Archives for 2006

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TiEcon 2006: Web 2.0 – Why Now?

Posted on May 16, 2006 ·

Liveblogging  Mike “TechCrunch”  Arrington‘s  Web 2.0 – Why Now? panel at TiEcon 2006.  (note: I am obviously publishing this, as well as other TiEcon posts after the Conference, but will only do very basic editing, and some linking, essentially posting my original notes.  My added comments appear in italics)

Panelists:

  • Manish Chandra: Founder, CEO Kaboodle,  5 jobs so far, started at Intel, then 4 startups
  • Emily Melton: Associate, Draper Fisher Jurvetson. Left DFJ in 2002, re-joined 2005
  • Kevin Rose, Founder,  Digg. Prior to that Hosted national TV program, TechTV
  • Tony Conrad, Founder, CEO Sphere, also Investor
  • Jeff Nolan, SAP , Apollo Group,the  “Attack Oracle” team (he actually has this on his business card), until recently with SAP Ventures, top blogger.

Mike:  For warmup, let’s talk about the individual companies. Kaboodle is basically bookmarking, social shopping. Statistics show that 80% of all Internet activity is research, not transactions. Kaboodle does not close deals, trying to make money on research side. How did Manish come to the idea?

Manish: Was remodeling home, a lot of pain to find stuff – hence the idea (do all consumer sites really start based on personal experience, or are these just sellable stories?) 

Emily: Since she is a VC, will talk about a portfolio company that she’s a Board Member of: Tagworld.  Mike: That’s a  little startup that’s going up against MySpace and others – how can it have any chances? (The little guy vs. big guy issue came up in the morning session as well) and Emily’s reaction is similar: people want to  have presence on the web, relationships ..etc – Tagworld provides tools.

Mike: Huge fan of  Digg:.  50% of TechCrunch’s traffic comes from digg. TechCrunch has significant traffic on its own, but when one of his articles gets digged, the combined traffic typically brings startup sites down.  Kevin: It started as an experiment giving power back to community. Coolness is not determined by editors like it is on Slashdot, but by member votes – “diggs”.  It’s also a social application, digging an item also bookmarks it to your name, you can share, set up friends…etc. 

Tony: Sphere, the new blog search engine. Previously he invested in Oddpost, (acquired by Yahoo, fastest return of all his investments), that’s when idea started. He saw when celebrity bloggers like  John Battelle and Dave Viner blogged about them, their traffic spiked: that was his “aha” moment re. blog-power.  Blog search engines typically bring posts in reverse chronological order… trying to dig up interesting stuff using a more intelligent algorithm.

Jeff didn’t get to talk about his company (SAP), since it’s not exactly a startup or a Web 2.0 🙂 However, previously as VC he backed several startups and in his current role (or outside that role?) he is SAP’s internal Web 2.0 evangelist.

After the warmup round Mike moved on to audience questions.

Question to Mike on criteria for picking what gets covered in TechCrunch.  –

 Mike: anything new, exciting Web 2.0-related.  What is Web 2.0?  He has a user-focused definition. Web 2.0 is about conversation.   In the years after the crash the Internet did not “go away”,  innovation continued behind the scenes. Joe Kraus’s famous quote about how cheap it is to build a company (new cheap tools).

Kevin: Spent $99 on a shared server, used Open Source stuff … total pre-launch cost for Digg was less than $1K. 

Jeff: LAMP stack important.  Php, Python powerful. Tension  between what developers built and what users want resolves itself in the increasing number of  mashups.

Emily: There is a major mindset-change. everyone has access to computers, pdas, cellphones .etc. Even the kids have web presence.  It’s become a lot easier to self-publish and even  build applications.

Question: Is Web 2.0 real or a bomb waiting to go off?

Mike: There is real innovation.   Web services, mashups. 

Jeff:  Web 2.0 is not really new, it’s the realization of everything that’s been happening for 5 years.  Barrier of entry for startups is low.

Manish: Closed platforms are out of fashion , the trend to opening  up leads to  mashups. Power goes back to the individual. People create new shopping pages of their liking on Kaboodle.  This is like walking into a store and rearranging the shelves the way we want it.

Tony:  Brings up the example of the Chicago Crime Scenes mashup. Nice application, hugely popular, even useful, but likely not a business.  Business opportunities are for those that open up their API.  The Blog space brings about businesses (e.g Technorati) with significant core IP, but most mashups are just nice presentation layers without core IP.

Question:  How to market?  Importance of early adopters? 

Mike: refers to the Same 50K people meme – echo chamber.  TechCrunch readers themselves often  re-blog his posts. They are all early adopters, which is demonstrated by  the browser stats:  65% use FireFox.  

Emily: VC’s also check out TechCrunched applications – then forget them, don’t come back (I have positive personal experience on this, when VC’s who earlier heard about SQLFusion  came back with renews interest after the Open Source Fusion beta.  So it does not hurt to to get on VC’s “keep an eye on” list).  Emily: Simply quoting high registration numbers is not compelling to her – repeat user base is.

Manish: Blogs can create  good initial exposure, then incresingly use  SEO, SEM… early days 6-7% was organic search (google, yahoo), now it is 20%.  Real viral effect occurs  when people start marketing your product.

Tony: Despite the criticism, the early adopter crowd makes sense, after all we’re in tech businesses, of course we attract the geek crowd… like if you’re in the sailing business, you go after sailing enthusiasts.

Mike: Asking Panel for example of successful marketing that gets beyond early adopters.

Tony: Flickr is definitely way beyond the early adopter crowd.  Mike:  Flickr is geeky,  overall it has a lot less users  than Yahoo photos (even though Yahoo acquired Flicker, they are treated as two separate domains for now), or even Easyshare by Kodak. 

Short debate between Tony , Jeff, Mike on the role /importance of early adopters.  Tony : blogging needs to get into topics that attract the mainstream, be it the Chicago Cubs, christianity .. whatever.

Manish: Skype forced adoption by uncles & aunts in Chicago, Ohio …etc. since it has a very attractive value proposition compared to expensive telephone services.

Jeff: many companies are building features ONLY for the early adopters – they will not transition to mass market, will not become businesses, just features.

Kevin: Digg has 9 million page views, 1 million unique users a day, with $0 spent on marketing.  He still thinks they are early adopters, the site hasn’t hit mainstream yet.

Tony : Sphere received 1 million pageviews in the first week, from  136K unique users. 

Jeff: Blogs are key in early adoption:  Even if you’re not a techie you will  search on a car, a new TV ….etc,  you’ll get blog entries mixed with other search results (My personal experience confirms this, blogs even penetrated news at “elite” positions).

Tony: Bloggers have huge influence.  Rob Hof is here in the audience, he is the  Silicon Valley bureau chief for Business Week and also writes a personal blog.  Jeff: Matt Marshall is here, too – I don’t read the Merc anymore, but SiliconBeat.

Manish: Print media still has bigger effect. He suggests Web 2.0 companies should look at both print media and blogs for marketing.

Mike: The New York Times is crap.  .

Question: Can open API’s can bite you in the ass? (pardon my French, I’m just quoting here)  Giving away your best stuff, people won’t come back to your site – i.e. Google or Craigslist if the mashup is better.

Manish : Open API’s bring huge adoption.  Get users first then figure out how to make money.

Mike: At the same time ate least you can’t have negative margin – this could be Youtube’s problem.  There are essentially three types of business models:

  • advertising revenues
  • fees
  • no revenues at all

Tony: There were debates in the early days about email as a business, since it’s supposed to be free. But would Yahoo exists without email?

Jeff on network effect: Flickr, del.icio.us are used in a lot of other applications..

Question:  Is the barrier of entry different between Web 1.0 and Web 2.0? 

Mike: It’s become easy to to recreate applications.   I could hire offshore programmers and recreate Digg cheaply (especially considering Kevin’s own statement that it cost less then $1K to launch).  This is where the network effect and being first to market becomes important.  We need to understand how network effect and first to market are related.  Tony has the 8th or 9nth search engine (Sphere), Emily’s Tagworld is also a “latecomer” yet they have a chance to make it, they are not dependent on the network efffect of the huge existing user base, and they have new IP.  Digg is a different story, it’s not core IP, it’s all about the huge network effect.

Kevin: There are too many copycats doing he same things…like online notepads… Disagreeing with Mike, does not see value in being a me-too, startup should do new things.

Out of time, (session got cut short due to security for the Schwarzenegger keynote) Mike asked all panelists to name their favorite Web 2.0 companies (except their own).  The list:

Flickr, Myspcae, Digg, Digg Spy, (yes it is part of Digg, but Emily made the point of specifically listing Spy) TechCrunch, Youtube, Akismet, WordPress, Del.ici.us, Riya, Skype.

If you were a panelist /participant in the discussion and I misinterpreted you, please feel free to correct / expand on your ideas in the form of comments.  Thanks.

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Filed Under: Bay Area, Blogging, Business, Marketing / PR, Open Source, Software, Startups, Technology ·
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SVASE VC Breakfast with Will Price, Blogger, Hummer Winblad Principal

Posted on May 15, 2006 ·

The SVASE  VC Breakfast Club session I’ll be moderating on Thursday, May 25th in San Francisco will be somewhat exceptional: this will be the first time pitching entrepreneurs get to know the VC closely prior to the event.  That’s because Will Price, Principal at Hummer Winblad Venture Partners is an active blogger himself.  His recent post Questions to Ask is a must-read – but I really don’t want  to pick one post only: if you plan to attend the session, do yourself a favor and check out his blog (and if you don’t come to our breakfast, it’s still worth reading)

That said, my standard pitch:  The VC Breakfast is an informal round-table where up to 10 Entrepreneurs get to deliver a pitch, then answer questions and get critiqued by a VC Partner. We’ve had VC’s from Draper Fisher, Hummer Winblad, Kleiner Perkins, Mayfield, Norwest,  Trinity, Mohr Davidow, Emergence Capital …etc.

These sessions are an incredible opportunity for Entrepreneurs, most of whom would probably have a hard time getting through the door to a VC Partners.   Since I’ve been through quite a few of these sessions, both as Entrepreneur and Moderator, let me share a few thoughts:

       

  • It’s a pressure-free environment, with no Powerpoint presentations, Business Plans…etc,  just casual conversation – but it does not mean you should come unprepared!   
  • Bring an Executive Summary –  some VC’s like it, others don’t.   
  • Follow a structure, don’t just talk freely about what you would like to do, or even worse, spend all your time describing the problem, without addressing what your solution is.   
  • Don’t forget “small things” like the Team, Product, Market..etc.   
  • It would not hurt to mention how much you are looking for, and how you would use the funds…   
  • Write down and practice your pitch, be ready to deliver a compelling story in 5 minutes.  You may have more time, but believe me, whatever your practice time was, when you are on the spot, you will likely take twice as long to deliver your story.   
  • Last, but not least, please be on time!  I am not kidding… some of you know why I have to even bring this up. As a matter of fact, our host, Deloitte & Touche specifically asked participants to allocate an extra 5 minutes to get through building security.

For event details check the  Zvents post  and remember to click through to register – there are only 10 slots and this one will sell out early!

See you there! Zbutton

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Filed Under: Bay Area, Blogging, Business, Enterprise Software, SaaS, Social Networking, Software, Startups ·
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TiEcon 2006: From 0 to 60 : Ramp it Up with Low Bucks

Posted on May 14, 2006 ·

Liveblogging  Jeff Clavier’s bootsrapping panel at TiEcon 2006.  (note: I am obviously publishing this, as well as other TiEcon posts the day after, but will only do very basic editing, and some linking, essentially posting my original notes)

Panelists:

David Hornik: best way to grow a company is without VC money – now that’s something to hear a VC say…

Jeff Clavier: Agrees, but sometimes  competitors force the entrepreneur to want to accelerate business which in turn leads to a need for VC investment.  

David adds another case when you need VC investment, citing a  payroll company he invested in: in that type of business customers expect a robust infrastructure, not just a  program, and building out the infrastructure is capital intensive.

Toni:  Background:  Oddpost, Yahoo,  Automattic – this being his 4th startup now, and he’s just recently “switched sides” to True Ventures.   Classic bootstrapping worked for him better than VC funding.  Too much VC investment can create a “fat model”, entrepreneurs may find themselves trying to use VC money to “create a market” where there is none.  Oddpost – could not raise money,  since  everyone thought they were crazy to be a “me-too” on the crowded email market.  They got some corporate customers (licencing deals) , eventually took VC money, but ended up not touching it, since Yahoo acquired them  4 months after the funding.   At Automattic they raised intentionally little, could have raised more, but does not favor that model.  Organic growth, go find customers, start revenue flow works better. 

Jeff:  Automattic is  going up against well-funded blogging companies, why is the “lean model” better?

Tony: WordPress is Open Source, combine that with the Silicon Valley effect: start an Open Source project, people will find you.  Want to be lean, organic, likes the craigslist approach: 15-8 people run a huge service.   Jeff Clavier compares them to MySQL’s Open Source – viral growth effect.   Tony: MySQL goes after the corporate market, it  needs Marketing,  while we have a consumer product, and our products are  blog-related, and bloggers are natural marketers.

Jeff: Often the original Founder is an engineer who needs a business savvy partner, or at least advisor, how do you get started in finding the right business guy?

David:  Teaches a class on IP at Stanford B-school.  Recently saw a flyer, showing the original Sun Founding Team.  It said: “Do you wanna be like them?  I am an engineer… looking for business partner”  Cool poster, but generally it’s safer to find them “organically”, living your life, networking, having coffee.  
                      (Warning: this is the Commercial: I am   available )

Toni: more business people are looking for technical parners then the other way around, they tend to be better at networking, while the techies are sitting at home writing code.

Fred Durham:  Don’t start by looking for a patner. Go find customers first before partners, since you’ll never get it right on your own without customers. 

Tim Tuttle: Found his first business partner through determined search on job boards. 

After the warmup / introductory questions Jeff quickly switched to taking questions from the audience.

Question on picking the right business, focus on one out of several options:

Toni: Early in life he was a trainee at Autodesk.  They had 9 original Founders, all engineers, all with their own ideas. Since they could not predict which one would take off, they pursued all for a while, eventually dropping all but on.  But generally it’s good to have a singular focus.

Jeff, as moderator demonstrates the importance of focus when he forces the next questioner to pick only one of two questions he wanted to ask.  After all, that’s what entrepreneurs have to do, too.
Question: How much money/equity to give away to ?   

David: Equity is a zero-sum game.  Early stage entrepreneur normally forgets this,tends to give away too much.  Raising money is a market mechanism  If the market is one, i.e. only one source is willing to fund you, that one source will determin the price.  Price of equity is  more easily determined in an investment situation then with partners.  What’s the value of participation? Depends… Give away as little equity as possible without feeling a jerk.

Fred: interrupts: Give away less than that, it’s  OK to feel a jerk. 

Kanwal: Don’t give partners / employees what you feel they’re worth  upfront, you can always do that later.

Tim: Don’t take money from friends.  Business and Friendship rarely match. (Oops, I know .. been there, done that...)

Question:  When do you give up pursuing a dead business? 

Fred: I failed many times, walked away relatively unharmed. Advice: run early. Get on a different horse. 

Tim: When you and the children need  a tent to live in, it’s a pretty good infication that it’s time to give up.

Question:  Specifically to Tim and Fred. How did you get initial traction once you have the product?

Tim: Raised little money, spent most of it on viral marketing.. 

Fred: Co-founder sent 100 invitations (spam) to random webmasters.  He got 20% response rate.

David:  A portfolio-company used quizzes. 

Toni : design product to be word-of-mouth compatible.

Question:  Entrepreneur ended up “in the tent” in 2002 starting again now.  Trying to release little bits of software to get customer feedback instead of writing plans. Is that a good approach?

Tony: Just be careful that the core is polished enough to put in front of  people without turning them off.

David: Don’t ask me as a VC what to do.. If your VC knows more about your business than you do, than one of you is an idiot.

Fred: Switching cost is huge, don’t easily jump to the next more attractive idea.

Question:  Inventor of ready-to-launch web application to save marriages. (huge audience laughter, apparently the entrepreneur crowd is in need of being saved….  Hey, if I am not married, what can you do for me?)  Finalist of Berkeley Business Plan Competition..  He just needs a VP Marketing to launch, but listening here made him realise he should be hunting for a CEO (Wow!).

David: You don’t want my money NOW, get it out, launch, create buzz, displayt ads – you will get called by VC’s.

Toni: You don’t need a VP Marketing to launch a product. You will need one later to take it above $10M.

Question on chances of a little startup vs. established players.

Kanwal  Uses Cisco as example: they won’t pay

attention until you’re large, then buy you. 

Tim: Truveo: big guys

wanted to build better video search, but they couldn’t, so they bought us.   Now that I am

part of a big com I understand why.  (Audience laughter…. someone on the panel remarks Tim probably missed  AOL’s PR training )

Question:  Legal issues., when to involve lawyers.

David: Cites strory of a great business, raised big interest in the Valley.  Later it turned out the Founder built the products on his employer’s computer and time – BAAAAD.  Advice: get lawywers involved early – try to find ones who are excited about the business and pre-fund their contribution until you can pay later.

Tim:  Strongly disagree, lawyers are a pain in the ass, put it off as long as you can.  

I don’t remember the context but two notable quotes from Fred:

“The only thing you want to do is to separate people from their money.”

“Nothing will focus your mind razor sharp better than losing money, especially your own”

(This post is also published at The Small Business Blog where I am a guest-blogger).

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Filed Under: Bay Area, Business, Startups ·
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TieCon 2006: John Doerr, VC, Enviromentalist, GreenTech Evangelist

Posted on May 13, 2006 ·

(Updated)
I’m at TieCon 2006 at the Santa Clara Convention Center.  Trying to park was a nightmare: 15 minutes circling in the parking structure.   Last time I was here for Software 2006, I parked right next to the stairs. Finally got in, sitting in the back of the conference room (power source!), flip my laptop on, and Voila!  – free wi-fi available… as it should be (at Software 2006 it cost $26/day)

Michael Malone,  introducing John Doerr just made the same comment – he parked in Great America’s overflow parking …. 3,000+ participants. Entrepreneurial spirit is definitely back.

Raw notes from the discussion with John Doerr of Kleiner Perkins Caufield and Byers, a Silicon Valley VC Legend:

If you’re thinking of coming to KP just for money, it’s expensive: don’t come. Come for the networking resources, experience. 

This being TiE,  a few India-pecific questions. Response: Kleiner backed 100 companies over the past 4 years and half of those have Indian leadership. They are passionate, have a sense of wanting to give back to India and the world.  KP is also active in in India, which happens to produce the largest pool of engineering pool in he world, English is spoken and it’s a democracy. KP made two recent investments in India.

New subject:  Technology –  what’s coming next?   John Doerr:  Biology.  This is what he really wants to talk about, now he gets passionate.  He talks about soon-to-debut   “Inconvenient Truth”   and shows a few powerful slides about Greenland shrinking, due to ice melt.  If Greenland melted all, the oceans would  rise by 20 feet. Just how much is that? – we get a feel when he shows a few slides of the Bay Area – oops, there goes the convention center we’re in…

So what can we do about it: need to reduce carbon emission. Opportunity for engineers, innovators, politicians: get efficient, produce growth requiring less energy, less pollution.

Kleiner Perkins has invested in 7 stealth GreenTech companies in the past 5 years. – $57M total invested in those.  Huge potential business, ROI eventually may be bigger than “traditional” tech. areas, but wait for payback longer.

Tom “World is Flat”  Friedman’s next book, Green is the New Red-White-blue:  the current biggest enemy facing this country is not Islamism, Communism, or other such ideologies, but Petrolism.  We need petrol tax to encourage getting energy efficient.  It takes guts, not for the “girlie man”.  (Timely quote from the Gubernator due to appear on a panel this afternoon.)

We’ve had no major innovation in energy for the past 30 years.  China has higher automotive emission standards than the USA.  If India and China develops the way the US has, we’re choking the world. We need to innovate.

Michael Malone: “you’re working with your heart, not your mind”. John Doerr: no, this will be the largest economic opportunity in the world.

On to the issue of the Pandemic Fly: Something of this magnitude happens 2-3 times in a century.  Shows some slides of the devastation of the Spanish Flu.  What can entrepreneurs do?  Improve surveillance and diagnostics. KP backed startups working on inexpensive diagnostic devices, and vaccine expected to be 10 times more effective than Tamiflu.  He is calling for backing entrepreneurs in this area.  Distribution, pricing: give it away free or cheap in the developing world, sell it in the developed world..

On Social Entrereneurship:  double bottom line. Build a sustainable operation and eliminate poverty.  John Doerr has some more personal involvement in this area,  not through Kleiner.

Politics: Silicon Valley traditionally was doing best by staying out of politics.  John sees politics playing a bigger role. Advocate for policies that reduce the climate crisis and increase energy innovation.”   Let’s have a President who will make “green ” a priority.

Social Entrepreneurs build should build scalable and sustainable businesses, but they don’t have to be profitable, just self-sustaining.  Do you want to built an inconsequential Enterprise Software company or do something big?   (This reminds me of Steve Jobs famous challenge to John Sculley: “Do you want to spend the rest of your life selling sugared water, or do you want to change the world?”)

In conclusion, John Doerr sums up what he is passionate about: “I want to revolutionize the energy industry, make investments in : fuel cell, solar, bio-fuels.

John’s call for action to the audience: If you’d like a copy of these slides, email me the titles of your  three favorite books.

References:

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Filed Under: Bay Area, Business, Politics, Social Networking, Startups, Technology ·
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Missing the Old TechCrunch

Posted on May 13, 2006 ·

This is obviously a matter of taste, but I preferred the old TechCrunch look, Frederico Oliveira’s design: cleaner, easier on the eye.  I find the  new, greener pastures a bit harsh, too vibrant.   Apparently so do the overwhelming majority of readers, based on a vote count of 256, 72% prefer the old site.   This is a static pic here, but if you click through, you can vote yourself, which then allows you to see the dynamic vote-count.  The poll is run by Ouriel Ohayon, the editor of the French TechCrunch which still appears to follow the old design – and so does Mike Arrington’s sidekick blog, CrunchNotes.

I understand the need for more advertising space though…

Update (5/13):  This stirred up quite a blog-storm.  Here’s an interesting comment: “Now, Techcrunch is all web 2.0, which is supposed to be about users, conversations and listening amongst other things. So given that Poll you link to above, I wonder: WIll Techcrunch listen to it’s audience?“

Well, this will certainly be interesting … will Mike follow the Gold standard, or … ?

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Filed Under: Blogging ·
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Jack Bauer’s IT Adventure

Posted on May 12, 2006 ·

No guns, explosives … Jack, you’re losing your edge! 

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Filed Under: Humor ·
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Innovative Software Business Models

Posted on May 10, 2006 ·

Joseph Weisenthal at The Stalwart felt it was time to dust off Shai Agassi’s infamous half a year old speech and warm up the Open Source as IP Socialism debate again. (hat tip: Jeff Nolan) Why now is beyond me, but in a way it’s perfect timing: draws attention to the Who Pays For Software? New and Old Business Models event tomorrow, where Open Source, SaaS and VC Panelists will discuss the old and new business models.

Talk about Business Models, I haven’t had a chance to write about Intalio’s innovative business model, which I heard about at the World is Flat breakfast organized by Ismael Ghalimi, Intalio CEO and IT Redux blogger.

As Marten Mickos pointed out: “Open Source is not a business model, it’s a software production model and philosophy”. How do you turn it into a business is the million-dollar question now: there is no gold standard, creative entrepreneurs are experimenting with their own models.

Intalio recently moved 80% or so of it’s offering into Open Source. The fully featured product is avaialable free as long as it is run on an Open Source Database, however, customers have to pay an Enterprise Licence if they intend to use it on a commercial DB. Services and Training are chargeable – so far that’s the “traditional” Open Source model, if there is such a thing…

However, Intalio started an innovative experience outsourcing their product management to none other but their customers. They publish the future product development roadmap, along with the estimated timeline and cost of features, enhancements. Customers then can “bid” as to how much they are willing to pay to rep-prioritize the plan and get their requested features developed sooner. To move an item up on the schedule the entire cost has to be covered and at least two customers have to request it. As the model scales up, the requisite minimum “vote” may move from two to a higher number of customers – the more the better, the closer they are to a standard core product. 50% of what customers pay will be made available to them as discount towards future Enterprise Licence purchases.

So let’s tally it up. If the model scales up, Intalio expects most of it’s development paid for by customers – albeit at cost level. But when you start from zero development cost, zero sales cost (there is no sales organization, it’s all a download-try-buy pull process), add revenue from training and services, provide incentives for customers to purchase licences (the 50%) – I’d say it looks pretty good to me. Let’s review the model in half a year or so…

Update (7/11/06): More details from Ismael on Intalio’s business model.

Update (3/18/07): A year later Ismael declares the model a success.

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Filed Under: Business, Open Source ·
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Who Pays For Software? New and Old Business Models

Posted on May 10, 2006 ·

Philippe attended an event titled Demystifying Open Source – How an Open Source Strategy Can Make and Save Money for Your Business.  He sums up statements by one of SQLFusion’s customer; the CTO of Del-Jen ( a Fluor company):

“Over a period of 4 years the cost of open source software did go down. The more they use it the less it cost.
On the other end the cost of commercial software increased constantly during the same period. The cost includes licensing and consulting.”

The product Fluor is using is Open Source Fusion Enterprise;  The small-business version, Open Source Fusion on-demand has opened for beta a few weeks ago.

Tomorrow I’ll be attending another event where I suspect we’ll hear a lot about Open Source: Who pays for software: new and old software business models – What’s next?

The panelists:
Josh Stein, Director, Draper Fischer Jurventson
Brian Bhelendorf, Founder and CTO of CollabNet.
Philippe Courtot, Chairman and CEO, Qualys.
Scott Dietzen, Ph.D., President and Chief Technology Officer, Zimbra
Marten Mickos, CEO MySQL.
Bernard Pesh, CTO of Salesforce.com.

This promises to be a hot event, pre-registration is now closed, but ad-hoc attendance appears to be open. Zbutton

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Filed Under: Bay Area, Business, Enterprise Software, Open Source, Software ·
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SMB / SME Have Become Obsolete Acronyms

Posted on May 10, 2006 ·

SMB / SME describes Small – Midsize Businesses (Enterprises), but in terms of describing a market segment, especially in the software industry it has become obsolete. Why?

It used to collectively refer to companies too small to be attractive for the major Enterprise Software providers – and of course the same held true vice versa: it described a group of businesses that could not afford “enterprise software”. Well, that’s changed with Oracle, SAP now catering for the lower- mid-market, and a growing number of innovative new software solutions affordable even by the really small businesses. Hence the problem with the SMB / SME acronyms: they were sufficient to describe the “crowd to be ignored”, now that the software industry can actually address the needs of this segment, it’s too heterogeneous to be lumped together. To demonstrate the point, here are two articles talking about sofware in the SMB market:

SaaS Players Jostle For Position (internetnews.com) uses the term SMB, cites a VC and software vendor, but clearly the focus is on “small- and medium-sized companies of several hundred employees and 20 or more sales reps”

In Gartner, SAP and small business – an oxymoron? Dennis points us to Small Business Vision – a Gartner Event. As he says: “SAP also has a definition of SMB which starts at revs of $250 million. (last time I looked) Which kind of says it.”

There is very little a $200M business and a 10-person startup have in common – their IT needs will definitely be different. Most analyst who talk about SMB really mean midsize businesses. That’s an important market, but let’s not forget the huge untapped opportunity the “long tail” presents; i.e. the millions of very small businesses that can now directly be reached, sold to, serviced inexpensively over the Net – classic SaaS style. Essentially what we are seeing is that the SMB / SME market really isn’t one segment at all, but at least two … perhaps three:

  • SAP, Oracle may consider a $100-200M million business “small”, but it really is midsized, the “M” in SME, with a few hundred employees and a dedicated IT department, that will likely need help with software implementation, but will cope with the ongoing maintenance themselves. SaaS is a wise choice for these businesses, but certainly not the only one.
  • One could define the “S” part, i.e. small businesses in terms of revenue or headcount, but from a software point of view a more important criteria is that they typically do not have permanent IT staff on payroll. This by definition makes any software products that are implemented and ran at the customer’s premises a poor choice – a potential maintenance nightmare. There is simply no better option for this group than SaaS – Software as a Service.
  • The third category in my mind is the very-very small business, possibly with 1-5 employees, who are likely all do-it-all types, focus on their core product / service, and are likely to struggle not only with IT, but some of the standard processes of running a business. This category needs more help than just technology, and vendors like WinWeb are experimenting with a unique combination of hosted software as well as “Live” services, i.e. expert advisors in various aspects of business. (Update: see Stefan’s new post on Live Services)

I’m hearing a new term more and more: VSB – for Very Small Business, describing either the third group above, or a combination of the second and third.

(Key ideas in this post were first published at The Small Business Blog where I am a guest blogger)

Update: 3 days after this post, Wikipedia now has an entry for VSB.

Update (8/14/2006): Vinnie‘s guest blogger, Jyoti Banerjee approaches the issue from the opposite direction, the “M” in SME / SMB, but comes to the same conclusion, i.e. they should not be lumped together with small- and micro-businesses.

Update (10/23/07): Further SMB segmentation by Gadi Shamia.

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Filed Under: Business, Enterprise Software, SaaS, SMB / SME, Software ·
post

Kartoo Presents Search Results on a Map

Posted on May 10, 2006 ·

I’ve found Kartoo following the trail from the visitors’ log.

Filed Under: Software ·
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