TALKING TECH

A great hour long interview with Fred Wilson of Union Square Ventures. Skip to 6:30 to begin the interview.

A few nights ago, I had the pleasure of attending a fireside chat with Tom Perkins & Frank Caufield of KPCB (more info). Although I had already listened to most of the chat’s content before, (from Tom’s interviews in the 2011 documentary Something Ventured) I had always admired Tom Perkins and his role in co-founding one of Sand Hill Road’s first venture capital firms so it was an exciting opportunity to hear from him in person.

His talk consisted mostly of his experiences on HP’s Board of Directors and his conflict with Patricia Dunn alongside some side tangents about Mark Hurd, The Maltese Falcon, Danielle Steel, and the SF Ballet. Although the fireside chat itself was relatively short, the Q&A session afterwards was highly enjoyable and I had the opportunity to shake his hand and ask him a few questions.

I’ve summarized my questions and his answers below to the best of my memory (not exact or quoted):

Q: With the recent rise of tech start-ups in Silicon Valley, many VC’s and angels have taken the “spray-and-pray” approach similar to that of McClure’s 500 Startups or Yuri’s recent 150K investments in YC. Has KPCB ever considered altering their investment strategy from a quality over quantity approach towards this spray-and-pray technique for fear of losing out on that one big social media company?

A: To answer your long question, yes we’ve started a social media fund and we are investing in these types of companies. (It was an unsatisfying answer and he most likely misheard my question given its length)

Q: Given your MIT/HBS background alongside your entrepreneurial venture into a “laser” company while working at HP, why did you never consider taking the serial entrepreneur route vs. the VC lifestyle?

A: To put it simply, the only company I ever started was the laser one and it was my only good idea. If you’re going to be an entrepreneur, you’ve got to have great ideas and I just never had any, so I decided I’d rather just work with other entrepreneurs and help them grow their companies. I wouldn’t recommend starting your own VC firm today as the industry just has too much competition but that’s not saying you shouldn’t work within a VC firm.

While reading Dan Gilbert’s “Stumbling Upon Happiness”, I came across an interesting fact that the only difference between humans and other species is the ability to think about the future.

And yet, despite our forecasting prowess, it still remains very difficult for technology companies to convince the general population that adopting a new technology for a large upfront cost will garner even larger long-term savings. A prime example lies in the ever present conflict of LEDs and incandescent light bulbs.

Consider a Philips Lighting Ambient LED 12.5 watt bulb costing $39.97 at your local hardware store.

A typical LED lasts 25,000 hours (3 years if run 24/7, 12 years if used nightly), uses 12.5 watts, and costs $37.50 to run for those 25,000 hours.

A conventional 60-watt bulb lasts 1000 hours, uses 60-watts, and costs $180 to run for 25,000 hours.

Given this math, there is clearly a huge benefit of long-term savings in using LEDs and yet the majority of the population refuses to pay that upfront $39.97 to save money down the line. Go figure.

For the past few years, experts have argued that the key to future online business models no longer lies in traditional advertisements and banner ads. Obviously it isn’t enough to throw up a simple website and expect revenues to pour in from Google Adwords and selling adspace. However, by employing creative use of advertisements, digital companies can still generate profits from a dying monetization technique.

Two separate companies that I believe should be working with each other are CaptchaAd and FreeAllMusic. Both companies have employed extremely creative uses of advertisement-based business models and seem to almost complement one another.

CaptchaAd is a German based company which recently won second place at Intel+UC Berkeley’s 5th Annual Technology Entrepreneurship Challenge. In case you don’t know, a Captcha is a challenge response test used by many websites to ensure that the response isn’t generated by a computer.

It’s essentially a security check to prevent spam and you’ve probably filled out many of them while signing up for different websites. CaptchaAd has creatively played on the idea of a Captcha by replacing the common “word spelling test” with a video advertisement. They obtain sponsorships from companies and play video advertisements which then ask the user a simple question about the video in order to let the user “pass.” For example, if Coca-Cola paid for an advertisement, CaptchaAd could play a video of a kid drinking Coca-Cola while playing soccer and then the Captcha question at the end of the video would be something like, “What sport was the kid playing?” By doing this, CaptchaAd still helps prevent spam by ensuring that the user is a human while effectively forcing the user to be more attentive to the video advertisement since they need to answer a relevant question in order to proceed with whatever they were trying to do.

FreeAllMusic, which will be open to the public in late January, is a website that acts as the Hulu for music. By first watching a 15-20 second advertisement clip, users will then be allowed to download any song of their choice for free, with no restrictions to sharing or copying. The company is literally freeing all music by solving the main problem of piracy in the music industry. Rather than having to seek illegal ways to download and share music, users can simply spend a few moments of their time watching an ad. When a user chooses an ad to watch, the company in that ad will pay for the song in a form of “micro-sponsorship.”

You can probably see where I’m going with this. Imagine a partnership between these two companies where CaptchaAd essentially forces users to watch the ads and answer correct questions in order to proceed to the music downloads. This way you don’t have people who minimize their screens while ads are playing and then open the screen 30 seconds later to download the song.

Advertisement-based business models aren’t dead. Companies who don’t employ interactivity and creativity are.

The amazing thing about this video is that AT&T predicted all of this technology back in 1993 and today, almost everything in the video is now in existence. The reason why corporations such as AT&T have been able to survive for such a long time lies in the fact that they are always thinking ahead to predict what the market will eventually need.

Humans are restless; give us an internet connection speed that loads pages in 2 seconds and soon we will be complaining that it’s too slow. The world is ever-changing and nothing survives without a plan for the future. To succeed, your ideas must be vast, life-changing, and adaptable.

“In times of change, learners inherit the Earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.”

Seth Godin made a very simple blog post a while back about risk and reward. A lot of people refuse to take risks because of their fear of the unknown, but a small increase in risk can bring about a doubling in reward. As you can see from the graph, the first jump comes at virtually no risk while it’s usually the second jump that can be more dangerous.

It isn’t hard to start the little things you’ve always wanted to do. We always talk about our goals and aspirations but we put them off with excuses. All your dreams become harder to execute as you get older because you will have other obligations such as family, work, etc… Even if you have those obligations now, you can still make time to follow your passions. Go travel. Start a website. Start a business. Breaking that entry barrier is the first jump in the graph and whether or not you decide to follow through and make that second jump is totally up to you.

But people, at least try to make that first jump. It’s really not that hard.

I play a game called Cube Runner on the IPhone. It’s a simplistic game involving your little ship which moves left and right as you tilt the phone. You dodge boxes and try to last the longest in order to obtain the best high score possible.

So why do I continue to play this simplistic game? Because, each and every single time I play, I try to beat a previous high score. If my roommate Charles beats my score, then I’ll keep playing until I beat his high score. The process is never ending; we compete to beat each other’s high scores to a point where we lose sight of why we started playing in the first place.

Everyone compares themselves to other people. It’s human nature. We all want to be the best at the game and have the highest score in life. But what does that mean? Everyone has a different definition of a high score. For some, it’s money. Others fame and power. Either way, if all you do is spend your life trying to beat everyone else’s high score, you’ll probably never get there.

A lot of startup companies didn’t get where they are now by trying to beat the high scores of well established corporations. Rather than play the same game, they played another game. They had different business models and different target markets. Look at Ebay. Facebook. How did they manage to topple Amazon and Myspace, the dominant players of the market? They found different opportunities, different strategies, and at the end of it all, it was these differences that let them reach their own high scores.

So don’t waste time comparing and competing. Make your own high score and do everything you can to get there.

That commercial never gets old, no matter how many times I watch it.

We often find ourselves seeking security in careers very far off from our passions. Why? Because we don’t think differently. We follow the norm. We do what is expected of us. Even if all you cared about was making money, I guarantee you that you can still follow your passion and do just that.

How many times have we just lay awake in our beds at night thinking about our purpose in this world. I’ll tell you what I believe. Your purpose is to follow the things you love and make the most out of them. Be great. Be amazing. Find a way to change the world doing something you love. Every single person featured in that commercial LOVED what they did and that’s why they were able to change the world. Gandhi, Martin Luther King Jr., Einstein, Bob Dylan. They might have been considered crazy in their early stages of life for pursuing the things that they did but look at them now. They are etched in our history, forever part of this world. You want to live forever? Then leave a legacy; let people a thousand years from now remember your name, and that is how you will live forever.

Defy the norm. Think differently.