Finance Geek

The world is a-buzz this morning with discussion of Google’s new product “Search, plus Your World” which integrates personal content from Google+, Picasa and other places in with search results from the open web from Google’s main search service (only available on Google.com so far, official press release here).

At one level this is already pretty cool – e.g. a search on my name throws up photos I’ve taken on my phone recently (e.g. this picture of Stanley with his newly built Christmas lego that I took on Saturday), and more usefully the intent is that content my friends have shared will also turn up – e.g. restaurant reviews. Note that my personal content will only be visible to me – i.e. nobody else will get the picture of Stanley in their search results (unless I shared it with them).

However, the content being surfaced is all Google related. I took this photo of Stanley with my Android phone and I think I uploaded it to Picasa. If I’d taken it on an iPhone and uploaded it to Facebook it wouldn’t show up. Ergo Google is using its power in search to promote its own services in areas where it is less strong – like social networking.

Unsurprisingly a lot of the comment about Search, plus Your World has been negative, and rightly so. MG Siegler thinks they are inviting an anti-trust inquiry, and Twitter General Counsel Alex Macgillivray responded by calling yesterday a “bad day for the internet” – more details of the negative response here.

Google has responded by saying that they are open to striking deals so they can feature content from Twitter, Facebook, and elsewhere, but that rings a little hollow to me. I’m reminded of Microsoft’s denials of circa ten years ago that bundling Media Player and Internet Explorer with Windows was anti-competitive.

However, it is not so much the rights and wrongs of this that interests me as the likely outcomes and impact on the startup ecosystem. Microsoft won the media player battle but is losing/has lost the more important browser battle, but both battles got mired in the courts and dragged on for years. Innovation became more difficult and with it life at startups suffered a little.

I suspect we will see something similar unfold here. Google’s search results will become more clogged up with their own properties making it harder for new services to get customers via organic search. Unless, of course, they cut a deal with Google…. That will be bad news for startups.

Moving to the bigger picture, this is another small piece of evidence that we are moving away from the first phase of the web which was characterised by free and open access, and the hope of an enduring new order, toward a mature phase where the web is controlled by a small number of companies and regulation becomes increasingly important. (On Monday I blogged about the potential for similar developments in mobile.)

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Legendary VC Vinod Khosla has a guest post about the ‘Surprising Path of Artficial Intelligence’ up on Techcrunch today.  It is a reminder of both the chequered history of computer smarts and the unrealised potential.

The history is one of promises unfulfilled.  Khosla quotes Google research chief Peter Norvig to sum it up:

[Khosla] I read the following in a NY Post article last year by Google’s research chief Peter Norvig:

[Norvig] Forty years ago this December, President Nixon declared a war on cancer, pledging a “total national commitment” to conquering the disease. Fifty years ago this spring, President Kennedy declared a space race, promising to land a man safely on the moon before the end of the decade. And 54 years ago, Artificial Intelligence pioneer Herbert Simon declared “there are now in the world machines that think” and predicted that a computer would be world chess champion within 10 years.

[Khosla] Though we made it to the moon the efforts in cancer and artificial intelligence have failed in their larger ambitions but have made progress. In cancer:

[Norvig] Those hoping for a single “cure” were disappointed because cancer turned out to be not a single problem but a complex arrangement of inter-related problems on which we continue to make incremental progress.

Artificial intelligence turned out to be more like cancer research than a moon shot. We don’t have HAL 9000, C-3PO, Commander Data, or the other androids imagined in the movies, but A.I. technology touches our lives many times every day…

Those every day touch points are everywhere and most of them go by un-noticed – artificial intelligence (AI) systems are built into photocopiers, building control systems, word processor software, computer games, cars, and mobile phones (I could go on).  On top of that there are the headline grabbing high profile AI success stories, including an IBM computer (Deep Blue) beating the world chess champion for the first time (1997), another IBM computer (Watson) beating human contestants to win the quiz show Jeopardy (2011), and Google’s self driving cars.

The interesting question (of course) is ‘where does it go next?’

The underlying driver here is improvement in computing power – particularly data processing and storage. Artificial intelligence systems work by looking for patterns in huge datasets and it is only now that is becoming cost effective. Apple’s Siri was the first attempt at a mass market wide ranging AI, and that became possible only in the iPhone4S. As the cost of processing and memory continue to fall systems like Siri (in the broadest terms) will start to become so useful that we get dependant upon them. Probably utterly dependant. If that seems incomprehensible now think about how reliant you are on your smartphone and whether that would have seemed likely ten years ago.

As a reminder of how fast computers are evolving consider the recent assessment by Forrester that in 1993 the iPad 2 would have ranked among the top 30 computers in the world. Imagine what you will hold in your hand in five years time.

Remember also Ray Kurzweil’s prediction that by 2029 we will be manufacturing computers that are comprehensively as intelligent as humans.

Khosla highlights healthcare and education as two areas where we will feel the benefits of AI. I can see his thinking there, and I look forward to his posts on those topics, but I suspect that in ten years time artificial intelligence will be as ubiquitous as electricity is today. To finish with a small example, learning is a key part of AI and systems that don’t personalise by learning will increasingly lose out to those that do. I can see that being true for both consumer and enterprise.

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I recently read Tim Wu’s The Master Switch (read my review here) the central thesis of which is that tech revolutions start with the promise of freedom to operate, light regulation, plenty of scope for new entrants and a promise of an enduring new order, but always end with regulated monopolies and oligopolies. A discussion over the weekend with Jof Arnold has got me wondering is Android is about to suffer the same fate.

The following bullets sum up the most pertinent recent news on Android:

• As an OS Android continues to do very well, with market share now over 50%
• Samsung is now the dominant Android vendor – Q4 sales were exceptionally strong
• HTC and Motorola, the other leading Android vendors are having a tough time
• The leading Android tablet, the Amazon Kindle Fire, runs a forked version of Android

Looking at this, it is easy to see a future for Android where the lions share of sales are with two vendors, one of whom (Amazon) has already forked Android and has a ‘closed’ mentality, and one (Samsung) that has a history of proprietary OS development (remember Bada). For a while Jof has been saying that he can see Samsung making its own fork of Android, and if that happens the smartphone market would be dominated by two companies with roughly equivalent proprietary OS-hardware combinations – Apple and Samsung.  The tablet market could end up in a similar place with Apple and Amazon being the lead players, although Samsung may have something to say about that.

There are of course other credible future scenarios for Android, including a resurgence of Motorola under Google’s ownership, but I think it is becoming clear that even if Android does win out against iOS it doesn’t necessarily follow that we will have an open, startup friendly, mobile ecosystem.  It may just be that we have a new set of gatekeepers.

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Yesterday I wrote that the market for social interest sites has matured to the point where it is difficult for new entrants, and this morning I saw the slide below which says something similar.  It is one of ten predictions for 2012 from Roger McNamee and Mike Maples, two leading US VCs.  You will see that they make this prediction with only 50% confidence, which I think was lower confidence than all bar one of their other predictions.  You can find the full set of predictions here.

To me predictions are most interesting when they are controversial the more people who believe them the harder it is to make money out of them.  I think that this is one where Roger and Mike’s confidence level will be higher in twelve months and hence now is a good time to make investments in startups that help traditional companies to leverage the social web.  That is part of the reason we invested in Conversocial last year.

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2011 was an amazing year for social interest sites. Twitter started growing fast again after an extended flat period, Tumblr finally made it up into the stratosphere and new kid on the block Pinterest had an amazing second half to the year. The Comscore chart below shows traffic growth for all three, as well as the epic decline of Myspace.

Facebook isn’t on this chart, but they had a pretty good year as well.

I’m a big user of Twitter and Facebook and have a Tumblog that I still post to occasionally and my guess is that all these sites will continue to do well, as will WordPress and some of the other self expression platforms out there.

However, I think this market is getting difficult for any new entrants that are looking for something more than a quick flip.

Firstly, the incumbents now have, or are starting to have, real scale – at least in terms of users and access to capital – making it easy for them to copy successful features from new entrants and/or acquire them before they reach scale. You may have seen that Twitter and Facebook both made a string of acquisitions last year. For me the launch of Google+ was also an indication of the challenges for new entrants in this market – in spite of having a decent idea, un-paralleled distribution and incredibly deep pockets they have still only achieved moderate success (so far at least).

And secondly, as I’ve said, I’m persuaded by the arguments of Forrester CEO George Colony that we are approaching a point where consumers are maxing out on the time they can spend with social.  Other evidence of saturation can be found here and here.  If we are approaching social saturation then new social interest sites will have to grow by taking time away from existing services.  Facebook, Twitter, etc, succeeded in doing this to Myspace but I think the new crop of leaders have a better understanding of what they are doing and won’t be easily unseated.

I still think there is opportunity in social though – but it is about leveraging the data in these sites to do the other things we love in life – like shopping and going out.  That is where I see the next leg of growth.

The main thing I see that might upset these predictions is privacy.  An increasing number of people see the potential for a major privacy backlash that undermines Facebook and if that transpires there will be space for new services.  Personally I think it is unlikely – the true privacy risks seem small to me – but enough people are discussing it that it is worthy of note.

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Happy New Year everyone!  I blog every day that I work, and this is my first day back in the office. It is good to be back. I’m optimistic that we can all do some good stuff in 2012 – there were a lot of pockets of growth in tech last year and I don’t think the worsening economic climate will change that (although a booming economy would make life easier).

This is a time of year when people take stock, look at trends and make predictions for 2012 and I’ve been reading a lot of what has been written. Figuring out what is going to be big in the next 2-3 years is, after all, my business.

One piece in particular caught my eye, and that was Five Myths of The Enterprise Startup by Aaron Levie, CEO and co-founder of Box.net (a DFJ portfolio company). His overall point is that the enterprise software industry is now being shaped by new forces which are altering the balance of power in favour of startups, and that 2012 will be a great year for new companies in this category.

Perhaps the most exciting thing about these changes is that they enable much faster growth than has historically been possible for enterprise software companies. This in turn sets the stage for much faster value creation, higher valuations and increased interest in the sector from VCs.

The most important change is, perhaps unsurprisingly, the cloud, which has enabled a new business models and go-to-market strategies which get round many of the barriers that previously inhibited growth:

• Freemium business models
• Viral distribution
• Social media
• Products with implementation cycles that can be measured in minutes

This in turn allows enterprises to buy in a totally new way.  Largely because implementation is easy the costs of discovering and trying out software are in many cases now pretty close to $0.  This means that end users can choose products themselves and IT departments no longer needs to act as gatekeepers, at least not to the same extent.  Sales cycles to end users are typically much shorter and require fewer expensive salespeople and it is this which creates the potential for rapid revenue growth and value creation.

This potential is translating into real excitement about some of the leading enterprise software startups – most notably at box.net and Dropbox, both of which raised very large rounds at (rumoured) huge valuations last year (see here for news on box.net and here for news on Dropbox).

None of this is new at a theoretical level – I first blogged about ‘Edge in adoption’ back in 2007 – but it is only recently that software startups have figured out how to combine all these enablers to good effect and that enterprises are starting to relax their previously rigid procurement processes.  Perhaps the biggest change from software companies is to focus on building great products with great user experiences, especially for new users, as that is the key to unlocking all four of the enablers listed above.

The other exciting thing from a startup perspective is that these developments nullify the advantages that traditional software vendors like Microsoft and Oracle have enjoyed for years.  Relationships with the CIO and account control count for little when the end user is in control and the traditional practice of seeing off startups by promising product developments down the road is much less effective when end users can get up and running with the startup quickly and cheaply.

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Regular readers will know that I’m a strong believer in open standards.  I think they provide the best platform for innovation and are the best protection against monopolists.  Hence I would love it if the open web prevailed, and the rising power of gatekeepers like Apple, Amazon, Facebook and even Google annoys me as a consumer and worries me as an investor.

The future of the web has been the topic of much debate since Forrester CEO George Colony predicted the end of the web and an era of the ‘app internet’ in his talk at Le Web earlier this month.  Fred Wilson, Mark Suster and others came out in defence of the web, but it seems to me that the commentary has been largely one sided.  Perhaps that is unsurprising given that as VCs and bloggers most of us have benefited hugely in the past from the open web and stand to continue to benefit into the future.

However, even though the open web is better, it won’t necessarily prevail.  In a great post last September Joe Hewitt set out why.

Firstly, at the most basic level the web is just a collection of protocols and languages.  It has no unique characteristics that assure it a permanent place in our information architectures:

The HTML, CSS, and JavaScript triumvirate are just another platform, like Windows and Android and iOS

Secondly, there are plausible non-web visions of the future:

I can easily see a world in which Web usage falls to insignificant levels compared to Android, iOS, and Windows …. The Web will be just another app that you use when you want to find some information, like Wikipedia, but it will no longer be your primary window. The Web will no longer be the place for social networks, games, forums, photo sharing, music players, video players, word processors, calendaring, or anything interactive. Newspapers and blogs will be replaced by Facebook and Twitter and you will access them only through native apps. HTTP will live on as the data backbone used by native applications, but it will no longer serve those applications through HTML.

An alternative non-open web vision of the future is one in which access to services is controlled by an oligopoly consisting of Apple, Amazon, Google and Facebook.

I don’t come with any solutions, but rather with a request that we all remain open to a full consideration of the strengths and weaknesses of the open web, and of alternative models – there can be no sacred cows.  That way we will have a better chance of preserving what is really important – and that is open and even access to content and distribution for consumers, and by extension for startups.

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Regular readers will know that I’m a strong believer in open standards.  I think they provide the best platform for innovation and are the best protection against monopolists.  Hence I would love it if the open web prevailed, and the rising power of gatekeepers like Apple, Amazon, Facebook and even Google annoys me as a consumer and worries me as an investor.

The future of the web has been the topic of much debate since Forrester CEO George Colony predicted the end of the web and an era of the ‘app internet’ in his talk at Le Web earlier this month.  Fred Wilson, Mark Suster and others came out in defence of the web, but it seems to me that the commentary has been largely one sided.  Perhaps that is unsurprising given that as VCs and bloggers most of us have benefited hugely in the past from the open web and stand to continue to benefit into the future.

However, even though the open web is better, it won’t necessarily prevail.  In a great post last September Joe Hewitt set out why.

Firstly, at the most basic level the web is just a collection of protocols and languages.  It has no unique characteristics that assure it a permanent place in our information architectures:

The HTML, CSS, and JavaScript triumvirate are just another platform, like Windows and Android and iOS

Secondly, there are plausible non-web visions of the future:

I can easily see a world in which Web usage falls to insignificant levels compared to Android, iOS, and Windows …. The Web will be just another app that you use when you want to find some information, like Wikipedia, but it will no longer be your primary window. The Web will no longer be the place for social networks, games, forums, photo sharing, music players, video players, word processors, calendaring, or anything interactive. Newspapers and blogs will be replaced by Facebook and Twitter and you will access them only through native apps. HTTP will live on as the data backbone used by native applications, but it will no longer serve those applications through HTML.

An alternative non-open web vision of the future is one in which access to services is controlled by an oligopoly consisting of Apple, Amazon, Google and Facebook.

I don’t come with any solutions, but rather with a request that we all remain open to a full consideration of the strengths and weaknesses of the open web, and of alternative models – there can be no sacred cows.  That way we will have a better chance of preserving what is really important – and that is open and even access to content and distribution for consumers, and by extension for startups.

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A few things recently have made me think that traditional retail is nearing the beginning of the end.  That isn’t to say it will disappear, but I think it will undergo some fundamental changes.

Perhaps most notable development was Amazon’s Price Check Promotion which offered a 5% discount to shoppers in traditional stores who looked up items using its Price Check App and then made a purchase through the online retailer.  I love the way this combines a compelling offer with a bold statement about the superior economics of online retail (more of which below).  Unsurprisingly it has been very popular.

Then the backlash from traditional retail shows just how scared they are.  When companies start complaining about unfair competition it is a good sign that they are on the ropes.

Another small example here in the UK is music and games retailer HMV – their market cap is now sub £20m, down from nearly a £1bn in recent years.

I’m putting all this in a blog post now because I have just read an interview with Marc Andreessen in which he makes the prediction that 2012 is the year in which “retail stores really start to feel the pressure”.  He gives a nice explanation of why online retail has a better business model:

as e-commerce gets more and more viable and as these category killers emerge in the superverticals. If I own mall real estate or retail stores in cities, or if I own chains like electronics chains, I’d be concerned…. I think electronics and clothes are going to be a real pressure point. Home furnishing is going to come under pressure. It’s going to get harder and harder to justify the retail store model.

The model has this fundamental problem where every store has to have its own inventory and every store is also a warehouse. The economic deadweight of that entire inventory in each store–that’s what took down Borders.

Retail runs at very thin margins. So if e-commerce takes a 5 percent or 10 percent or 15 percent bite out of your category, then it becomes harder to stay in business as a retailer

I can see three broad areas of investment opportunity coming out of ecommerce as a result of this tipping point from offline retail to online retail:

• traditional retailers looking for ways to get more value out of their in-store stock by building integrated online-offline propositions which make local stock available online
• software tools which make local stock available via third party sites like eBay (see their acquisition of Milo)
• ecommerce companies which innovate to make the shopping experience more user friendly and accessible – StylistPick here in the UK is a good example

Note this is different from the daily deals and flash sales opportunities that have been prevalent over the last couple of years.  These models unlocked huge value by getting local retailers online and providing a sales channel for end of line stock, but whilst there is overlap, to my mind they are not the same as true shopping.

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If you are like me you have a rough understanding of how Google ranks sites in its search engine results and how those have changed over time.  In the beginning it was all about Page Rank and sites were ranked based on the number of links into the site and the quality of the sites on which those links sit.  Then over time a number of other elements were added to the algorithm including freshness of content, page load times and how popular a site is when Google serves it as a search result (aka ‘user experience signals’).  You probably also have an idea that Google has also been constantly changing its algorithm in an attempt to stay one step ahead of spammers who learn the rules and game the system to get their low quality links high up the search results page.

Search engine optimisation (SEO) or the business of appearing high in Google’s search results, is important for just about any business now, and if you want to understand a bit more about how it works check out the infographic below.  It is a bit anti-Google in its positioning, but contains lots of good stuff.  The section on Google punishing paid links was most interesting to me.  I used to run a couple of paid links from this blog which made a couple of grand a year which I gave to charity.  I took those links down after my page rank dropped from seven to six and I thought Google might be penalising me.  A number of people said that Google wasn’t likely to notice a paid link on a small site like The Equity Kicker, but I thought it better to be safe than sorry.  The prominence of the paid link discussion on this infographic makes me think I made the right decision.

The infographic was originally published on Silicon Valley Watcher.  Props to Azeem Azhar for the pointer.

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The difference between success and failure for companies is making the right decisions – no surprises there.  Another truism is that making the right calls is often a subjective process, with no right or wrong answer.  Decisions like whether to hire candidate A or B, or what your budget should be for next year are at least in part matters of gut feel, and inevitably there will be times when the CEO disagrees with the rest of the board.

In this situation it is imperative that there is a proper debate and everyone takes the time to properly understand everyone else’s position (and I stress properly), and that everyone feels that they have and respected.  However, if there is still disagreement, then the CEO must do what he or she thinks is right, even if the investor board members disagree.  In a recent post on his Information Arbitrage blog Roger Ehrenberg put it like this:

the buck ultimately has to stop with the CEO, and if the CEO cedes effective leadership to the Board it will create both an unhealthy dynamic and an untenable situation as more real-time decisions need to be made

This can be tough for investors who have some real skin in the game and care passionately about the success of the company.  They don’t want to see it go wrong and they are being asked to stand by and let the company take a decision that they don’t agree with that might make it go wrong.  However, none of us became investors because we want an easy life, and tough as it may be we should learn to live with it, as the alternative is worse.  I say that as an investor who in the past has definitely found it tough to stand by as companies take what I thought were the wrong decisions.

However, if there are too many disagreements and the board and CEO lose faith in each other then the situation becomes untenable.  Brad Feld wrote about this back in July, saying:

the board – and individual board members – are often involved in many operational decisions, but the ultimate decision is (and should be) the CEO’s. If the CEO is not in a position to be the ultimate decision maker, he shouldn’t be the CEO. And if board members don’t trust the CEO to make the decision, they should take one of two actions available to them – leave the board or replace the CEO.

This last sentence is the rub.  Ultimately if there isn’t a meeting of minds most of the time on most issues between any two people then they shouldn’t be on the same board together.  That said, it can be difficult for some investors to resign as directors, particularly in situations where the number of VCs is limited.  In that situation if the CEO is going to stay then the investor director should, whilst still being helpful where possible, take a back seat and not let their disagreement with the CEO get in the way of the functioning of the company.

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Fortieth in a series of weekly posts by myself and Nicholas Lovell of Gamesbrief which answer the fifty questions you should ask before raising venture capital.  We expect the series to run for a year after which we will collate the posts into a book.  You can find the rationale behind the series here, and the list of questions here.  We welcome your comments on any and every aspect of what we are doing.

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Most VCs are secretive about the detail of their decision making processes.  Some have spent a lot of time thinking about it and regard their processes as a core part of their IP whilst others are reluctant to share because they haven’t thought about it and don’t have too much to say.  For these reasons it is hard to get a complete picture of how decisions are taken in the industry as a whole, and this post is based on what I’ve observed across the two partnerships I’ve worked in, one we acquired, what I’ve seen at DFJ in the Valley, what my friends at other funds have told me, and the small amounts I’ve read on the web.

Caveat made, I think for most funds, from a practical perspective postive investment decisions go through the following steps:

1. A partner (or maybe two) falls in love with a deal
2. They socialise it with other partners, typically at the weekly partners meeting
3. If there is a positive reception the proposing partner does more due diligence and works to build an investment case, whilst the other partners think about the deal and maybe socialise it with some of their contacts
4. The proposer makes a formal request of her investment committee to offer a termsheet to the company, at which point if there is a consensus in favour of making the investment an in principle decision to do the deal will be made, and a termsheet will be offered
5. If the legals go smoothly and any remaining due diligence goes without a hitch the investment is made – often there is a second formal investment committee review prior to completion, but unless something unexpected crops up this is a meeting to check that due process has been followed rather make a decision on the investment

The time from steps two to four can vary hugely, depending on how hot the deal is, and how ready the partnership is to make the investment.  The benefit of getting to know a VC before starting a fund raising process is that they will already have socialised your company with their partners before a deal is in discussion, which makes it easier and quicker to build consensus and offer a termsheet.

The level of consensus required before a positive decision can be made varies hugely, but the general model is that all the partners agree to make the investment.  That is in contrast to the way traditional funds like 3i used to operate where investment managers would find a company they liked, work it up into a deal, and then pitch it to an investment committee that was largely unfamiliar with the deal which would then hand out a ‘yes’ or a ‘no’.  These days the investment committee is either made up of the investing partners in the fund or it is a committee that largely exists to rubber stamp the decisions that the investing partners suggest that it make.

The required level of consensus varies both between funds and also within funds over time.  Smaller and newer funds typically require the greatest levels of consensus, and in a young fund with only two or three partners it is common that a deal will only get done if there is a very high level of buy in from all the partners.  However, the level of consensus necesarily drops when the number of partners increases, when thre is a need to increase the rate of investment, or when portfolio management begins taking up more of the partners’ time.  Different funds approach this in different ways.  Some evolve detailed processes (often based on voting) by which deals get done with only tacit support from some partners.  Others operate less formulaic processes for getting deals done without every partner needing to really love a deal – a common model is for a dominant partner to run the investment committee meetings and drive the group to a decision when there is an appropriate level of buy in across the group.

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The talk below from Forrester CEO George Colony was perhaps the most interesting one I saw at Le Web last week.  He had two big points to make:

1. Web service/application architectures will shift to more local processing and storage.  This is a natural result of the fact that processor and storage technologies are improving faster than networks. 
2. Social networks are so well penetrated now that there is little room to grow – that includes penetration into the population and hours spent per day by the active users.

I want to focus on the second of these today.  Both have been bouncing round my mind since I saw the presentation on Thursday, but I think the second is more topical.  Firstly it was the subject of debate on Fred Wilson’s Avc.com from yesterday, and secondly it is more pertinent to the activity of most of the readers of this blog – as entrepreneurs, investors and consumers.

My first reaction to the argument that social is close to saturation point made sense to me, and most of the people I spoke to about it at the conference afterwards agreed.  The reasoning is logical and comes from research Forrester conducted research with over 1m US consumers which found that ‘social is running out of hours and people’.  Taking the hours piece first – people are spending more time on social than they are volunteering, praying, emailing and using telephones, and more than they are exercising, and only a little bit less than shopping and childcare.  His argument is that people simply don’t have much more time to give to social.  The second piece of the argument is that at around 80% in the developed world social is already so well penetrated that growth can’t come from adding new users either.

Colony’s conclusion from this is not that social will go away, but that the next generation of social apps will be about doing things more efficiently and saving time.  That contrasts with many of the current crop of social apps where the use case is often killing time.

Fred Wilson posted the video below yesterday and invited debate in the comments of his post.  Many commenters were simply outright critical of Colony, but several drew the distinction between social as an app, which might be peaking, and social as a platform, which is only just getting started, and this I think probably hits the nail on the head.  Applications are where people spend time, platforms are where things happen.  There might not be much time left in the day for all of us to spend much more time in social apps, but we can all increase our engagement with social by using the platform components more – that means hitting more like buttons, sharing more generally, connecting more sites to Facebook and Twitter, and using social more to help discover online content and interact with the brands and companies we love.

This might have been what Colony meant when he said the next generation of social services will be about driving efficiency.

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"VCs are people too". That was what I was thinking this morning as I read Fred Wilson‘s post about approaching VCs when they are out in public.

Fred says it is ok say hello and hand over a business card, but make it quick and don’t pitch.  That makes sense to me.  All decent VCs love meeting people and are in the business of getting to know companies will be happy sparing a few seconds to share contact details.

People spend a lot of time worrying about how to behave around VCs, about how or when to make an initial approach and then at subsequent chance encounters about how much to pitch.  The right answer depends on context – are they with family or is it a work social, how many other people have pitched them that evening, do they look tired, are they standing on their own or talking to other people etc.  VCs are humans too, just like you, and the best way to figure it out is to put yourself in their shoes and think about what you would like.  If you do to others as you would have done unto yourself you won’t go to far wrong in this world.

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Dave Morin CEO of Path and Mike McCue CEO of Flipboard were both interviewed on the main stage yesterday at Le Web.  They are both high profile CEOs of high profile startups that have raised a lot of money for very design focused mobile apps.

They have also both recently launched new iPhone apps and we had demos of both.  Morin and McCue were both at pains to show how beautiful their apps are and how much time and effort they had put into making the interface intuitive and easy to use.  They both also explained that they had wanted to get the apps right before launching and had preferred to take their time and get it right rather than launch early with an imperfect product.

Morin explained how with the first version of Path they had launched early with a minimum viable product but they found that iteration cycles on mobile were too long to make the lean methodology work, which was why they switched methodology for the second release.

So we have two leading companies that are moving away from the lean startup methodology just at the point when the rest of the world is adopting it as an orthodoxy.

I haven’t figured out what to make of this yet.  Path and Flipboard have both raised huge amounts of capital so they have the luxury of not being lean if they don’t want to, and that might explain why they are adopting a different approach to everyone else.  Alternatively, it might be that as great design becomes more and more important there is less and less to be learned from minimum viable product.  Put differently, if great design is the essence of the product there is no way to quickly develop a rough version.

The point about iteration cycle times on mobile is also interesting.  I’m assuming that is because of app store approval processes, and if we move back towards a more web oriented world that will become less of a problem.  And if we don’t, it won’t.  I’m not sure which way that will go, but if Morin is right the outcome will have a big impact on the way startups approach product development.

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