Vinny Lingham’s Blog

I’ll be speaking on the Omniture sponsored panel today, at Search Engine Strategies in San Jose. My focus on the panel will be to discuss Return on Effort. If you’re at SES today, look me up (you can use the contact form to mail me!).

I’m attending the MIT/Stanford Venture Lab (VLAB) conference on Cloud Computing.

Jonathan Bryce, Co-founder, Mosso, is the keynote speaker.

Overview: “Cloud computing increases capacity and expands computing capabilities without heavy investment in infrastructure, training or software licensing. Most importantly though, it democratizes Web 2.0 application development. With the removal of two significant barriers to entry - cost and capacity access - suddenly even small, lesser-funded entrepreneurs can dream big and bring their grand Web 2.0 applications to market.”

Moderator: Ross Mayfield - Chairman, President & Co-founder, Socialtext

Panelists: Paul McNamara, CEO, Coghead
Ping Li, Partner, Accel Partners
Michael Crandell, CEO & Founder, RightScale
Lydia Leong, Research Director, Gartner
Jonathan Bryce, Co-founder, Mosso

There was a lot of Q&A and the basic agreement that the audience had was that cloud computing is the future, although there are a lot of challenges that lie ahead. I think the consensus view was somewhere between 5-10 years before it became mainstream practice.

Jonathan took the podium to discuss his experiences with Mosso, which is a subsidiary of RackSpace.

Rackspace in 2004 not only survived, but thrived during the downturn post 2000. Their average growth was about 60% a year and Jonathan was part of the team that drove the company to setup a virtualization platform for the company and facing the fact that cloud computing was inevitable, but they had to change or die. His proposal was to:

Stop selling servers
Share infrastructure
Cut prices by 1/4
Become an innovator

Jonathan realized that this would cannabalize the existing business, so they created a separate entity which was a threatening competitor, stole some of the best talent, moved out and bashed servers on their own site.

The differences between cloud computing and traditional servers are very startling. In the traditional server business, there is a lot of upfront cost that goes into setting up a server for a customer - which inevitably means setup fees and long term contracts. With cloud computing, it’s pay as you go, and it’s cheaper for both the customers and the provider.

Before Amazon launched S3, storage cost $20/GB with buyers needing to buy terabytes at a time. With S3, it’s not 15c/GB.

Many people wonder how and why we can offer unlimited free hosting at SynthaSite - this explains it quite well. The cost of hosting has dropped to a minimum amount and given that in a competitive market, the price drops to marginal costs (Economics 101), how can anyone charge a small business or personal user to host a website that literally costs pennies…

Cloud computing is changing the economics of the Net and allowing more competitive businesses to spawn, which will create business models and revenues out of value creation, and not complexity or overhead (value vs. time+materials+markup). It’s like comparing an accountant to an investment banker.

This it the title of the session at TiECon that I’m in right now.

In this Panel discussion we take a look at current technology investing trends from a panel of blue chip VCs. If you are thinking of starting your company then this is a must attend seminar for you.

Come and hear VCs from Silicon Valley’s premier firms provided their insight on hot areas of investment both locally and globally.

Key Discussion points:

- What are the Hot trends?
- Cleantech - Lasting trend or passing fad?
- Virtualization - What is next?
- Web2.0 and beyond: Will the next killer social application have to be built on Facebook or Google?
- Software - SAAS or Enterprise?
- Wireless - What is a bigger disruptor iPhone or WiMax??

TiE Host(s):
Waheed Qureshi, Zenprise

Moderator(s):
Packy Kelly, KPMG LLP

Panelist(s):
Shawn Carolan, Menlo Ventures
Navin Chaddha, Mayfield Fund
Ken Elefant, Opus Capital
Deepak Kamra, Canaan Partners
Mark Sherman, Battery Ventures

Hot investments right now: Green tech, Software as a Service, Financial technologies, computer services, digital media & software, virtualization, gaming.

$17bn gaming market is now bigger than Hollywood! Navin Chaddha from the Mayfield Fund made the point that about 1,500 companies year are getting funded - how many of these will succeed?

Enterprise 2.0 best practice, according to Navin, is to look at the new generation needs of Internet 500 companies and start catering your produce to companies that have large amounts of scale. Companies need to start focusing on countries outside the USA. The mindset has to change to earn lower ARPU (Average Revenue per User) but with large scale.

Focus on SEO so that you don’t have to spend money with Google on CPC’s - especially as a startup - great advice! He used Fixya, as an example.

Nice piece from Navin.

Deepak is looking at social networks and video, enterprise software & sofware aka platform as a service.

Shawn sees opportunity in the premium sms market for mobile and the iPhone as a big area of innovation with the new iPhone SDK. Skeptical of consumer oriented mobile plays in the US - but sees huge opportunity in India and other emerging markets.

Navin outlines that India only has 2m broadband users - and 300m mobile users!! Mobile payments in India will be big - but not locally in the US. 10 million SME’s in India that will not purchase a payment terminal - and 300m Indians who will not get a credit card. The mobile phone will become the new transaction terminal (as a South Africa - I’ve heard this all before - so it’s nothing new. We have companies like Fundamo & MTN who have been doing this for years).

Question: When is the right time for an Entrepreneur to approach a Venture Capital firm?

Right approach: Experienced team, big markets, enough details to support, competitive analysis and research, all venture bets are contrarian bets (there’s that contrarian approach again).

Understand your strengths and weaknesses before approaching. If they’re a seed firm - it’s fine to be two guys with an idea - if they are a bigger firm, you need to be a bit more established. Founders of previous companies who are getting involved with new companies in a space where they have some expertise receive bonus points for domain expertise.

Question: Are Facebook apps hot or not?

Ken Elefant: Not hot. Facebook related companies that provide an infrastructure (pick axes to gold miners are good thought).
Deepak: Some are hot, other are not. Huge volumes - not supportable by advertising. Sponsorship will probably work. Subscription models are interesting - but the vast majority of Facebook apps will not be financially viable.

SaaS is the biggest theme among the venture capital community at the moment, according to Mark.

Question : Will server virtualization lead to desktop virtualization? What is the future?

Ken: Desktop virtualization is an interesting space. Ken recently had a company in that space acquired by Microsoft. Security around these environments is a concern - the question is how much value can be extracted.

That’s pretty much the end of the session.