CIMG0086

The World's Best View on Government Spending
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The Family Tree

I am happy to say that I am back to blogging.

And happy to announce that my twins were born and are healthy. My best seed investment so far :)

And we are soon to announce an investment in a really exciting company that has to do with events like twins!

Identity and Differentiation

I have a thesis that a lot of consumer purchasing is driven by the genetically driven need to be different and reproduce. I noticed this because I was reviewing multiple surveys of what types of online activity correlated with different ages. After looking at all the data, the first idea that popped into my head, was that the different online activity by user was largely driven by age. And that it was more important than any other variable. The data showed very clear patterns of online activity by the year for a human.

And interestingly, online activity changes very significantly at the time of puberty in humans. As the realization of sexual and mental changes occur in the mind, there is probably a need to stand out as unique, different, and "special." A competitive sport really. That drives a lot of consumer purchases to fulfill those needs.

Originally, not a lot of different types of consumer material goods were necessary. Probably because there weren't that many humans in your small social tribe to compete with to reproduce with mates. People in tribes could probably just take very archetypal personalities. And get along fine and reproduce.

But along came the 20th century. The role of cities exploded in value. And that lead to many people getting continuously pulled into the cities. And what better initial way to stand out than with very visual material goods. For example, maybe this is how fashion got started. As cities were just scaling, the fashion industry was born to highlight personal status.

If you catch my angle on this, you can see where I am headed to next.

We are about to see the biggest explosion in new consumer product and service creation ever.

The rise of the internet and social networking and having an online life, will bring even larger amounts of people together into online clubs. And they will need to differentiate. Its the reason why MySpace grew and Friendster stalled. That MySpace allowed for the easiest and best personalization features. And its the reason why people will need more online "things" so that they stand out in the online world. And probably the offline world too.

If I had to guess (how I really secretly think), we are on a near vertical rise in the rate of consumer product creation. And this is incredible news for innovators and inventors that really understand the structure, hierarchy, and detail of human needs.

Bring forward your idea. And I will back you.

Environment

A close friend of mine executive produced a great movie called An Inconvenient Truth

Its a very interesting and incredibly well produced and directed view about our environment.

While watching it, it started to dawn on me that there is another change in the environment going on. I think this movie not only speaks about humans and our environment. But what it is to be a human.

While I do agree that we are affecting the environment on earth for living species like us, I also believe that this movie is also tapping into a subterranean (pun intended) dynamic about us as humans.

And that trend is that because of the rise of technologies that create the virtual that we are losing touch with our previous very physically bound roots. I think this a background fear that as a society we will actively debate and discuss in the next 5 to 10 years.

Because of our highly genetically programmed will to survive, our "sensors" are picking up that we are losing touch with the physical. This movie activates that background, subconscious concern of ours and uses it to highlight the main discussion points in the movie. This is a very effective byproduct of the production and directing for the movie.

Ideas and Attention:

It used to be about getting your "15 minutes of fame"

Now it seems like its all about making your point in "30 seconds of attention"

I found a great site called Presentation Zen. Very useful for site design, presentations, video, etc.

Messaging: Part II Community Around Communication

In Part I, I talked about the nature of our symbolic communication. And the origins of our messaging. Well, there is also a set of communication that imparts feedback and context to a communication and to a conversation.

This set of communication is the sense that others are involved with us in real time in the communication. Some startups are addressing this opportunity through embeddable widgets. That's probably why MyBlogLog is rumored to be in talks with Yahoo to be acquired.

Right now, the web and blogs and social media feel somewhat asynchronous. There's real opportunity on making the experience a shared social experience. Right now, most blog/social media experiences for users, just like you reading this right now, give the user a somewhat alone experience.

In our effort to expand out of connected aloneness, its important to do that. The current experience is like going to a concert or sporting event and watching the stage but looking at it through a straw with barriers that shut out the other audience. You know there's other people around but you can't sense them.

Take a look at this recent video. Which is quite funny! And notice the effect of the "laughtrack" on its effect on your experience.

Messaging: Part I Communication and Language

I've been thinking about the nature of the internet and communications. I've got a lot of stuff to post. But I am going to break it down into a series of posts. This is my first in a multi-part series on messaging and humans.

Part I Communication and Language

When I was an undergrad at MIT, I had a "humanities" minor in computational linguistics. It was really interesting. Noam Chomsky led the thinking about linguistics at MIT. Noam's ideas about linguistics and politics seem to be uncorrelated. But they are one in the same. Another thought leader in communications, Jaron Lanier, was my boss at VPL Research, where he coined the term virtual reality. I had lots of interesting discussions over years with Jaron about symbolic communication.

Basically, symbolic communication has to do with the observation that all spoken and written language are composed of symbols. Symbols that represent the physical, visceral, conceptual and emotional human experiences. These experiences have components that tend to repeat and be shared across humans. We share these components by physically producing them as sounds and written words. In effect, these words and language as symbolic communication are a form of a lossy compression algorithm. That's right. This post. You talking to a friend. Language is just a lossy compression algorithm to represent these experiences.

Human culture has driven lots of microcultures. Each with their own language. Each with their own lossy compression algorithm. Over time, languages are subject to Darwinian competition, just like physical organisms. Just like companies in a capitalistic society. Capitalism has spread English as the business dominant language. It's basically the dominant protocol/format for the algorithm.

How did this start? First, as humans we used sounds which were probably composed of 1 or 2 sounds. Basic sounds to represent basic experiences. These sounds were probably utterances that we used to communicate with our tribe members. And they were short in order to get the point across and not be confused. Over time, syllables and phonemes were added to these utterances to build longer words and more narrow experiences. Perhaps narrow experiences shared by a subset of people.

And then with the advent of writing and print, written language took off.

Why are the most popular website domain names a few syllables? Probably because they are easy to remember. And communicate. Just like those early utterances.

So, in essence all of our written and spoken language is a sequence of symbols. Like the ones you are reading right this instance. And you can now see that language is basically a lossy compression algorithm for communicating experiences. Maybe that's why it is so easy to misunderstand what people say. And why its so powerful to have the internet now. Because our symbolic communication can be shared with 6 billion humans.

Thinking of langauge has also helped me see that distinct terminology can be used almost like codewords to identify who is in your tribe. And who isn't. Maybe that's why its so important to certain groups of people to make their members speak like they do. And enforce the correct usage of those symbols. Basically, language is being used as code for group formation of individuals. And to identify with a group. And to identify who is in the group. And who isn't. New groups need new codewords so that the members feel distinct and part of a new self-contained group. These new groups form from the burgeoning need of humans to continue to form identity and differentiate from each other. This leads to the constant creation of new words. New slang. New terms. Forever.

Everyone has had the experience of hearing a word that they are not used to. And wondering what it is. A lot of people call that slang. A lot of people call that terminology. And then when you hear an explanation of what that term or slang means, its a pretty simple concept that was just symbolically compressed into that word, which sounds like a codeword for a group that you don't know.

So, language as a lossy compression algorithm to share experiences. Language as a code to build "tribes."

In my next post, I'll write about how language has been used in different hubs over the millenia. And how we are at the biggest change in communication since we first started speaking to one another in our own local tribe.

CRV QuickStart: Clarity on What it is


My firm Charles River Ventures announced yesterday a program to help entrepreneurs get a cool idea off the ground called QuickStart.

There's been a tremendously positive reaction. We also noticed that there was some confusion about what it is. So let me clear things up a bit.

1) What is QuickStart?
QuickStart is a seed funding program whereby CRV will invest $250K in a promising new startup in the form of a loan to the starutp.

2) What kind of a loan is it? And who is the loan to?
The loan is a convertible note made to the entrepreneur's company. It is unsecured debt. If the company goes out of business, the entrepreneur is not personally liable in any way. The purpose of the loan is to get the entrepreneur up and running and proving out their concept quickly

3) Why is it a loan?
Well, because entrepreneurs started asking us for their seed funding to be a loan. The advantage of the loan is that it allows the entrepreneur to keep the entire equity of the company for themselves as they prove out their concept. There is no equity dilution for taking the loan.

It is also a simple 2 page loan that is easy to understand. And it is fast. There is no need to go out and convince and negotiate the "valuation" of the company for the entrepreneur. This allows for the entrepreneur to quickly get operating and prove out the concept in a stealthy way.

4) If the entrepreneur wanted the seed funding of QuickStart to be seed equity instead of seed loan could they do that with CRV?

YES, totally up to the entrepreneur. We are just offering another option.

5)Why is CRV doing this?
Because entrepreneurs kept asking us for this and we realized the whole startup funding market was entering a new long term trend. A trend where with $250K an entrepreneur could build out and prove a concept.

We believe that there is heightened experimentation on the part of entrepreneurs and we want to support as broad a landscape of entrepreneurship in these projects that are "capital light." We realize that QuickStart could be viewed as disruptive to the business model of seed equity angel investors who traditionally ask entrepreneurs to dilute their stock during the seed phase. We didn't set out on purpose to disrupt anyone's business model. All we are doing is moving in the direction of the entrepreneurs' needs to get concepts out and tested quickly in a way that is palatable to the entrepreneur.

6) If this is so great for entrepreneurs, what is the benefit to CRV? In exchange for giving $250K as a loan to the company what does CRV get?
Very simply, CRV gets the right to participate equally with other equity investors IF and WHEN the entrepreneur decides they want to raise a Series A equity round.

7) Assuming the entrepreneur accepts the $250K QuickStart convertible loan, what are their obligations to CRV?
The obligation is a right for CRV to participate in the first EQUITY round (Series A) with other investors on an equal basis. On our website, we state that we have a right to participate in 50% of the Series A equity round. Frankly, we said that as most Series A investments have 2 venture firms as investors. And we'd like to be 1 of the 2. Thus 50% of the Series A round. But if the entrepreneur wants more than 2 firms, all we are asking for is the right to participate equally with other investors in that first Series A.

8) Who controls the size, timing, valuation, etc. of the Series A equity round? The entrepreneur does. CRV claims no right at all here. We believe that the entrepreneur has the right to go to the free market and suggest the size of Series A they want to raise. At the time they want to raise it. At the valuation they are seeking. From whatever investors they want.

9) Will CRV help me in raising Series A?
If the entrepreneur asks us to, we are happy to introduce the company to quality investors that we know and trust.

10) Why is CRV charging interest on the loan?
Because we have to per IRS rules regarding loans. We have ZERO desire to operate as a bank. We are not in business to make money directly on these loans. Our hope is that the company does super well and we can convert the loan into equity. And participate in the growth of the company. That's what we'd like to do.

11) What is the "discount" on the seed loan mean?
The discount is a discount on the conversion price of the seed loan. That discount would get applied only if and when an equity round is raised. And the discount is only applied to the seed loan portion ($250K) of the future series A equity round. The example on QuickStart shows an example of this. It is definitely not interest and does not get paid out if a Series A equity round is never raised.

11) What happens if the company never raises a Series A and is acquired before raising equity?
That's ok with us. We ask that the loan be paid back at the time of acquisition.

12) Can the entrepreneur include other investors in the seed round?

Yes. We are happy to include other investors in the seed round if the entrepreneur wants to include them. We aren't doing this to block other investors out. We are doing this to participate in new, really exciting concepts that are sprouting all over. So if inclined, other investors including angel investors can join in the seed round if the entrepreneur wants.

13) Will CRV continue their traditional venture investing?
Yes. All we are doing is extending our offering to cover the new reality and new marketplace.

The benefit to CRV is that CRV will get to participate in a lot of really exciting startups in a way that is good for CRV and good for the entrepreneur at the same time. We are just evolving and changing with what the market needs and wants. That's why we are doing this!

Connected Aloneness

Have you noticed that you are spending more and more of your time in front of your PC? And less time in front of your usual media, like the TV, like the radio, like the newspaper? Well, of course you have. The data from Comscore and Compete say that you do. And my guess is that if you ask most of your friends, they would probably say so.

At the same time, have you noticed that more and more of time with friends is virtual? That you have more virtual relationships and friends?

We are rapidly transitioning to a model where we are abstracting from our humanness of enjoying in-person face-to-face physically based meetings. To virtual encounters. To virtual meetings. To virtual relationships.

So, let's back up a step. And ask when did this start? Well, historians will argue that it started the moment we as humans started using symbolic communication known as language. Which then became books. But let's skip some millennia and get to recent history.

Let's go back to when (if you are old enough!) you first saw someone walking around with a Sony Walkman. Remember how people would get irritated about that person with their earphones plugged into their ears just enjoying their own sonic world? Well, now its commonplace. But back about 20+ years ago, it was a new social phenomena.

It was the beginning of our use of our own personal worlds. Where we separated from the people around us. Enjoying our own experience.

Zoom forward two decades. Now the use of cellphones and MP3 players are commonly accepted. And even email, IM, and your own list of virtual friends on a social networking site like MySpace has its own representation and in some way, an emotional connection for yourself.

Recent studies on kids between grades 7 through 11 indicate that IM use with people you know in real life is being surpassed by IM use with people you virtually know online. That the discovery of virtual people through virtual sites is a real phenomena. And is already dwarfing the use of IM. These surveys also reveal that these kids view as a status badge the number of virtual friends they have listed as "friends' on the social networking site's profile.

Why is this happening? Well, because it's fun! And maybe because it offers a seemingly brand new social playing field. Where you can feel a sense of discovery, differentiation, identity, and mastery. Where you can feel a bigger global stage for your life. A sense that your life is connected to everyone. A sense that you are not alone.

Are we any happier because of it? Good question. I don't know. Each person should answer this for themselves.

Where is it going? I think we are on version 0.1 of the virtual world.

Face it, we are already living in the virtual world. Its just clunky. We live in a virtual world full of text blogs, podcasts, flash video embeds, IM, email, and web page surfing. And sure, we hear of all the "registered users" of Second Life.

By and large, it's a clunky 2D one-person-at-a-time text world that is in the cro magnon stages of something that is arcing to an inevitability. An inevitable virtual world that creates experiences for all of us that are like the ones in Total Recall and Snowcrash. Only better integrated with our physical lives.

We are rapidly, in fits and starts, building out this new world for all of us. One where we can feel connected to everyone. But right now, connected while being alone.

This is something to think about. As we continue to read blogs like this. View video on sites like YouTube. Meet virtual "friends" at MySpace. And go about our usual digital lives. All in front of our PC. With everyone, keystrokes away from us.

In our connected aloneness.

evhead: The Birth of Obvious Corp.

Just a note out about Evan Williams' new company, called Obvious, which acquired the assets of Odeo, where my firm Charles River Ventures was one of the investors.

Evan was and is great to work with. Evan is creative, fun, and down to earth.

Evan wanted a structure with maximum flexibility without the overhead of additional investors other than himself. He made a good and fair proposal to the board of Odeo and we happily accepted. Everyone around the table was happy to recognize the obvious and support Evan in his goal of starting Obvious.

We are excited to see him do great new things with Obvious. We wish him the best and congratulate him on his new adventure.

The Consumer. What does a consumer do?

Well consume.

But investors and entrepreneurs use the word "consumer" as shorthand. It has been the capitalist slang for "human." Does this mean that there might be a different view of the word "consumer" ?

Its the purpose of this blog to explore and discuss all facets of this so-called "human." What drives a human. What motivates a human. What they do. What they construct. What they communicate. What they consume.

In a sort of client/server model, humans have been the consumers of the production of enterprises. Enterprises in the sense of pooling people together to create, communicate, and control. This model has existed for ages and fueled the development of the world we now know. And it covers the developments of organizations from religious groups to corporate marketing to governmental groups.

Historians have defined ages as the "agricultural period," the "industrial age," and the "information age." These are technological descriptions of societal development.

The previous ages have now enabled what I am calling the "virtual age."

Basically the use of virtual technologies. Virtual technologies are technologies that use bits, not atoms, as way to affect and integrate the real world. One could argue that the information age was about this. But it wasn't. It was about creating the information and network infrastructure that allows for this "virtualization" of the world and our lives.

The Virtual Age is all about the expansion and integration of our real world and our virtual world.

Remember the Truman Show? It caught our attention in a numerically huge way.....because it tapped into what people were sensing. That we are indeed in the "Virtual Age."