On Friday, 12/13, @nabeel and I recorded our latest edition of Hallway Chat.
Show notes:
As always, thanks for listening and feedback welcome!
There seems to be a lot of folks paying attention to Snapchat rejecting Facebook’s $3B offer.
Loosely speaking I’ve seen negative sentiments like
“This means Facebook is in trouble”
“I knew it, we are in a bubble”
“The Snapchat founders are nuts”
I don’t think it’s any of those things.
Consider Facebook’s stock is pretty high right now. They are flush with cash, profitable and can easily afford $3B for a leader in this new emerging market. And kudos to Zuck and co for taking bold moves. Their purchase of Instagram was extremely smart. This was a sensible offer, not one from desperation.
It is reasonable to assume that the Snapchat founders have already taken out millions of dollars in secondary sales of their stock. They are not risking losing it all, instead they are going for it.
I like this tweet by Aaron Levie. In less than 140 characters he summed it all up nicely.
No one rational would have turned down $3 billion for SnapChat. But, no one rational would have built SnapChat in the first place.
— Aaron Levie (@levie)
Snapchat’s future is up to them. They have to do a lot of things right. But they have an opportunity to build a big, important company.
(Update: to be clear, I’m not referring to any Spark Capital portfolio companies, past or present)
“If he’s so smart, why did he sell his company?”
That was the line a very well regarded venture capitalist said to me over breakfast earlier this year.
At the time it struck a chord. He was referencing an entrepreneur in the Bay Area that sold his successful company way too early. It’s now worth likely 10x as much. Maybe more.
That conversation reminded me of the email @ev sent to the board back on 2008. A larger company wanted to buy Twitter at the time and made a generous offer at the time. We didn’t want to sell but @ev was the largest shareholder and his opinion was critical. I went to bed and woke up to a thoughtful email about why we shouldn’t sell. I was more than grateful to ev for that day and others to come.
Last week I read Bill Gates will have sold all of his Microsoft stock by the year 2018 through a series of planned transactions that began many moons ago.
I was dismayed by this. Why would he sell all of his stock? How can he expect investors, employees and customers to believe if he doesn’t. Doesn’t he care about his company? His legacy? Again that line, “if he’s so smart, why did he sell” seemed to apply to yet another founder.
Then yesterday I went for a long run in the rain with Lauren. About 5 miles in I mentioned the Bill Gates story and his plan to fully divest his ownership in the company he founded and led.
Lauren disagreed with my frustration and disbelief. “Look at his passion now. Look at all of the incredible work he’s doing. Could he do all that if he was focused on the past? Would there be a Melinda Gates Foundation?”
She’s absolutely right.
Consider Elon Musk. He sold PayPal which is worth much more today than when they sold the business to eBay. But since then he was able to use that success to start Tesla and SpaceX. Would those companies have happened if he remained at PayPal ? What else is Elon going to create. Something tells me he’s not done.
It’s easy for us as investors and outsiders to want founders to go all the way. It’s in our interest and we hold on to the romantic notion of not selling out.
But there are sometimes good reasons for selling of successful companies even if we don’t see them at the time.
(Excuse the typos. Wrote this on my mobile)
I continue to be in awe of our online connected communities that where we discover our passions and then allow us to act on it in ways we previously didn’t consider possible for ourselves.
Just a few examples:
There are folks getting book deals from their contributions on Tumblr. Here is one of my favorites.
I know people that join creative marketplaces like Storenvy and Etsy and are able to quit their day job and focus 100% on building their craft and business.
You see it in places like Uber as well. Drivers starting out doing odd jobs on Uber and then developing enough business to work for themselves.
Over the past year, I’ve met extraordinary photographers that found their talents with the arrival of the iPhone 4 & Instagram a few years back. Through their beautiful imagery, they gained a massive following which led to a professional career in photography. It wasn’t pro photographers going to Instagram. It was the other way around.
Absolutely wonderful.
We have invested in Storenvy, Skillshare, Kitchensurfing and some even newer communities (we haven’t announced yet) —— I hope they all can help people work for themselves and focus on their true love.
For the better part of this year, I’ve been looking at ways to make our home smarter, more efficient and as a result connected.
Our home devices are cumbersome and clunky for the most part.
It’s no wonder Nest is so compelling. It took a dumb, ignored device and made it great. Reminds me of the state of the MP3 market before the iPod came along and blew us all away.
Besides the thermostat there are so many other devices in our homes that are equally hard to use and disconnected.
Your remote control, cable box, electrical system, lighting system, heating system, appliances, phone systems etc haven’t changed in decades. Either you spend a lot of money on an expensive, closed home automation system or you live with the status quo.
We have an ADT alarm system in our house. I heard they have a feature called Pulse so you can control and manage the system from a mobile device.
I called ADT about it a few ago. I got transferred a few times. The customer service person was confusing. Here is what I learned: I have to get a box that will be professionally installed (truck roll). My monthly bill goes up by $10 or $15 per month (not clear). The box costs $399 but I’m told I called at a “good time” and I can get it for $99. I also have to agree to a 3 year contract — no exceptions. Can I pay more for the box so I don’t have to sign a 3 year contract? No.
Ok, I’ll try it anyway.
So came to my house last week and the nice fellow said he couldn’t install it because the Pulse system was down.
Another appointment, another truck roll.
I am rooting so damn hard for startups like August, Nest, SmartThings, and others, to come into our homes and shake up this market.
To those unaware (or too young to remember), “Crackberry” was the name many of us called our Blackberry once upon a time.
I was an early and loyal user. From the early days of with a pager style version and up until winning my title.
The Blackberry was a beloved product for sure. It was designed to do one thing — always on email in your pocket. And it did that thing very well.
It was so novel and addicting many users reported phantom vibrations when the device wasn’t with them. They just felt it anyway.
All of this seems like a lifetime ago as Blackberry is now looking for a buyer. The past half a decade or so has not been kind to the company. Apple and Google have catapulted in front with products that make mobile the most important part of our connected lives.
However, this was a company many large companies would have loved to acquire back in the day. It would have been a perfect acquisition for Microsoft. Strong enterprise penetration and a seamless integration with Microsoft Exchange server.
I have no idea what someone will pay to acquire the company but its far less than what it was worth years ago. It feels simply too late. Shouldn’t the board have acted sooner?
Perhaps, but it likely looks a lot easier from the outside than the inside.
I’ve been on many boards where you just want to believe in the future that is better than today.
You see the new products on the roadmap and they look exciting. The team is fired up. Maybe this product will be the one to get things back on track. You want to believe. You don’t want to be the asshole sitting in the board room being negative while management and the employees are working like crazy working.
Sometimes I have gotten it right. Staying positive through rough times was the right call. Or calling a spade a spade during the tough times.
But lord knows I’ve also gotten it wrong by waiting too long.
Just wanting to believe.
Over the last week, Microsoft announced that it was shutting down MSN TV which came from their acqusition of WebTV Networks back in 1997.
And during that same week, Samsung acquired Boxee.
I thought I would share some thoughts since I worked at WebTV before and after the acquisition and served on the board of directors at Boxee.
First, WebTV Networks.
WebTV was my first real startup.
(Technically that’s not accurate, WebTV was actually the second startup but the first one was such a short stint that it’s hard to call it my first.)
(WebTV founders from left to right: Phil Goldman, Steve Perlman and Bruce Leak, 1996)
I loved WebTV. My commute from San Francisco to Palo Alto every day was long but I never cared. I never spent time thinking about my stock options and what they might be worth someday. All I knew was that I was working with amazing people working on something incredible. (I transferred my WebTV car sticker from car to car until 2005. I still possess all of my webtv t-shirts)
The first version of WebTV (1996) was a set top box that you connected to your analog, interlace televison (remember no hd/progresive scan monitors then!) and it delivered the web on your tv that you could control with your remote control. This was before we had ubiquitious broadband and WebTV connected to the internet over a 56k dial up modem.
The first device had 2 megs of RAM and ROM. It was fully compabilitable with Netscape 3.0 on the desktop (except for Java support….long story).
But even with a small pipe and scarce resources in the box, the user experience was fantastic. The browser was lean and mean. All internet content was transcoded in the server to make sure it was optimized for the set top box. The software was tightly integrated with the hardware. Average session duration was off the charts.
The team worked crazy hours to make it happen. It was mighty audaciuos right from the start. The company was acquired by Microsoft for $425MM and became profitable. The technology evolved and we brought the first integrated DVR into the world, and future versions of the technology found their way into the Xbox, Ultimate TV, MSTV and MSN TV.
Many of the friends and relationships from those days continue almost 20 years later. The team has gone in many different directions and have done so many things. Steve is still building incredible things at Rearden. Andy Rubin changed the word with Android. Lee is creating super cool stuff at Nest. Bruce is building a company at CloudCar. Jackie created Sponge School. Naveen is CFO at TiVo. Tim Nichols started Duff Research, built awesome apps and was acquired by PayPal. Patrick Bonnaure is at a new stealth mode startup. Tim Bucher went on to build Zing (acquired by Dell), lead Macintosh Engineering and now Black Pearl. Wass has a crazy cool lab at MIT. The list goes on and on.
That experience taught me so many things. Seek that wonderful combo: working on a product you love with people you admire and respect. I also learned numerous startup and product lessons which left their mark.
(Avner Ronen, Boxee cofounder & CEO, 2009)
About ten years after Microsoft acquired WebTV, I met Avner Ronen – the ceo and cofounder of Boxee. Later in 2008 I wrote about our initial Series A investment here.
After we co-led the Series A with our friends at Union Square Ventures, the buzz around the company continued to grow. The product was still in beta but had an engaged active community. It was a small community to be sure but they wanted Boxee to be successful. It was a taste of something new and exciting. So different than the typical cable experience.
So much had changed in the world since the days of WebTV. We now have super fast connections to the internet (good bye dial up!). We have awesome legal, online video. (most content WebTV displayed was text and jpegs). And Moore’s law was showing us hardare to run Boxee’s software was getting cheaper and cheaper where you could see a path to low cost stand alone devices.
But then the crazy factor began.
Even though Boxee had a tiny team, balance sheet and user base, content owners were worried. They had their video online but apparently they didn’t want you to watch it on your “big screen". They pressured and forced various companies not to work with little Boxee.
I had several conversations with traditional media folks about this. The conversation often went like this:
Me: “Boxee is just like firefox. It’s an open source browser that displays your content. We don’t block ads (unlike DVRs or browser ad-blockers), give you free distribution and make your stuff look great on the big screen"
Them: “Our content is only online for PC and desktop use. Read the terms of service"
Me: “But even without boxee, users can simply connect their MacBook to a big tv or big screen right?“
Them: “We don’t want or expect people to do that”
Me: “Why?“
Them: “that’s not how we do it”
I’ll spare you the rest of this part of the story but you get the idea. It was beyond frustrating. It was one of the important reasons we agreed to sell the company a lot earlier than any of us wanted to.
I want to express my heart felt gratitude to the entire Boxee team that worked tirelessly over the years. They worked most weekends. They made impossible schedules work somehow.
I saw Avner make back to back red eyes, get products out the door, figure out ways to finance his company when it was beyond hard, keep the team intact, deal with crazy corporate bullying, establish critical partnerships and lead a company while one of his parents was dying. He never complained or asked for more or threatened to walked away. He’s an inspiration and Samsung is lucky to have him.
I am also pleased most of the team will work on the future of television at Samsung. I still believe in the future of television that is different than the thing we get today (ie closed, proprietary, packaged, bundled, windowed, crappy ui, black out rules, etc). I hope the team can keep working and improve this madness.
I’ll end this post with a line from an email my friend Bruce Jaffee sent to me when we announced our initial Boxee investment. Bruce was a Microsoft exec when they acquired WebTV.
He wrote, “you can take the boy out of WebTV but you can’t take WebTV out of the boy".
It’s no secret that the follow/follower model in Twitter was a meaningful breakthrough in social experiences.
It’s elegant, simple and works.
And as a result we see this model in some of the most popular products around today. Each adding their own flavor of the follower model.
It’s only Tuesday but I’ve already met with four startups this week that are about to launch new social products that also use the follow/follower model.
And that is perfectly fine. Yet just because its beautiful in Twitter doesn’t mean it can work everywhere
It also makes me wonder what comes next. Will every network and community be built on top of this framework? Or will we see alternatives tuned for content discovery and consumption.
On this topic, Medium is interesting. Amazing content and user profiles (here’s mine) but they don’t have a follow/follower model at this time. Particularly fascinating since Medium’s CEO/founder, Ev Williams, is a Twitter cofounder.
It seems to me the biggest challenge with follow/follower models is the idea of yet another network to join and how to discover new content outside of your feed. Tumblr does an excellent job with tracked hashtags and reblogs. Medium does it with collections.
I’m quite interested in how this evolves and where this might take us.
When the first consumer internet wave hit, I was part of an early stage start up called WebTV Networks. We designed a tightly integrated product with software, hardware and internet services.
We sold over a million units and Microsoft acquired the company.
During those days we saw other startups building ambitious consumer electronics as well. Companies like Palm, Handspring, 3DO, Danger just to name a few.
Since then I’ve been smitted with consumer electronics. If you listen to any of our podcasts, Nabeel and I talk about hardware in pretty much every episode.
A few years back another fellow geek friend Antonio and i were talking about how back in the day we had much more hardware to play with. But at the time all the best hardware/software was coming out of a single company — Apple. That felt discouraging.
Well, what a difference a few years make. Now we have startups building extraordinary consumer products again. Things like Nest, August, Oculus Rift, Myo and many others have been introduced and are simply mind blowing.
I’m thrilled to see founders and investors getting inspired again to build these products. There is no doubt that hardware is hard. But it’s also awesome and I hope this trend is here to stay.
(Oh and yes, we will soon announce a some new consumer electronics investments as well. Stay tuned!)