17 December 2004

Letting Go

I believe very strongly that different people have different strengths at different times in a company's life. It's easy to characterize it as pre-revenue to $5mn in revenues; $5-20mn and $20+. As with all generalizations it avoids the subtleties but hits the key points. I have learnt, painfully at times, that my strength is in the "pre-money to $5mn revenue" area. I am genuinely interested in all the bits that come with being a larger company but have very little to add to a CEO who has been there before. For those fighting through to the first year of product sales (as opposed to NRE or grants) I can offer a ton of tough love.

However, like any affair there is a good, better, worse moment to admit that your value on the board could be improved by a someone with skills in the next category up (or the workout category!!)

It does not make it any easier to step down, refocus on the company's where you add more value and move on.

Still feels like shit though when they are doing well.

13 December 2004

Apple - London

I just passed the Apple Store on Lonon's Regent Street at 13.00 - ish. It's FULL. The queue at the checkout was about 20-25 minutes. Nearly everyone was buying i-Pod's and i-Pod accessories (a lot of sound options) but it was clear that people were looking at the Powerbooks and G5's as well.

Happy Christmas Apple.

More On The Economy

Apologies to the Daily Telegraph for failing to remember the link to this. But its yet more evidence that inflation and the dollar's collapse, or the Rbl's rise (the mental masturbation required to make a difference is not worth the effort). Surprisingly it is at the high end where restaurant spend is on the up and up. I thought that the pain was being felt by the "middle-class."

Electronic Telegraph (UK)

December 10, 2004

Russia's super-rich steer clear of shops as boom era ends By Julius Strauss in Moscow

In Moscow's elite Tretyakov Passage, a typical offering at Tiffany's yesterday was a gold, pearl and diamond necklace for about £14,000. In the windows of Gucci, Dolce and Gabbana and Tod's, shimmering behind a phalanx of security guards, some of the smaller accessories cost more than an average Russian earns in a year. For those with serious money there were the Bentley, Maserati and Ferrari showrooms next door. But yesterday, barely a month before Orthodox Christmas and despite a warm spell that brought temperatures up to around zero, the outlets where the super-rich shop were almost empty.

In Russia, which has enjoyed five years of vigorous growth under President Vladimir Putin, experts say it is too early to speak of an economic slump. But economists and even government officials say that the boom which has given Moscow more billionaires than any other city in the world is now over. According to the latest figures, economic growth has fallen to its lowest in 22 months. Industrial growth is back to the levels last seen after the crash of 1998.

Anton Struchenevsky, economist at the investment company Troika Dialogue (sic), said: "This is more than a slowdown. In the second half of 2004 we are talking about stagnation in five leading industries."

In his first term Mr Putin made the goal of doubling the country's GDP by the end of the decade his top political priority. In scenes reminiscent of the Soviet era, he is now frequently shown on state television urging government ministers to ever-greater efforts in the pursuit of national prosperity.

But two mini-slumps this year mean that even government forecasts now say that his economic goal can not be achieved before 2012 at the earliest. With year-on-year growth down to around 4.5 per cent in November, it could take much longer. The downturn comes at a time when oil prices, the main source of Russia's wealth, are at record highs.

After coming to power in 2000, Mr Putin laid the ground for broad-based reforms. His economics minister, German Greff (sic), was allowed to pursue a western-style liberalisation of the economy that brought foreign money pouring in. But in the past two years the siloviki, former colleagues from the security services with little time for liberal democracy and a pool understanding of economics, have won the president's ear. The result has been a new chill in the country's business community.

Some economists now believe that Russia is on the cusp of a return to a state-run economy.

The unseating of Ukraine's pro-Russian president-elect, Viktor Yanukovich, has all but dashed Mr Putin's hopes of revamping a regional empire on the ashes of the Soviet Union. Now the former KGB officer, who likes to model himself on one of the greatest Russian modernisers, Peter the Great, is in danger of seeing an even greater ambition - that of turning Russia into a strong, wealthy and modern country - go the same way.

11 December 2004

Mobile Roaming Charges

The Register on the EU on Roaming Charges.

It's interesting stuff if only because I am working with a couple of start-ups on ways to use VoIP rather than your mobile. Unfortunately nearly all solutions require either a phone hack or a network type solution. Which takes us back to the network operators. The easiest solution at the moment seems to be yet more death for fixed-line operators.

Bets On James Enck's Longevity at Daiwa

After this post on the lack of real thinking allowed in brokerage research I guess a market should open in days that he will be at Daiwa after bonus payment date.

China versus Russia

In Saturday's FT there is a long piece on Liu Chuanzhi, Legend's CEO and The Man Who Ate IBM (Subscription only) The article says very little actually unless you are a sucker for reading PR releases.

Also in today's FT this piece on the first time in Ikea's history that they have failed to open a store on schedule. The blame is being put squarely on the local authorities shoulders who in a usual piece of shameless hucksterism saw a way to a quick bribe when they "discovered" that an obscure stamp on an obscure piece of paper had not been obtained. I am sure that it happened but normally Ikea would have solved the problem; whisper it quietly but the rumor doing the rounds of the retailers is that they were just not ready. Anyway this post is not about Ikea exploiting corrupt bureaucrats to cover their own problems.

The theme is China versus Russia. Mr. Liu Chuanzhi started Legend in 1984/5, 8 years before the collapse of the Communist regime of the former Soviet Union. After a couple of missteps they localized IBM PC's. They started building their own brand PC's in 1990. Today he runs a business that has bought the PC making business of the guys who invented (sic) the PC. Does it seem likely that a Russian-led firm will buy IBM chip design business before 2010?

The question is in itself flawed, as the comparison is actually apples and oranges. Legend has taken over a business that is about inventory and logistics and the application of technology. Russia will never compete in this business space. The real question is where are the international business leaders in Russia who have boot-strapped businesses and when will they start to challenge to be global leaders. Where is the Russian tech business that is exploiting Russia's great talents to take on the world?

My life is about entrepreneurs not established businesses. However, I don't feel or see management quality almost anywhere. There are some inordinately clever people surrounding the Oligarchs and a bunch of pretty clever ones around the Minigarchs. But they are not building businesses they are deploying overwhelming financial power to win in not very crowded spaces. They are not and never will be entrepreneurs. For the record let it be known that VC's are not entrepreneurs either. Some may think more entrepreneurially than others but our future is safe - until it's time to raise the next fund. I spent some time with a pizza & cinema entrepreneur from the regions this week. His mantra is quality of execution. There are very few other businesses where I get that feeling.

There was a point to the Ikea link. Business in both Russia and China is fundamentally corrupt at the bureaucratic level. Yet China has succeeded in creating a number of international businesses that compete on their ability alone; Legend, Huawei and UT Starcom straight off the top of my head. Where is the Russian UT Starcom?

A previous post despaired at the India versus Russia comparison because it is so meaningless. This one despairs at the China versus Russia comparison because it is so huge.

08 December 2004

Messages - DFJ Nexus

For nearly all of you please ignore this message. On 12/7/2004 someone asked about the status of our raising for DFJ Nexus. We are.

Please contact me at astobie at dfjnexus dot com

07 December 2004

The Next Big Issue

It's interesting to watch an issue emerge and the reasons for which they emerge. Ukraine is now a VERY big issue in Russia. It became a big issue when Russia failed to steal an election and the people decided to respond in a very unexpected way (for Eastern Europeans.) However, what should be a minor issue has become something considerably more significant in terms of Russia / Western Elections.

Putin Warns West to Back Off
VC's Bubble Their Way Into China

An interesting article being sceptical of VC's rushing to China. This is not a post decrying VC's rushing to China when they could be coming to Russia. Though it's still a nice idea.

I guess that my business model is to be ahead of the bubble so whilst I still don't have cash please stay away. However, bubbles in any emerging market have an impact in every other emerging market as once bitten, twice shy always works. It would be nice to know that intelligent people would look at all markets equally.

The Talk of a Bubble as Venture Capitalists Flock to China

06 December 2004

Hypocrisy

This from Dan Gillmor's eJournal on the steroid story that refuses to go away in professional sports.

His last point is that he has tuned out the steroid story to focus on the Middle East and a lot of people dying. I believe that this is the worng answer. We have tuned out too much and accept being lied to as the norm. I tried to add this to the comments section but hit server problems.

I would never compare deaths in Iraq with taking drugs in sport. However, our ability to tune out events that we knew to be lies, corrupt, hypocritical started with sports and then moved pretty rapidly to low-level politics, then to national politicians and then suddenly to voting and participating in society.

Drugs in sport is just another example of us (the people) being taken for a ride by the establishment. In some cases it does not matter; take boxing for example which is now so corrupt that it barely registers a flicker before being ignored again. In too many cases just ignoring the bad and corrupt leads to a situation where we accept being lied to as part of the daily truth.

At some point we have to stand up and be counted by demanding that lies be accountable. Sports is not a bad place to start.
India versus Russia

Vladimir Vladimirovich went down to India to get away from his problems in the Ukraine. This from the NY Times Putin Woos Indian Help for High-Tech Hub on 6th December makes me rather annoyed.

It's too easy to stand in awe of the Indian outsourcing model. However, Russia cannot compete in this space on price alone. It can compete under the Israeli model; invent and move to the US. Outsourcing, will never be Russia's strength they are not process oriented and their strength will be in being disruptive not in executing somebody else's idea.

05 December 2004

Me Too Investing

Om charts the end of the original Reef Edge business plan and then finishes the post with the (multi-) million dollar question;
The big question, however remains for the venture capital community: how do you evaluate a start-up that is involved in highly commoditized business like WiFi?
Um...you don't. Venture investing is about anticipating trends, being the start-up that the main stream wants to buy when the product goes mainstream. If you are investing in VoIP today then please go read the hundreds of posts available on me too investing. That is unless you are Tim Draper at DFJ who has the uncanny knack of spotting disruptions in business models. Skype continues to outperform expectations.

The answer lies in the link at the top of Om's page in a very readable 10 Commandments for Entrepreneurs from a Mayfield Blog. Actually it's 13 coommandments and the 3 extra are the most important. I paraphrase;

1. Great technology
2. Great team
3. A market undergoing significant transition

The VoIP market is still in the process of undergoing significant change but the end games are beginning to look a little clearer. With the possible exception of Popular Telephony I don't see much technology disruption going on in the VoIP business model. Technologically the changes are even fewer and further between. This game has been going on for a while. We are approaching the moment of truth when the last 3-4 years of worrying will either lead to a great sale, a good sale, a thank god we sold that sale or oh shit. With the only really unknown happening at the good end of the scale.

Telecom has been undergoing it's own moment of transition for a while now ~ effectively since the beginning of the Internet bubble. There are some plays to be made at the edge (sic) but I doubt that an investment made today in a technology will result in a "Google" day.

We made one play in the telecom world very early and very boldly generating pretty much a 10 on the ulcer scale. At the end of the year I will step down off the board in favour of someone who can help the company as it transitions from a business generating $5-7mn in sales to one that could well do over $40mn in 2005. Job done, time to get the ulcer in full functioning mode again.

01 December 2004

Ukraine

There seems to be some doubt as to why Russia would support a gangster who has never done them any favours over a democrat who was happy to sell to the highest bidder.

Just in case the confusion continues anywhere out there. Russia wants the Ukraine to be a pariah state which is shunned by the rest of the world, with the possible exception of that paragon of democracy Lukashenko from Belarus.

Short term financial gains be damned this is long-term control over its own backyard. Which, if anything is to be learnt from history, is probably a good idea. It's just that your average Russian always has to take the hardest route from a-to-b. If it's possible to fit in a convulted trip via AB1 at the same time that would suit them just fine.

If Putin surrounded himself with people who could think there way out of a 2004 paper bag the solution would be screamingly obvious. Schooling in cold-war spy techniques tends to create a degree of paranoia that makes it logical to support the guy who does not want your support.

17 December 2004

Letting Go

I believe very strongly that different people have different strengths at different times in a company's life. It's easy to characterize it as pre-revenue to $5mn in revenues; $5-20mn and $20+. As with all generalizations it avoids the subtleties but hits the key points. I have learnt, painfully at times, that my strength is in the "pre-money to $5mn revenue" area. I am genuinely interested in all the bits that come with being a larger company but have very little to add to a CEO who has been there before. For those fighting through to the first year of product sales (as opposed to NRE or grants) I can offer a ton of tough love.

However, like any affair there is a good, better, worse moment to admit that your value on the board could be improved by a someone with skills in the next category up (or the workout category!!)

It does not make it any easier to step down, refocus on the company's where you add more value and move on.

Still feels like shit though when they are doing well.

13 December 2004

Apple - London

I just passed the Apple Store on Lonon's Regent Street at 13.00 - ish. It's FULL. The queue at the checkout was about 20-25 minutes. Nearly everyone was buying i-Pod's and i-Pod accessories (a lot of sound options) but it was clear that people were looking at the Powerbooks and G5's as well.

Happy Christmas Apple.

More On The Economy

Apologies to the Daily Telegraph for failing to remember the link to this. But its yet more evidence that inflation and the dollar's collapse, or the Rbl's rise (the mental masturbation required to make a difference is not worth the effort). Surprisingly it is at the high end where restaurant spend is on the up and up. I thought that the pain was being felt by the "middle-class."

Electronic Telegraph (UK)

December 10, 2004

Russia's super-rich steer clear of shops as boom era ends By Julius Strauss in Moscow

In Moscow's elite Tretyakov Passage, a typical offering at Tiffany's yesterday was a gold, pearl and diamond necklace for about £14,000. In the windows of Gucci, Dolce and Gabbana and Tod's, shimmering behind a phalanx of security guards, some of the smaller accessories cost more than an average Russian earns in a year. For those with serious money there were the Bentley, Maserati and Ferrari showrooms next door. But yesterday, barely a month before Orthodox Christmas and despite a warm spell that brought temperatures up to around zero, the outlets where the super-rich shop were almost empty.

In Russia, which has enjoyed five years of vigorous growth under President Vladimir Putin, experts say it is too early to speak of an economic slump. But economists and even government officials say that the boom which has given Moscow more billionaires than any other city in the world is now over. According to the latest figures, economic growth has fallen to its lowest in 22 months. Industrial growth is back to the levels last seen after the crash of 1998.

Anton Struchenevsky, economist at the investment company Troika Dialogue (sic), said: "This is more than a slowdown. In the second half of 2004 we are talking about stagnation in five leading industries."

In his first term Mr Putin made the goal of doubling the country's GDP by the end of the decade his top political priority. In scenes reminiscent of the Soviet era, he is now frequently shown on state television urging government ministers to ever-greater efforts in the pursuit of national prosperity.

But two mini-slumps this year mean that even government forecasts now say that his economic goal can not be achieved before 2012 at the earliest. With year-on-year growth down to around 4.5 per cent in November, it could take much longer. The downturn comes at a time when oil prices, the main source of Russia's wealth, are at record highs.

After coming to power in 2000, Mr Putin laid the ground for broad-based reforms. His economics minister, German Greff (sic), was allowed to pursue a western-style liberalisation of the economy that brought foreign money pouring in. But in the past two years the siloviki, former colleagues from the security services with little time for liberal democracy and a pool understanding of economics, have won the president's ear. The result has been a new chill in the country's business community.

Some economists now believe that Russia is on the cusp of a return to a state-run economy.

The unseating of Ukraine's pro-Russian president-elect, Viktor Yanukovich, has all but dashed Mr Putin's hopes of revamping a regional empire on the ashes of the Soviet Union. Now the former KGB officer, who likes to model himself on one of the greatest Russian modernisers, Peter the Great, is in danger of seeing an even greater ambition - that of turning Russia into a strong, wealthy and modern country - go the same way.

11 December 2004

Mobile Roaming Charges

The Register on the EU on Roaming Charges.

It's interesting stuff if only because I am working with a couple of start-ups on ways to use VoIP rather than your mobile. Unfortunately nearly all solutions require either a phone hack or a network type solution. Which takes us back to the network operators. The easiest solution at the moment seems to be yet more death for fixed-line operators.

Bets On James Enck's Longevity at Daiwa

After this post on the lack of real thinking allowed in brokerage research I guess a market should open in days that he will be at Daiwa after bonus payment date.

China versus Russia

In Saturday's FT there is a long piece on Liu Chuanzhi, Legend's CEO and The Man Who Ate IBM (Subscription only) The article says very little actually unless you are a sucker for reading PR releases.

Also in today's FT this piece on the first time in Ikea's history that they have failed to open a store on schedule. The blame is being put squarely on the local authorities shoulders who in a usual piece of shameless hucksterism saw a way to a quick bribe when they "discovered" that an obscure stamp on an obscure piece of paper had not been obtained. I am sure that it happened but normally Ikea would have solved the problem; whisper it quietly but the rumor doing the rounds of the retailers is that they were just not ready. Anyway this post is not about Ikea exploiting corrupt bureaucrats to cover their own problems.

The theme is China versus Russia. Mr. Liu Chuanzhi started Legend in 1984/5, 8 years before the collapse of the Communist regime of the former Soviet Union. After a couple of missteps they localized IBM PC's. They started building their own brand PC's in 1990. Today he runs a business that has bought the PC making business of the guys who invented (sic) the PC. Does it seem likely that a Russian-led firm will buy IBM chip design business before 2010?

The question is in itself flawed, as the comparison is actually apples and oranges. Legend has taken over a business that is about inventory and logistics and the application of technology. Russia will never compete in this business space. The real question is where are the international business leaders in Russia who have boot-strapped businesses and when will they start to challenge to be global leaders. Where is the Russian tech business that is exploiting Russia's great talents to take on the world?

My life is about entrepreneurs not established businesses. However, I don't feel or see management quality almost anywhere. There are some inordinately clever people surrounding the Oligarchs and a bunch of pretty clever ones around the Minigarchs. But they are not building businesses they are deploying overwhelming financial power to win in not very crowded spaces. They are not and never will be entrepreneurs. For the record let it be known that VC's are not entrepreneurs either. Some may think more entrepreneurially than others but our future is safe - until it's time to raise the next fund. I spent some time with a pizza & cinema entrepreneur from the regions this week. His mantra is quality of execution. There are very few other businesses where I get that feeling.

There was a point to the Ikea link. Business in both Russia and China is fundamentally corrupt at the bureaucratic level. Yet China has succeeded in creating a number of international businesses that compete on their ability alone; Legend, Huawei and UT Starcom straight off the top of my head. Where is the Russian UT Starcom?

A previous post despaired at the India versus Russia comparison because it is so meaningless. This one despairs at the China versus Russia comparison because it is so huge.

08 December 2004

Messages - DFJ Nexus

For nearly all of you please ignore this message. On 12/7/2004 someone asked about the status of our raising for DFJ Nexus. We are.

Please contact me at astobie at dfjnexus dot com

07 December 2004

The Next Big Issue

It's interesting to watch an issue emerge and the reasons for which they emerge. Ukraine is now a VERY big issue in Russia. It became a big issue when Russia failed to steal an election and the people decided to respond in a very unexpected way (for Eastern Europeans.) However, what should be a minor issue has become something considerably more significant in terms of Russia / Western Elections.

Putin Warns West to Back Off

VC's Bubble Their Way Into China

An interesting article being sceptical of VC's rushing to China. This is not a post decrying VC's rushing to China when they could be coming to Russia. Though it's still a nice idea.

I guess that my business model is to be ahead of the bubble so whilst I still don't have cash please stay away. However, bubbles in any emerging market have an impact in every other emerging market as once bitten, twice shy always works. It would be nice to know that intelligent people would look at all markets equally.

The Talk of a Bubble as Venture Capitalists Flock to China

06 December 2004

Hypocrisy

This from Dan Gillmor's eJournal on the steroid story that refuses to go away in professional sports.

His last point is that he has tuned out the steroid story to focus on the Middle East and a lot of people dying. I believe that this is the worng answer. We have tuned out too much and accept being lied to as the norm. I tried to add this to the comments section but hit server problems.

I would never compare deaths in Iraq with taking drugs in sport. However, our ability to tune out events that we knew to be lies, corrupt, hypocritical started with sports and then moved pretty rapidly to low-level politics, then to national politicians and then suddenly to voting and participating in society.

Drugs in sport is just another example of us (the people) being taken for a ride by the establishment. In some cases it does not matter; take boxing for example which is now so corrupt that it barely registers a flicker before being ignored again. In too many cases just ignoring the bad and corrupt leads to a situation where we accept being lied to as part of the daily truth.

At some point we have to stand up and be counted by demanding that lies be accountable. Sports is not a bad place to start.

India versus Russia

Vladimir Vladimirovich went down to India to get away from his problems in the Ukraine. This from the NY Times Putin Woos Indian Help for High-Tech Hub on 6th December makes me rather annoyed.

It's too easy to stand in awe of the Indian outsourcing model. However, Russia cannot compete in this space on price alone. It can compete under the Israeli model; invent and move to the US. Outsourcing, will never be Russia's strength they are not process oriented and their strength will be in being disruptive not in executing somebody else's idea.

05 December 2004

Me Too Investing

Om charts the end of the original Reef Edge business plan and then finishes the post with the (multi-) million dollar question;
The big question, however remains for the venture capital community: how do you evaluate a start-up that is involved in highly commoditized business like WiFi?
Um...you don't. Venture investing is about anticipating trends, being the start-up that the main stream wants to buy when the product goes mainstream. If you are investing in VoIP today then please go read the hundreds of posts available on me too investing. That is unless you are Tim Draper at DFJ who has the uncanny knack of spotting disruptions in business models. Skype continues to outperform expectations.

The answer lies in the link at the top of Om's page in a very readable 10 Commandments for Entrepreneurs from a Mayfield Blog. Actually it's 13 coommandments and the 3 extra are the most important. I paraphrase;

1. Great technology
2. Great team
3. A market undergoing significant transition

The VoIP market is still in the process of undergoing significant change but the end games are beginning to look a little clearer. With the possible exception of Popular Telephony I don't see much technology disruption going on in the VoIP business model. Technologically the changes are even fewer and further between. This game has been going on for a while. We are approaching the moment of truth when the last 3-4 years of worrying will either lead to a great sale, a good sale, a thank god we sold that sale or oh shit. With the only really unknown happening at the good end of the scale.

Telecom has been undergoing it's own moment of transition for a while now ~ effectively since the beginning of the Internet bubble. There are some plays to be made at the edge (sic) but I doubt that an investment made today in a technology will result in a "Google" day.

We made one play in the telecom world very early and very boldly generating pretty much a 10 on the ulcer scale. At the end of the year I will step down off the board in favour of someone who can help the company as it transitions from a business generating $5-7mn in sales to one that could well do over $40mn in 2005. Job done, time to get the ulcer in full functioning mode again.

01 December 2004

Ukraine

There seems to be some doubt as to why Russia would support a gangster who has never done them any favours over a democrat who was happy to sell to the highest bidder.

Just in case the confusion continues anywhere out there. Russia wants the Ukraine to be a pariah state which is shunned by the rest of the world, with the possible exception of that paragon of democracy Lukashenko from Belarus.

Short term financial gains be damned this is long-term control over its own backyard. Which, if anything is to be learnt from history, is probably a good idea. It's just that your average Russian always has to take the hardest route from a-to-b. If it's possible to fit in a convulted trip via AB1 at the same time that would suit them just fine.

If Putin surrounded himself with people who could think there way out of a 2004 paper bag the solution would be screamingly obvious. Schooling in cold-war spy techniques tends to create a degree of paranoia that makes it logical to support the guy who does not want your support.