via GigaOm

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Picking the future of Microsoft

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Microsoft’s withdrawal from its bid for Yahoo! has hardly clarified the the tech landscape. In fact it has made the shape of the industry far more uncertain, as Microsoft mulls moves to shore up its future.

Microsoft is one of the most financially successful companies on the planet. It anticipates operating income this year of over $26 billion, maintaining strong growth from the last few years (just $9 billion in 2004), making it arguably stronger than other highly profitable companies in financial services and oil, which have more inconsistent incomes. However their success is founded on operating systems and client-installed office productivity software. Online services account for around 5% of their revenues, and entertainment 12%. There is no question that their core revenue is under attack. The summary of the challenge is “lower cost alternatives”, including online software and services, and open source.

So what will Microsoft do? The latest rumor is that Microsoft intends to buy Yahoo!’s search business, then buy Facebook for $15 to $20 billion. This is highly credible, though gossip is rife. Unquestionably this would give Microsoft a very strong position, both in the online advertising business, and also in leveraging what is now the dominant social network platform. In addition, the total price would be less than what Microsoft was prepared to pay for Yahoo! as a whole, keeping some of its financial powder dry.

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MySpace embraces “data availability” – a major step forward to the Wide Open Web

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MySpace has just announced its Data Availability program, which includes adoption of a range of DataPortability standards, and data sharing with Ebay, Yahoo, and Twitter. Detailed coverage of this at TechCrunch, ReadWriteWeb, VentureBeat, and many others (see Techmeme). At the same time, MySpace has joined Google, Facebook, Microsoft, LinkedIn, Digg and others on the DataPortability project. DataPortability notes:

While the participation and endorsement of large vendors such as MySpace in the DataPortability project is a key part of our overall goals of industry wide user-centric data portability, we’d like to re-iterate that the project is an open, grass-roots initiative. This means that individuals, startups and medium scale companies are just as welcome to join the process and have just as much capacity to influence or even lead the discussions and the outcomes.

An important part of the background to this is that Ben Metcalfe is Director of Engineering for the MySpace Platform. Ben has played an important role in getting MySpace to understand the importance of an open approach (see his thoughts on this announcement), drawing on his experience in leading the BBC’s developer platform, and his existing involvement with DataPortability. I caught up with Ben recently in San Francisco and we discussed where data portability is going. Absolutely the leadership of the large players is fundamental to driving this.

This year there will be many announcements of this kind, but this is a particularly important one, both through the visibility of the announcement, and even more importantly the value of what it enables. The millions who are using multiple platforms such as MySpace, Yahoo, Twitter and so on will be able to bring together their activities, and clearly see that we are transcending the closed web. People will begin to understand that the natural format of the web is open, with our activities naturally flowing across applications. Expectations will heighten, and the already rapid pace towards the Wide Open Web will accelerate.

To win in an open world Flash is becoming even more open – the result will be applications that reach every platform

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Adobe has just announced the Open Screen Project, a broad-based initiative to push Flash’s reach across all digital platforms, including mobile and television. Supporters include BBC, Cisco, Motorola, MTV, Nokia, Samsung, Sony Ericsson, and a host of other consumer technology, content, and mobile companies.

When Living Networks was launched in 2002, I wrote about how Macromedia (which has since been acquired by Adobe) used an open strategy to make Flash a standard in rich media on the web:

Whenever you go to a website and are presented with a snazzy animated introduction, you are seeing Macromedia Flash at work. The free Flash Player software that enables people to view these animations is now running on around 97% of PCs that are connected to the Internet. At the outset, Macromedia had a clear-cut challenge. Web surfers would only download Flash Player if there were interesting websites using Flash, while website designers would only use Flash if a sufficient proportion of their target audience had installed the software. Macromedia makes its money by selling the software for developers to create Flash files, but to make it a viable market it had to give away the Flash Player software.

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The next phase of the Internet will be about creating value from the WOW (Wide Open Web)

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So far the primary theme of the Web 2.0 Expo in San Francisco seems to be openness and APIs (Application Programming Interfaces), which I defined in our Web 2.0 Framework as “A defined interface to a computer application or database that allows access by other applications.” Web companies new and old are announcing APIs that provide access to the data that resides on their site.

ReadWriteWeb writes about the next frontier after ubiquitous APIs, an interview of Web 2.0 keynoter Max Levchin focuses on the implications of APIs on every application, and Tim O’Reilly in his keynote says that the paradox is that applications built on open, decentralized networks are leading to new concentrations of power.

In the last weeks I’ve been looking across what is available on APIs, and it is quite extraordinary. Driven significantly by the impetus of Google’s leadership, over the last couple of years the industry has taken a massive turn towards openness, making it hard to run online initiatives any other way.

I am finding myself completely staggered by the possibilities. There are so many ways that this vast trove of information can be used in new and innovative applications. ReadWriteWeb’s article provides a list of the ways APIs can be used. Some of the promising areas I see include:

Content aggregation. Despite the existing proliferation of blog and feed aggregators, there are many more opportunities to create highly specialized content aggregators, bringing together the web’s most relevant content in niche domains.

Collaborative filtering. The richness of information about people’s content preferences available from something like FriendFeed (or the individual feeds that go into it) make it possible to correlate taste across media and genres.

Latent social networks: Suggesting friends or connections based not just on profile or musical tastes, but an integrated view of preferences and activities. This could be particularly powerful in dating.

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Is one web ratings black box better than another black box? Why should we believe Alexa is better?

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Alexa, the Amazon.com subsidiarywhich provides website traffic and rankings information, has just announced it has revamped its rankings system. Since I have the Alexa toolbar installed in my browser, which shows the ranking of whichever website you’re currently looking at, I actually noticed this morning that the rankings were changing. Techcrunch reports that the change has downrated many technology blogs. It has actually increased the ranking for this blog by about one third.

However the announcement gives absolutely no information on how the ranking is calculated or the sources used. There are bold, completely unsubstantiated claims:

– MORE SOURCES: Alexa rankings are now based on more sources of data to give a better indicator of website popularity

– BETTER RANKINGS: The rankings are an even better indication of website popularity due to new and improved algorithms

Alexa has been much criticized for the inaccuracy of its rankings system, which until now has relied entirely on picking up the web browsing activities of those who have installed its toolbar. This is a skewed population, and there are various ways to game the system.

While I don’t necessarily expect Alexa to reveal its exact algorithms, I think people would be far more likely to have confidence in its measures if it gave at least some indication of what the new sources are, or what they look like, or what changes to the algorithm were made. In fact we know less now about how the Alexa rankings are compiled than we did before. Alexa think they’re better. I guess I think they’re better, since I’m ranked higher. But why should anyone else believe they’re better? Tell us please, oh Alexa, just something that supports your claims that Alexa is improved…