Monthly Archive for November, 2006

VMworld 2006: It’s A Wrap

Published
by
Brian Berliner
on November 11, 2006
in Software and Technology
. 0 Comments

Last week’s VMworld 2006 Conference is over, and it was a record-breaking event for VMware. With an estimated 7,000 attendees, the event continues to grow each year. There is clearly lots of interest in Virtual Machine technologies.

Manek Dubash of Techworld does a nice write-up of the event. Looks like VMware Workstation 6 will continue to be the tool-of-choice for dev/test use, with the following expected additions:

  • Record/replay - which allows you to record entire the runtime state of the VM as it changes, and then play it back for debugging purposes
  • Support for Vista as host and guest, and for Solaris 10 as a guest
  • Virtual battery for laptops that shows battery life
  • Easy virtual disk mounting for Windows so you can mount a VM disk file as a drive
  • New virtual hardware to include USB2 and a 64-bit sound driver
  • Max RAM moves from 4GB to 8GB
  • Improved and more flexible shared folders
  • Cross-platform drag and drop and copy/paste operations
  • Improved inter-operability with remote control software such as VNC
  • Support for multiple displays
  • Experimental support for quad-core machines and more virtual PCI slots

The killer feature here is the Record/Replay capability. Nice.

ACE 2.0 features were also divulged:

The product, which was demonstrated in alpha at VMworld this week, allows administrators to distribute pre-packaged virtual machines to users in a secure manner. This means, for instance, that contractors can be allowed to attach to the enterprise network using their own laptops but only via the ACE VM.

ACE (the Assured Computing Environment) is great because it gives IT administrators security and control over the client environment. It also puts VMware into a space owned by Citrix — and it’s not a small space. Expect other startups to go after similar opportunities, like Moka5. There is absolutely big money to be made here, as IT environments continue to pendulum swing of distributed vs centralized administration and the need to reduce the amount of human time consumed by client administration and maintenance. Virtual client machines allow for distributed clients that are managed and secured centrally.

VMware also announced the Virtual Appliance Marketplace. Virtual Appliances are a great way for companies to distribute their solutions in a pre-built, pre-configured, pre-tested, pre-certified environment. Also a nice way to package try-before-you-buy packages of solutions. After all, who really wants to install 10 different open source applications just to be able to test out your particular solution? Instead, just give them a nice clean VM with everything ready to go. Remove the friction. Check out rPath if you need help building one of these.

Mendel Rosenblum, Chief Scientist and Co-Founder of VMware, did a keynote address. Particularly interesting to me was the mention of Nested Paging. Techworld covers it:

He also showed a demonstration of a future AMD CPU feature, Nested Paging. This technology moves the mapping of virtual machine memory page tables to physical memory into the CPU hardware. Rosenblum demonstrated an extreme example of how applications could be accelerated –AMD’s Margaret Lewis said that acceleration of memory-intensive tasks such as compilation is likely to be around 43 per cent. Lewis said that this technology, first announced in August, would be available in 2008.

AMD continues to lead Intel in the hardware virtualization race (I, personally, like their SVM approach to Intel’s). VMM page table mapping done by hardware would make a huge difference to overall perceived performance.

Finally, be sure to check out the Beta of VMware Lab Manager. This is the result of the Akimbi Systems acquisition that I’ve mentioned previously. I’m proud to have been an ever-so-tiny part of this success story. I look forward to watching the next steps of VMware’s continued maturity.

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Mary Meeker: Not So Meek

Published
by
Brian Berliner
on November 9, 2006
in Mobile and Venture Capital
. 0 Comments

Mary Meeker of Morgan Stanley presented some great data today at the Web 2.0 Summit today. Last year, her talk was the highlight of the conference, and this year’s presentation does not disappoint. Take a look!

The slides: The State of the Internet, Part 3

Comments:

  • It looks like the hard work that went into the Internet Bubble is finally starting to pay off. At least, for a few of the best companies, as it should be.
  • In public markets, about 2% of technology companies have created about 100% of net wealth. This is not Pareto’s 80/20 principle. Expect the love to be shared more over the next few years.
  • About 60% of Internet traffic may be P2P file sharing of unmonetized video. No surprise here. Videos are huge, easy to rip, and easy to distribute. Don’t expect this to change.
  • Mobile data services revenue ~$20B — comparable to online ad revenue. Supports what I was saying in my article on Version.
  • Mobile: 2.5G and 3G Subscribers projected to be close to 2B in 2009. Big market? Um, yeah.
  • LOTS of room for Internet Ad Revenue opportunities. I would expect a big drop in Direct Telephone with a movement to Internet / Online in next 3 years.
  • It’s no surprise that Microsoft has moved to selling their own audio hardware with the Zune. Apple showed them that the big money is made on the hardware devices ($14B in CQ3:06) and not in the sale/distribution of audio/video through iTunes ($1.8B in CQ3:06).

Richard MacManus does a nice summary with additional points.

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Heroes and YouTube

Published
by
Brian Berliner
on November 7, 2006
in Entertainment, Personal, Startups and Venture Capital
. 0 Comments

On last night’s episode of Heroes…

Zach films his friend, Claire (”The Cheerleader”) exploring the bounds of her amazing regenerative powers — she quickly heals after any injury, making her basically unbreakable and unkillable. Claire’s younger brother, Kyle, finds and views the tape and recognizes a money-making opportunity:

Kyle: I’m gonna put this thing on YouTube, make like a million bucks.

And the quick response:

Zach: YouTube’s free, you idiot!

Silly siblings of heroes.

They should put it up on Revver.

Heroes is not just cool because it’s an epic story told well.

It’s cool because the studios are finally starting to integrate with the audience. Hiro’s got a blog (shocking name choice for our Japanese Hero, I know), and Comic Book Artist Craig Byrne runs the 9th Wonders! site with lots of forum activities. And, let’s face it, who doesn’t love the fact that the show has an integrated comic book being created and exposed with each episode, time travel, regular people who can fly, and the tagline of “Save The Cheerleader, Save The World”.

And, you can even watch the show on-line (with a commercial break between each part).

Well done, NBC.

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Dan Primack Launches peHUB!

Published
by
Brian Berliner
on November 4, 2006
in Blogging, Startups and Venture Capital
. 0 Comments

Matt Mashall at VentureBeat gets an early jump on the new Private Equity Hub, known as peHUB, that will be announced on Monday and run by Dan Primack of Thomson Financial.

John Furrier interviewed Dan on PodTech.net. Here’s the MP3 of the podcast, and John’s write-up.

In the podcast, Dan says:

It’s supposed to be kind of a public forum for the private equity community. Everyone from early stage VCs all the way up to the mega buyout folks, and kind of everybody who touches them, whether that be entrepreneurs, or attorneys, or bankers, or business school students. Yeah, it’s blog-based, it’s going to be myself and the editorial team here writing, and we also have a group of about 50 guest authors who will regularly be contributing to the site. And, again, it’s a kind of wide range. We’ve got venture capitalists, we’ve got big buyout folks, we’ve got some entrepreneurs, we’ve got placement agents for funds, and limited partners — it’s a good group!

I’ve introduced you to Dan and PE Week before. peHUB will be must-read for the VC/PE community as well. Congratulations, Dan. I look forward to the conversations!

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CRV QuickStart: It’s All About The Dealflow

Published
by
Brian Berliner
on November 1, 2006
in Startups and Venture Capital
. 1 Comment

Looks like the story of the day is the CRV QuickStart announcement from Charles River Ventures. It’s basically the formalization of a Seed-Stage investing program that many VC firms have:

  • They put in up to $250,000 as a convertible note to get you to Series A.
  • The note earns interest and CRV has the right to roll the note and the interest into the company’s Series A at a discount of up to 25%.
  • CRV also has the right, but not the obligation, to contribute up to 50% of the Series A funding.

These are all perfectly standard “market” terms. I did exactly the same thing with Allocity, which was seeded in precisely the same way by Mohr Davidow Ventures (and subsequently acquired by EMC). Angel investors also do convertible notes all the time. This really is the simplest way to structure things at the seed-stage.

But, lots of VC’s do seed investments like this. Why is this one special?

It’s not so much that it’s special, but it’s very smart for CRV to formalize the program and make it public. It’s also wise for them to show the terms in public. That way, everyone knows what they are signing up to when they send in their investor pitch.

For CRV, this does one thing: It gives them access to a lot of dealflow and allows them to make more, smaller investments. It’s a smart move.

Fred Wilson wrote:

There is a lot to like about this deal. I hope Charles River shows us the best deals that come out of this program!

I agree! Now, Fred distinguishes his firm from CRV QuickStart by stating that Union Square Ventures is much more hands-on. I don’t know how hands-on CRV intends to be with this program, but there is nothing stopping CRV from hiring a person or two to shepherd these seed-stage companies to greater success. Time will tell.

Josh Kopelman wrote:

It also is a recognition of some of the challenges that larger venture funds face. Take a hypothetical traditional $400M VC firm. In order to achieve a 20% IRR, the fund must return 3x their initial capital over a 7 year term — or $1.2B. Now say this hypothetical VC firm typically owns 20% of their portfolio companies at exit (an industry average). That means that at exit their portfolio needs to create $6 Billion dollars worth of market value (ie, $1.2B / 20%). Assuming that their average investment size is $20M, that means that they invest in 20 companies — this assumes an average exit valuation of $300M PER COMPANY. Given the tight IPO Market and an average M&A exit value of less approximately $150M, this math creates some real challenges.

Josh makes an excellent point, but it’s a grander discussion than the topic at hand. And, it’s a discussion worthy of a separate post. CRV QuickStart is not intended to solve this dilemma — it’s just about getting earlier access to quality dealflow.

Josh goes on to point out some conflict of interests around the way that CRV has structured the deal:

  1. A convertible note could cause CRV to want a low valuation in Series A so that their early risk will purchase them more shares. I.e., will CRV really be helping the companies make progress during the seed round, or will they be motivated to hold back in hopes of buying more of the company in Series A? This is poppycock. It’s absolutely in CRV’s interest to help the companies during the seed and to secure a great valuation and solid footing with a VC syndicate partner.
  2. Concern about bad optics if CRV decides not to invest in the Series A. Yeah, that’s something that would need to be addressed. However, if the company cannot address those simple optics issues, then I have little hope that they can build a successful company.
  3. Josh questions whether someone like CRV could devote the hands-on time necessary to nurture many of these investments. I think that’s a great problem for CRV to have. I agree with Josh, but believe that CRV can solve this easily by hiring early-stage entrepreneurs and advisor capitalists (like myself) to help them with the load and give them a piece of the action.

Michael Arrington wrote:

Angel investors, ranging from individuals like Ron Conway and Jeff Clavier, to small funds like YCombinator and First Round Capital, have taken real market share from established venture capitalists by moving quickly and investing small amounts of capital instead of force feeding unwanted millions on a young startup. While taking a ton of early capital may sound enticing, companies can price themselves out of small but lucrative acquisitions simply because they’ve taken too much capital.

I love what Paul Graham is doing at YCombinator. I would add Perry Wu to the list.

Matt Marshall wrote:

CRV has downsized considerably in recent years. The firm now manages a $250 million fund, down from a whopping $1.2 billion fund they’d raised during the Internet bubble years. The team estimate they’ll do between 25 and 50 deals over the next three years.

This sounds a bit like what was happening at Sevin Rosen Funds, another firm that has been around a very long time and has naturally been shrinking the fund size based on the current VC market. SRF had found great success doing seed-stage and incubator type deals in the past (informally), but has struggled lately with the fact that the seed-stage companies are Internet properties. It’s great that CRV is formalizing their program and adapting. That’s the only way to survive.

Best of luck to CRV and their team.

I predict a very busy holiday season for Tai, Zachary, and Wu!

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