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Internet Investing at, and other random stuff…

Backing Your Dreams

September 16, 2011


So, the word leaked out yesterday.   I was really touched by all the well wishes on Facebook and Twitter. Thank you all so much.

At dinner with some of my favorite entrepreneurs I had the following exchange with Narendra Rocherolle, who, if you don’t know, you should:

N: So Mike, why are you doing this new fund thing?

M: I really want to focus on super early stage stuff.

N: Yeah, but why?

M: Well, that is what I really love. When I get up in the morning, the thing that really charges me up is getting to hang with young, hungry and passionate entrepreneurs — batting ideas around, strategizing with them about building a business, and/or just hanging out over a beer and hearing what they are excited about.

N: Yeah, OK, we all know that, but why? Why do you get so excited about this stuff?

No one had really asked me that. Why do we love the things we do?  We went around the table — Matt, why do you love music?  Dave, why do you love the outdoors?  And so forth.

Which made me realize we don’t often step back to examine why we have the motivations we do.  Why do we have the likes and dislikes we do?  Why are we passionate about the things we love?

Getting back to the question at hand:  I had to think for a few minutes, but then  I responded to Narendra that I think my passion for the super early stage lies in the fact that I am getting to back entrepreneurs’ dreams.  Special entrepreneurs always have a dream — not just the product they are building, but what it is they ultimately will build, the company, the culture, the organization; how they are going to impact peoples’ lives;  how they are going to change the world.  Talented people who are inspired by a dream are, themselves, inspiring.  And getting to help them achieve their dreams is inspiring.  And that is why I love what I do.

I look forward to backing many more dreams, and helping (some of) them becoming realities.

My Next Chapter

September 15, 2011


Effective today, I will be leaving Polaris Venture Partners, and setting out to launch a new seed firm.

While I am excited by the prospect of building something new, it is difficult to leave the partnership I have been part of for 12 years.  I feel lucky to have had the chance to learn the venture business from two of the industry’s finest practitioners, and to have worked with a remarkable group of partners.  But over the past few years I have grown a passion for working with young entrepreneurs at the very earliest stage of conceiving and launching a venture. I have certainly had the chance to do that at Polaris, whether it be through Dogpatch Labs or making seed investments, but now I’ve decided I want to make this my exclusive focus.

My Polaris partners and I have both come to the conclusion that pursuing this focus is best done in a vehicle other than Polaris funds.  While Polaris will certainly continue to dedicate a significant portion of its funds to seed investing through Dogpatch Labs, and other similar efforts, I want to focus exclusively on super-early seed stage investments.  Polaris’s diversified strategy has been and will continue to be an incredibly successful formula, but my partners and I have come to realize that a dedicated seed fund is the best platform from which to pursue my passion for the super early stage.

I am deeply gratified that Polaris is supporting the formation of my new venture, and look forward to what I hope will be numerous opportunities to co-invest with my Polaris partners

The “Brave New World of Data” Isn’t Just About Consumers

March 16, 2011


Venture Beat has a widely retweeted post, titled “The Brave New World of Data,” that describes Reid Hofman’s talk on the growing importance of data on the web.  Hoffman give several examples how the use of data can make (mainly consumer) applications and services more powerful.

While I heartily agree with Hofffman’s thesis, I also think there is a whole range of business value being created by online data that is being overlooked.  As both brick and mortar and web businesses alike conduct more and more of their business online — a trend I think we all agree is universal and only increasing — opportunities abound for those businesses to capture incredibly powerful data about their business.  This, in my mind, is the REALLY big opportunity for data — the opportunity for businesses to harness the data made available online to transform themselves into data driven businesses.  We are certainly seeing this in the current generation of highly successful consumer web plays.  Under the cover, Zynga looks much more like a quant shop than a game studio.  And in my own portfolio the LOLapps team continues to impress with their fanatically analystical approach.  But the opportunity is for all businesses to emulate the hyper-analytical cultures in those businesses and become truly data driven business.

Why Selling to SMBs Is Becoming Sexy

February 26, 2011


For years, VCs have had the refrain of how hard it is to sell to the huge but massively fragmented SMB market.   Invoking the curse of the SMB market was a great way to winnow out our email boxes and/or avoid a followup meeting.

Today, though, SMB-facing businesses seem all the rage.  Why the turnabout?

It’s simple — the migration onto the Web has flipped small and medium sized businesses from the hardest to reach to the easiest to reach businesses.  Today, nearly all SMBs are online — using the Web both for their own business and to find goods and services.  As a result, where larger enterprises still require direct sales, SMBs often can be brought into the sales funnel using very highly leveraged online marketing campaigns, whether it be SEM/SEO, email marketing, or social media.  Large and very profitable software-as-a-service businesses can be built targetting SMBs without ever raising the type of capital necessary for businesses that depend on a direct salesforce.

At Polaris, we’ve had the chance to see this across a number of our software companies, most notably LogMeIn, which went from tiny startup to billion dollar public company in just 5 years and less than $20 million in capital.  With our partner Dave Barrett, who worked closely LogMeIn and its marketing guru Sean Ellis, leading the charge, we’ve since backed a range of companies focused on bringing cost- and -management-effective solutions to SMBs, including the likes of Egnyte (file management), KISSMetrics (analytics), Recurly (subscription management) and a couple other not yet public projects.

OK, so maybe it’s not exactly “sexy,” but it sure is a great way to build highly profitable businesses…

How to Win on the Internet: Data

February 23, 2011


There is alot of hype swirling around these days about the big platform shifts: social, local, mobile, cloud, it’s all transforming the web as we know it, we hear just about every day now.

I buy into alot of the hype. Each of these is a bid deal in its own right, and the four together feel more like a tsunami than a wave.

But one trend that I don’t hear nearly as much about is at least as important as those four: the rise of data as the killer differentiator for Internet businesses.  Sure, social/viral customer aggregation is changing the rules, and yes every web business needs a mobile strategy, and of course everything is moving to the cloud. But, if you ask me, the line between the winners and also rans of this generation’s startups is going to be drawn according to who really and truly understands data, and uses it to their own and their customers’ advantage, versus those who only give data lip service in fundraising pitches.

Most entrepreneurs we meet with these days are at least smart enough to pay homage to data being a key longterm asset. But I am not convinced many of them really are capable of executing on this.  I’ve been fortunate to have a front row seat from which to appreciate both the challenge and power of leveraging data.  For three of my current portfolio companies, data is the single most important strategic asset contributing to their success.  And in each instance, major investments in infrastructure from the outset, a near maniacal passion for analyzing data, and some pretty crazy math chops, are key aspects of the companies’ culture and strategy.

While you should certainly include that data slide in your fundraising pitch, first ask yourself whether you’ve really made it a priority>

Social Networks Aren’t Really About your Friends After All

February 1, 2011


Social Networks are all about our friends — we “friend” people on Facebook for a reason, right?  Well, of course. Our social graph is just a fancy term for our network of friends.

But as the space emerges, the social web is more and more going to be about people we don’t know yet.  Talking to startups doing interesting things in the space, we are hearing more and more about leveraging the social web to help you make connections with strangers you have a reason to know.  Your mobile device tells you about people in your close proximity; or you get to connect with people you don’t’know but have similar interests to;  or you find a service provider who has been endorsed by someone you know; or you identify a friend of a friend who works at that company you are dying to go work for.

The fun of the social web will continue to be around your friends, but the value is going to be more about finding strangers.

Social Ad Systems Emerging — Slowly

January 26, 2011


As social continues to take over the web, social ad systems are ever so slowly starting to emerge.

Yesterday, Facebook announced its new “sponsored stories” ad product, where brands can promote a user’s interaction with the brand to the user’s friends.  And just this morning it is reported that Twitter has begun testing its own self-serve platform for “promoted tweets.”

It will be interesting to watch whether Facebook and Twitter vying for brand dollars will accelerate the evolution of social ad systems.  I could be wrong, but it seems to me that while in general the social web moves at a far more rapid pace than did the Google-era web, efforts at monetizing have been come more gradually as the current mindset prioritizes growth and market dominance over monetization.  I took a look and discovered that Google rolled out AdWords just a bit over a year after raising its first VC round, whereas today consumer/social web entrepreneurs and VCs alike seem more comfortable to be single-minded about growth for longer periods.

The 5-50-500 Rule

November 30, 2010


I spent the morning today visiting with the team at Quantcast, which is up to some pretty exciting stuff, and ended up discussing with co-founder Paul Sutter what Paul calls the “5-50-500” rule. I found it pretty instructive not just as a lens for evaluating Quantcast’s progress, but more generally as a useful way to think about the phases of a startup.

The idea is that startups go through distinct phases that are marked by the number of customers it serves.  [Note, this is oriented towards B2B businesses].  The “5” phase is marked by very high touch relations with the first 5 customers, typically beta customers who are helping inform you of product requirements and product-market fit generally.  The “50” phase is where you more or less have product market fit and you shift focus toward go to market strategy and tactics.  And the “500” phase is where you focus on building a scalable model for selling and delivering your product/service.

While, of course, there are other metrics by which to chunk out the phases of a business (no. of employees, revenue and profit levels, amount of risk reduced/remaining, to name a few), it is a very worthwhile exercise to ask yourself what will be required to sell and service 5, 5o and 500 customers.  You may be surprised by the answers…

This is Going to be BIG

November 15, 2010


I have totally drunk the Kool-Aid on Social CRM — it’s my latest favorite answer to the question “what’s the next big thing?”

The social sea-change spreading across the web is not just influencing consumer sites and services, but will have a major impact on categories from Ad Tech to enterprise software. And nowhere is this more evident than in CRM.  Which makes also the sense in the world, since the “C” whose relationship is being managed is an inherently social creature who is becoming increasingly comfortable with (even dependent on) social products and services.

Paul Greenberg explains that Social CRM makes sense in large part because

customers … want to engage more than ever with the companies that they are purchasing from and they are conversing about those companies in the channels that the companies don’t control.

According to Greenberg, companies are looking to SCRM for 5 different uses:

  • How to find out what their customers are saying about their brand – good and bad.
  • How to provide customers with inputs to the company so that the customers can either have the opportunity to participate in dialogue with the company, or provide feedback to the company in multiple ways or minimally, have avenues for greater transparency from the company.
  • How to provide self-service avenues that are sufficient to allow the singular customer to sculpt his or her own individual experience with the company whether  as simple as deciding on the channel that the individual customer wants to use to find out information or as complex as creating and using tools to produce a product that is tailored to the customer’s individual desires.
  • How to make sure all of the customer’s interactions and social data become part of the individual’s customer record – adding to the more traditional transaction records and basic field level data (name, address, etc) that already resides there.
  • How to use all that to gain insight into the social customer and to figure out the value of that social customer to the company?
  • But above and beyond the various ways social data and interactions can be leveraged to make current CRM functions more effective, we are seeing startups using the social web to rethink the ways that businesses can identify, attract, acquire and retain users. And it is this new wave of startups that has me most exicted.

    Minimum Viable Network

    November 2, 2010


    The Lean Startup movement has brought the concept of a “minimum viable product” into the mainstream of startup culture and strategy.  Last weekend an entrepreneur I met introduced me to the concept of “minimum viable network.”  In a nutshell, the idea is more or less just that you need a critical mass before a social network becomes useful.  And where,  as with sites like Yelp, the network requires some degree of physical proximity, this critical mass must be obtained in each region the network operates.