A VC - Fred Wilson

That's a question I used to get all of the time in the early days of this blog. I don't get it so much anymore. Because slowly but surely people are wising up to the fact that blogging is work and its a very valuable use of my time

Take yesterday for example. I wrote a longish blog post on the Union Square Ventures blog about our most recent investment, Boxee. That post got picked up on techmeme where it ran for most of the day yesterday. I don't yet know how many people visited that post yesterday but I am sure it was thousands of readers

About 75 of them left comments on the post asking for an invite to Boxee's invite only alpha. I got a bunch more invite requests on this blog where I had linked to the USV blog post yesterday.

So this morning I spent an hour, between 5am and 6am, going through all of those comments, harvesting the email addresses from disqus, and inviting everyone to try out the boxee alpha.

That's about 100 trials. Not that many when you think about it in the context of the 50,000 registered users of boxee.

But the time and energy I've put into this blog for the past five years has built a unique and very sophisticated audience. You are connectors and hubs of influence.

I know that one person out of the 100 I invited this morning will be incredibly impactful for boxee. It could be five people, it could be ten. Who knows?

But in the world of social media, word of mouth and word of link marketing, it is connectors and influencers like all of you that make the difference.

And that's one of the main reasons I keep writing, commenting, discussing, and participating in blogs, tumblr, twitter, disqus, and the social media world at large.

Its about the "realest" work I do.

I wrote a post about our most recent investment, Boxee, today on the Union Square Ventures blog. Boxee founder and CEO Avner Ronen wrote a post on the Boxee blog about the investment. I encourage you to click on those links and read all about Boxee. You can also click here and see what people are saying about boxee on twitter right now.

But for those who aren't going to do that and still want to know what Boxee is, I call it the "firefox of the media center software sector". That's my view anyway. Here's a ~ 2 min video that shows Boxee in action.

quick intro to boxee from boxee on Vimeo.

• Boxee Media Center hacks its way onto AppleTV
• TechCrunch post on the Boxee financing
• VentureBeat post on the Boxee financing
• AlleyInsider post on the Boxee financing
• The Deal's post on the Boxee financing

The post of the day comes from Andy Finnell who writes that iPhone app developers must abandon the $0.99 price that many apps are selling for these days.

Andy calculates that a developer who wants to make a living off an iPhone app (at $40k/year) must sell 196 apps per day to do that. He also calculates that at $9.99 per app, you'd need to sell 16 apps per day to do that.

But Andy's best point is this one:

Competing with another application solely on price is a sure fire way to go out of business. Your product should have a selling point other than the price, whether it be more features, better usability, a unique approach to the problem or all of the above.

There will always be students and hobbyists in the market who can sell a competing product for way less than you. They don’t need to make a living off the app, so they’re not trying to. This happens all the time in the Mac market. If you charge enough for your app that you can make living off it, then you can spend all your time improving it. With that extra time you should be able to make a superior product to your lower priced competitors.

People are willing to pay more for superior products. Unfortunately, with the App Store developers haven’t given them the opportunity to do so.

I personally think that the best approach is to have a free and paid app with the free app being enough of a teaser that it gets the loyal users to pay up for the premium product. That is, by the way, the strategy our portfolio company Zynga is taking with their Live Poker app.

A developer would be much better off with 196 apps per day being downloaded with 180 of them free and 16 of them paid than 196 of them at $0.99 because there is no "decision cost" on the free apps.

Josh Kopelman wrote a great post on this a while back called The Penny Gap. Getting someone to pay anything is hard. Once they've made the decision to pay, the difference between $0.99 and $9.99 isn't as big as many think it is.

But the bottom line in all of this is you have to build something really useful to get someone to pay for it. Free apps outsell paid apps in the iTunes store by something like a 10 to 1 ratio. And Andy is right, make something unique and useful and charge real money for it and you'll have a better chance at making a living that way. It's good advice.

I started this discussion yesterday with my observation that Obama ended his weekly address with the point that "in this nation we rise and fall as one nation, one people." But that doesn't ring true to me. I think we are well past that point. I think we are so intertwined with the rest of the world, that we rise and fall as one world, one people. This picture I posted a month or so ago on this blog tells the story. It's a chart of the dow, ftse, hang seng, and nikkei in sept and oct.

Tom Friedman makes the same point today in his opinion piece in the Times:

a world economy that is so much more intertwined than people realized, which is exemplified by British police departments that are financially strapped today because they put their savings in online Icelandic banks — to get a little better yield — that have gone bust

And yet, our government is fighting the idea of cross border regulatory authority. Today's NY Times has a story about the G20 meeting that took place this weekend in DC. Here's a quote from that article:

There is also a more basic philosophical divide across the Atlantic: Europeans in general favor more state control over markets, even to the point of granting regulators cross-border authority, while the United States stresses the primacy of national regulators.

That's understandable. This country has a long history of not wanting anyone to tell us what to do or how to do it. But I wonder if this position is tenable when it comes to the global economy.

I do not believe we can regulate markets on a nation by nation basis. They are simply too intertwined these days. If we want to figure out how to stabilize the financial markets this time, I think it's going to take a global approach, global coordination, and yes, global regulation.

Last month I attended the New Business Models For News Summit and found myself running the "revenue" breakout group. We talked quite a bit about generating revenue from local merchants. There are a bunch of companies working on this problem, including three in our portfolio, Clickable, outside.in and Targetspot.

The conventional wisdom is that it is going to take a long time for local merchants to move their ad budgets online and that very few Internet companies can afford the large sales forces it is going to take to sell online advertising locally. I think these problems are in the process of getting solved by companies like ReachLocal, Yodle, and our portfolio company Clickable. I also think that local media companies (radio stations, newspapers, tv stations, etc) will start to become local ad agencies and will start selling multiple advertising solutions, not just their own properties.

But one problem nags at me. Local merchants like "Joe The Plumber" usually don't have a web presence and many don't really even want one. But if you are going to buy cpc advertising, then you'll need a place for the clicks to go. The local ad agencies and local oriented web services are happy to create a web presence for local merchants, but they are often poorly designed and there's no standardization of them.

Here's where Google can and should step in. The other day David Karp asked a question on Tumblr:

Which messenger bag should I get for a 15" macbook pro?

The answer was Crumpler of course and I went to Google and did a search on "crumpler nyc". Then I found the Crumpler store in my neighborhood and clicked on the link. I got a page that looks like this:

I shortened the url with bit.ly and sent the answer to david via Tumblr.

Every small business that Google knows about has a page that looks like this and a corresponding "pin" on Google's excellent map service. Here's the same page for our venture capital firm, Union Square Ventures. I think this is a huge opportunity for Google that they are not currently doing very much with.

Henry Blodget wrote a post the other day talking about what Google needs to do to get its stock moving again and he listed four areas Google should look to for revenue growth. He did not list local/maps. I think local/maps is one place where Google has a huge advantage by virtue of the dominance of its cpc ad network and the dominance of its maps service.

And the thing Google needs to do is make the merchant pages in its service good enough that local merchants can use them as landing pages. Here's a few things they can do that would help:

1) a user friendly URL:

not this - [http://maps.google.com/maps?ie=UTF-8&oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&um=1&q=crumpler+nyc&fb=1&view=text&latlng=5061625533362562256&sa=X&oi=local_result&resnum=5&ct=result]

something like this - [http://maps.google.com/crumpler/manhattan/westvillage]

2) the ability to domain map the page - talk about taking ownership of a page. If Google allowed local merchants to domain map these merchant pages with their own URLs, that would be a huge step in the right direction.

3) the ability to skin the page or at least do some simple branding on it.

4) let the merchant take over the "overview" and "details" tabs and enter their own content in them.

5) calls to action: email, click to call, buy online, etc. Google can power some of these services themselves and allow merchants to enter their own call to actions.

We grew up with the yellow pages. Everyone knows how to use them. Each merchant has a listing and they are all similar. Merchants can pay to dress up their listings and many do. But the standardization breeds familiarity and trust and encourages more usage.

Google should be the yellow pages of the internet. They are already. But they aren't doing enough for the local merchant and that's a big problem that's impacting all of the other local oriented services. Google is the platform that many internet businesses are built on and in local they need to work harder on their platform so that we can build out the local internet opportunity. And there's a ton of revenue in this for them if they do.

I have a friend Charlie who is a serial entrepreneur and he says that venture capital "values capital over people". That's a criticism that has a ring of truth to me (as opposed to much of what Adeo said the other day).

We just spent the past day with our investors and we are blessed to have a collection of great people behind us. They provide the capital that we get to invest in startups. And I am incredibly grateful for their support. But it isn't capital that drives the startup ecosystem. It's the entrepreneurs who drive it. And it's important to remember that.

Back in 2005, I wrote a post called The VC's Customer. In that post, I made a point publicly that I've been making privately for years. VCs that serve the entrepreneurs win and VCs that serve the market lose.

I think in times like we are in, it's worth remembering this. And I want to thank Charlie for suggesting to me last night that I return to that post.

One week ago, last friday morning, I wrote that I was waiting for the fill on three "good to fill" orders I had placed weeks before. They were:

$AMZN at $40
$GOOG at $320
$AAPL at $90

I got my fill on $GOOG earlier this week and mid-day yesterday I got filled on the $AAPL and $AMZN. I am pleased that I was able to buy stock in these three great companies at these prices.

Of course, when you buy on the way down, you have to be cool with watching the value of your stock go down. At the hedge fund annual meeting earlier this week I saw a hedge fund manager talk about buying bank debt at 80 cents on the dollar and then watch it go to 60 cents on the dollar. He has kept buying it as he thinks 80 cents is a bargain and 60 cents is a fire sale price. But when you play this game, you have to be able to take the 25% paper loss on that 80 cents trade.

I like to focus on my average cost on a given stock. And buying on the way down lowers your average cost. I have taken my average cost in $GOOG from over $400 to around $350 and if the good till filled orders I placed this morning get filled, I'll take it to below $320.

I am using the exact same strategy with $AAPL and $AMZN. I like the fundamentals of these three companies, I am certain they'll make it to the other size of this mess with those fundamentals intact, and when the market gives me the opportunity to buy the best businesses I understand well at 8-12x current cash flow, I think you have to take it.

As the prices go lower, I am increasing the size of my buys. I am not betting the farm on any of these investments, but if the market wants to give me $GOOG at 5x cash flow, I am going to put even more money behind that trade. That would be $160/sh by the way, and I don't think its going anywhere near there.

What's interesting to me is the analysts have now gotten bearish on $GOOG as Henry Blodget reported yesterday. That may be the final shoe to drop. Cynics always say that the analysts are the "last to know".

I believe that online advertising will be flat YOY in 2009 and that search will gain share and gain between 5% and 15% YOY. I think Google's revenues will grow next year and I also think they'll finally work on their cost structure.

So unlike the analysts, I am bullish on Google and getting more so as the price goes lower. Same with $AMZN and $AAPL. So I'm happy to finally get the fill and just placed some more orders at lower prices. Buying on the way down isn't fun but you have to think like a buyer not a seller.

Our portfolio company Zynga quietly released Live Poker yesterday for the iPhone. Live Poker is the same Texas Hold'em game that over 1.4mm people play every day on Facebook, MySpace, Bebo, and Hi5. Now you can have it on the iPhone and play against your friends who are on the web at one of these social nets. Like Texas Hold'em on the social nets, Live Poker is free but there is also an upgraded version with a larger chip package for $9.99.

The reason I am blogging about this, other than to get all of you to go download the app, is because Live Poker is the first first application to leverage Facebook Connect to allow iPhone users to play with their real friends and access social information such as real player photos. Just think about that for a second. We've now got apps on open mobile phones connecting with apps on open social nets. It's only a matter of time until we see more of these live mobile apps running on iPhone, Blackberry, Android, Windows Mobile, Symbian, and connecting to Facebook, MySpace, and other social nets.

The social web is going mobile quickly with popular mobile apps like Loopt and Twitterific. Now we are seeing popular social apps going mobile. When we sat down at the beginning of the year to identify the biggest investable trends in web apps, we put down words like open, social, playful, and mobile. Live Poker leverages all of them and is a glimpse into our future.

I've been reading a bunch of posts recently suggesting that the VC model is broken. But guess what? It's always been broken. As Jeff Nolan points out in a short and sweet post:

there is a permanent structural imbalance in VC that simply doesn’t change and serves to exacerbate the amplitude of the swings from good times to bad. There are maybe a dozen VC firms that generate the bulk of returns, a handful of “individualist” firms that simply chart their own path to good success, and a whole bunch of followers that get slaughtered. This was the case in 2001 and it’s the case today.

Jeff's truth has been the story with the venture capital asset class for the entire 22 years I've worked in this business and probably for long before that. Jeff and Matt's posts were inspired by this presentation that Adeo Ressi of TheFunded gave at HBS recently.

I don't buy most of Adeo's arguments in his presentation but I am not going to critique it. Most of what he says is old news. The chart that TechCrunch picked up in particular is not news and I don't even think its right. LPs have been telling me that the VC industry has been cash flow negative for years.

Clearly there is too much money and there are too many firms in the venture capital business. The same is true of every asset class I follow. I was at a hedge fund annual meeting yesterday and they predicted a huge number of hedge funds will go out of business in the next 12 months. I think the same will be true of private equity, real estate, and a number of other asset classes.

The venture capital business is changing if you look closely. Many of the biggest and best firms are slowly but surely turning their attention from information technology to energy technology (ET). Not all of them will be good ET investors and the firms that don't navigate that transition well will struggle. Firms that continue to focus on IT have largely turned their attention to the web where capital requirements are lower and technology and IP barriers are non-existent. Many firms are struggling with these realities and they may decide to throw in the towel on IT. The VCs who came of age in the glory years of IT venture capital in the 80s and 90s are getting older and quite a few have stepped back or retired outright. While it is certainly true that there will be new firms and new VCs who pick up the slack, the reality that money is harder to come by and may stay that way for years will likely force the venture industry to get smaller not bigger.

But be careful what you wish for. We will get a better, more efficient venture capital industry that produces better returns for investors from all these changes. But we may also get less capital for entrepreneurs. Just like there aren't thousands of great VCs, there aren't thousands of great venture capital investment opportunities. When the industry is flush with cash, entrepreneurs are the beneficiary. When it is not flush with cash, entrepreneurs will feel it too.

Adeo is seeking "less funds and better funds" and I think he'll get that wish. But he's also looking for "more deals and equal treatment". The law of supply and demand suggests that we are likely to get less deals and worse treatment, at least in the short term.

Good entrepreneurs are crafty and will figure out how to navigate this new reality. They'll do what they are already doing, which is to figure out how to bootstrap and build a business without VC, or they'll wait longer to tap into VC. In the web sector, that's a very good approach and I recommend it to every entrepreneur I meet with. In ET and biotech, it's harder to do that and a tightening of the money supply there is a bigger problem.

The other big factor that nobody is really talking about is the globalization of startup culture and venture capital. The capital that gets invested into venture capital firms and our portfolio companies is increasingly global and will become more so. And the investment opportunities are equally global. Everyone is focusing on what's going on in Silicon Valley and to a lesser extent the rest of the US startup scene. But what is going on in China and India and other parts of the world is truly mind blowing. And I think we'll see non-US startups producing a significant, if not majority, of the investment exits within the next ten years. Much of the "sky is falling" prognostication is focused on Silicon Valley and misses the big picture.

So in the wise words of Pete Townshend, "venture capital is dead, long live venture capital."

Bustup not bailout should be our rallying cry. Once upon a time busting up big companies was a populist movement. Its time for that movement to rise up again. Not so much to rid our society of monopolies but to rid our society of financial minefields that are 'too big to fail'. I read a quote on twitter yesterday that said 'too big to fail means too big to exist'.

And yet the govt's answer to our problems is to push for more consolidation. Its nutty. Scale and complexity is the enemy of innovation and what ails most of the large businesses in this country, auto in particular, is a structural lack of innovation in the industry architecture

It takes something like 5 years to get a new car designed and built in most large auto companies. That's too long. I realize that designing and building a new car platform is not like hacking up a new web app. But five years? C'mon. We have to do better than that

And we need to completely neuter the auto industry's ability to lobby our govt to stop important initiatives like clean/alt+energy and mass transit. Its borderline criminal what the auto industry's political efforts have done to our global competitive position right now

The same is true of the financial services business, the airline business, electric utilities, and a host of other industries

I am sympathetic to the arguments that we cannot allow the entire supply chain of the auto industry fail and I am certainly aware how many plants will close and jobs will be lost if we let GM, Chrysler, and Ford fail. Its a tough call and Obama has already staked out a pro bailout auto position

So I hope someone in his incoming team reads this and the conversations on this topic that went on via twitter yesterday. If we give taxpayer money to the auto business, it should be to finance a wholesale bustup of the business. One PE firm should buy Volt. Another should buy Buick. A third should buy Jeep. A fourth should buy Lincoln. And if a brand can't find a buyer at any price with a boatload of taxpayer money behind it then it should fail

This is the best way out of this mess. We have to get the biggest businesses in this country smaller and nimbler, we have to get smart money behind them, builders not spreadsheet pushers, and we must focus on innovation not lobbying. That's the only way forward that makes sense short of throwing them all under the bus and starting over

Note: I wrote this on the eliptical trainer at the gym so no links and prob some typos. I'll try to fix both later

Thanks everyone for the traffic!

You'd have thought we would learn our lesson with stock options. Back in the post-bubble era, I spent a lot of time on boards talking about granting new options to employees who are underwater. When the value of a company goes up too fast, and then comes back to reality (or overshoots it which is a common occurrence), the recently hired employees get screwed. As Alley Insider explains, 80% of Silicon Valley's public companies have underwater stock options right now. Apparently over 1/3 of Google's employees are under water on their stock options. The problem is not as bad in the privately held companies, and since the IRS came out with 409a, it's become much easier to grant options at very low prices so I think privately held companies are not likely to face these same issues unless they are very profitable and/or very close to going public or having an exit.

There is another way to grant equity to employees. It's called restricted stock. And I've become a big fan of restricted stock over the years. When comScore was preparing to go public in the spring of 2007, we had a long discussion about stock options versus restricted stock and adopted a plan that allowed the company to issue both, but in practice the company moved towards restricted stock grants and away from options. It was a good move. comScore's stock, like most every other public company, is down and if they had issued stock options, all the options issued post IPO would be under water. Instead, the employees are in the same place as me and all the other shareholders, down but not out.

There's a big psychological difference between owning stock that is worth less than it was and owning options that are underwater. When the stock market bottoms and starts moving back up, if you own stock you start making money again. If you own under water options, there's a chance your options will never be worth anything. That's not a good way to motivate employees.

Restricted stock has its own issues. When the employee gets a grant of restricted stock, he or she is getting real value that is taxable. Since the stock is restricted and the employee has to stick around for three or four years to earn it, there's a vesting/repurchase feature that reduces the tax impact initially. And there are a number of ways to manage this tax impact for the employee but it is true that restricted stock is not the most tax effiicent way to grant stock. Stock options don't face the tax issues upfront and are preferable for that reason.

I think restricted stock is a no-brainer for founders and early employees when the value of the stock is almost nothing. I also think its a no-brainer for public companies with marketable stock. The place where I am not yet convinced about restricted stock is privately held companies where the stock has real value but it is not yet liquid. In that situation, the tax issues with restricted stock make it less attractive than stock options. And with 409a in place, it's now possible for privately held companies to issue options with strike prices that make them unlikely to get under water. So I think options are still the way to go with companies that are post startup/early stage and not yet public. But just make sure to grant the options with a strike that is as low as possible.

Our portfolio company outside.in announced on their blog yesterday that traffic is up 400% ytd and scaling, performance, and reliability are becoming key concerns for them. And so they also announced they are looking for a CTO who can help them manage to these new priorities.

Outside.in scans the web for local news and information, geotags the content, and serves it up in three places; the outside.in web site, blogs (see the story map on my sidebar), and neighborhood pages on its media partners websites. Basically outside.in organizes the hyperlocal web. It's a great business and a great opportunity for someone with experience scaling large web services.

Outside.in's CEO Mark Josephson has more detail on this position, which is in Brookyn (Dumbo), on the outside.in blog. If you are interested, and I sure hope you are, please email to jobs@outside.in with your resume or LinkedIn profile.

• A $3 Million Round And A New CEO For Outside.in
• Outside.in Gets $3M Funding and New CEO
• Blogging In The 'Burbs
• Outside.in gets $3M and a new CEO for local news
• Hyperlocal Has To Be Peer Produced
• Outside.in Radar: Super-mega-hyper-local content

When I was a kid we used to watch movies on TV and they'd have commercial breaks in them. That was when we'd run to the kitchen for a drink, head to the bathroom, or just chill out for a minute or two. I have fond memories of watching movies that way.

That's what we did this weekend in our home. We've got Hulu hooked up to our big screen TV two ways, via the browser on our mac mini and via boxee, also running on our mac mini (but you can also run Boxee on Apple TV).

On saturday afternoon my oldest daughter was scrolling through the films in Hulu and found a Gus Van Sant film called Finding Forrester. So we decided to watch it. There were four or five commercial breaks during the film, we broke once so I could pick up my son at his basketball practice, and we were able to watch the whole thing before we all went out on Sat evening. We never once had a buffering issue and although it was not HD, it looked way better than standard TV on the big screen.

Yesterday evening, Josh and I were alone and we decided to watch Finding Forrester again. No problem, we went to the mac mini, loaded up Hulu via Boxee, and watched it again.

This is the future of the movie business I think. Sure, we'll still go to the theater with friends and family for a night out. But when the entire library of films is available for streaming on demand via the Internet, that's how we'll choose to watch them. And the commercial interruptions? No problem, like it was when I was 10, it's the perfect time to run to the bathroom or get a glass of water and a twizzler.

Our friend Jeff Jarvis has a book coming out shortly called What Would Google Do?

Jeff was kind enough to give me a pre-galley and I am reading it now. I will blog some quotes as I read it as I've done with several other books this year. Here's the first of hopefully many to come:

Yahoo! is the last old media company. Google is the first post-media company.

I like the term post-media way better than new-media. I am going to try to use it going forward.

Nick Carr takes offense to Mark Zuckerberg's "second law of social media" which Saul Hansell describes as:

“I would expect that next year, people will share twice as much information as they share this year, and next year, they will be sharing twice as much as they did the year before”

Nick ends his short post with the following point:

I'm troubled, though, by the implications of this exponential growth in our release of intimate data. I mean, aren't we all pretty much tapped out already? Think forward a few years, and imagine the kind of details we're all going to have to disgorge just to satisfy the demands of Zuckerberg's Second Law. Shall no fart pass without a tweet?

I think Nick is missing two key points. First, I read Mark's comment as talking about all of us, not just what Nick or I share. So it's not that I'll double my output next year (although I do think I've been doubling each year for the past five years), it's that all of us together will share twice as much info next year as we in the aggregate have shared this year.

The second point is that sharing is not limited to blogging and twittering. It includes posting photos to Flickr, like the 82 photos that Obama's photographer David Katz posted the other day. It includes videos we upload to YouTube, music we post to Tumblr, quotes we like that we reblog, sharing our travel plans on dopplr, uploading our transactions to wesabe, posting our stock trades to covestor, and many other forms of social sharing that are too numerous to outline here.

We are just at the start of the social media revolution and this is not about twittering farts. To suggest that is trivialize an important societal change that we are undergoing. As I've said before, my vision for social media is really simple:

every single human being posting their thoughts and experiences in any number of ways to the Internet

I think it's going to happen and Zuckerberg's law is in line with my thinking about how we are going to get there.

For the past 2 1/2 years, we've been using Sonos as the primary interface to music in our home. It started when Sonos did an advertising deal on this blog and as part of that campaign, I did a long review of Sonos. That first Sonos box led to a few more, and we've now got four Sonos boxes in our two homes (we paid for all of them). Sonos has updated their software a couple times since then and they've addressed all of the issues I raised in that initial review.

But a week or so ago, they did something really big. They released an iPhone/iPod Touch app. I have four Sonos boxes and I have four Sonos wireless controllers. It's the wireless controller that really makes Sonos what it is. The picture at the top of this post is the Sonos wireless controller in our family room where it usually hangs out, controlling our music all day long.

But the controllers are $399 each and they are a bit bulky, need a proprietary charger, and serve only one purpose.

Compare that to the iPod Touch that's running the Sonos app on in our family room now. It costs $229 and it does everything that the Sonos controller does. It's easier to type on when searching for music, it's easier to scroll through artists and/or albums with the gestures on the touch screen, and it's lighter and smaller. In short, the iPod touch running the Sonos app is a better experience than Sonos' own wireless controller.

The iPhone/iPod Touch form factor makes for an ideal family room remote. It's better than any universal remote we've ever used. And it benefits from the application store/market ecosystem it can participate in. I think the Sonos app is just the first of many entertainment device controller apps that will find their way onto our iPod Touch.

But honestly, I don't like the idea of paying for the 8gb of storage on that iPod Touch that we aren't using. I don't like the idea of the audio codec and headphone hack and assorted other hardware that's required to provide iPod functionality that we'll never use.

If Apple were to release an iTouch (an iPod Touch without the iPod functionality) that simply was a processor, OS, wifi, touch screen, browser, and a minimal amount of storage (but not enough for photos and music), it would be a killer device to build home controller apps on. I think it could be sold for less than $150 (I'd love to hear some opinions of what Apple could sell it for profitably). And it could participate in the app ecosytem like the iPhone and iPod Touch can. It might even be a great game device too.

Developers are using the iPhone SDK to do amazing things (like pocket guitar) and I think it's inevitable that we'll soon see a third device in the iPhone family because it will allow developers to focus on new markets like home entertainment controllers like the Sonos app.

• McInblog Review of Sonos iPhone App

Bigness of purpose is what separates 20th century and 21st century organizations: yesterday, we built huge corporations to do tiny, incremental things - tomorrow, we must build small organizations that can do tremendously massive things.

Umair Haque - Seven Lessons For Radical Innovators

I did this interview several months ago as part of a Federated Media campaign that may run on this blog at some point. I like how it came out even though I look exhausted in the video. It's roughly 8 mins long and it's mostly about how technology has changed the way I work.

Over the years, I've seen a bunch of ways to screen a venture capital portfolio looking for insights into risk, return, capital allocation, and areas of concern. I posted about one of them last week I call the Survival Matrix and people seemed to like that one so I've got another one for you this morning.

The Survival Matrix is all about risk, particularly financing risk, in your portfolio. It allows you to easily identify the companies that are going to have near term financing issues.

I call this next one the Portfolio Maturation screen. You plot annual revenues on the y-axis and a subjective measure of "traction" on the x-axis. It's tempting to be overly quantitative with the x-axis and I urge you to avoid doing that. Just pick a numerical score for each company (1 to 30) that gives you some sense of how well they are doing in their attempts to scale into their market opportunity. If the company is a consumer facing web service, then uvs per month would be a good metric to think about. If the company is an ad network, then the amount of inventory they control would be a good metric. If the company is a enterprise oriented web service, then number of customers or channel partners or market share would be a good metric.

Here's what it looks like (again this a set of make believe companies and does not reflect our portfolio or any portfolio I am aware of).

The size of the balls represents how much is invested in each company.

What you want to see (of course) is the balls move up and to the right over time. And you want to see them start out small and get bigger as they move up and to the right.

I've seen companies get to the up and right location different ways. You can move up in a straight line by adding revenues in parallel with scaling into your market. That's the most typical way to grow.

Or like the light blue/green ball, you can move out on the x-axis agressively acquiring customers without generating revenues and then once you've reached critical mass, you can turn on the revenue engine and move into the desired location.

You can also scale along the revenue line first, like the orange and purple balls, and then try to gain traction. In my experience, this is the safest way to grow a business but also the hardest move to make. For whatever reason, a lot of balls get stuck in the upper left of this chart.

What you don't want to see is the lavender ball stuck at no traction and no revenue and growing bigger and bigger. That's a troubled company and you need to either figure out how to help them or find a way to get them out of the portfolio.

The other great thing about this screen is it shows if you are scaling capital into your best companies. We like to start with a very small ball and grow it over time as the company develops its business. If the balls are too big on the lower left of this chart or too small on the upper right, then we are not doing a good job of capital allocation and that's a problem.

I hope you like this screen. Let me know what you think about it in the comments please.