Monthly Archives: March 2008

SolarWinds Files for IPO

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Solarwinds LogoThe writing was on the wall for SolarWinds, and now the writing is also on the S/1 statement on file with the Securities and Exchange Commission. JP Morgan, Goldman Sachs, and Lehman Brothers are handling the offering. Not a bad group of underwriters for an Austin IPO. Looking at the numbers, the company  hopes to raise $250m throught he offering. The company made profits of $13.6M on revenue of $61.7M in 2007.

Now let’s see how long it takes HomeAway to get to the financial printer for their registration statement.

MindBites Launches

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MindBites LogoThe instructional video space is hot right now, and Austin is homebase for two of the emerging companies in the space; ExpertVillage and MindBites.

In mid-2007 Demand Media (which recently acquired Pluck) bought ExpertVillage. In January, 5Min landed 5Million for their website. Last month former Google Video/YouTubers launched HowCast with an $8M investment. Today, MindBites is launching and announcing $1M in a Series A funding from True Ventures.

True isn’t exactly a household name for Austinites, but they’ve invested in such popular new media companies as Automaticc (makers of WordPress), GigaOM, Meebo, and Sphere. “We invested in MindBites because it’s a great fit to our existing portfolio of aggressive, new media Web businesses,” said John Burke, General Partner at True Ventures. “We like to identify and support entrepreneurs at the earliest stages of development in the highest-growth segments of the technology market.

While many of the “how-to” websites are going after popular and general knowledge, MindBites is poised to take advantage of the long tail, according to company founder Jason Reneau. The company’s focus is on supporting digital authors, and helping them get their content out to the masses. At first glance, instructional videos on how to replace the motor on your treadmill don’t sound too interesting. But if you happen to have a $2,500 investment in such a treadmill that needs a new motor, it’s well worth the $1.99 to purchase this video. Of the hundreds of thousands of treadmills in the world, how many will need a motor replacement in the next 5 years? This is where the long tail starts to really hit home.

The pricing model is similar to that of iTunes. You can purchase credits for about $1.99 each, and videos cost one credit. At that price point, there is certainly no hesitation to try out a video that might be helpful. Plus the first 60 seconds are a free preview, so you can get a sample of what you’ll be buying. You can watch it on your computer, or download the video to your video iPod or iPhone.

The system was built using the popular rapid development framework Ruby on Rails, and uses Amazon’s S3 storage cloud for storing videos. The rapid development tools must be working well, as major development was just started in January.

The potential market is huge, and there are millions of people in the world with specialized skills that can create video tutorials. According to Founder and CEO Jason Reneau. “Just like eBay let’s you make money off of what’s in your garage, MindBites let’s you make money off what’s in your mind.”

Small World Labs Raises $1M Series A

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Small World Labs LogoSmall World Labs, a leading provider of enterprise social media solutions and online community building expertise, today announced it has received more than $1 million toward a Series A funding round which it will closeout in the next 60 days. The funding will be used to further enhance Small World Labs’ leadership in community management as well as augment its technology platform. You can read our Q&A with CEO Michael Wilson here.

“By combining proven technology with community management expertise, Small World Labs provides a unique value to enterprises looking to implement an effective social media solution,” said Jordan Rohan of Clearmeadow Partners, one of the participating investors in the Series A round. Previous to founding Clearmeadow Partners, Rohan served as Managing Director and Internet Analyst for RBC Capital Markets.

Privately held since its inception in 2005, Small World Labs has been profitable over its two and a half year history. “I’m grateful for the vote of confidence shown by investors who share our commitment to being a true business partner to our customers,” said Michael Wilson, CEO of Small World Labs. “By combining a robust, enterprise-ready software architecture with a team of social media experts we call community managers, we’ve created a unique position in a rapidly growing marketplace.”

Small World Labs customers include the Dallas Morning News, San Diego Union Tribune, CMP, Guideposts, Fox Networks, Oracle, Save The Children, American Cancer Society and more.

Interview with Guy Kawasaki (Pt 2)

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Picture with Guy KawasakiAt the SXSW Interactive festival, I had the chance to sit down with Guy Kawasaki and talk one-on-one about startups, the new VC environment, and his new website Alltop. Guy and I first met at Apple’s first Worldwide Developer Conference in San Jose in (I think) 1987 when he had just left the position of Evangelist at Apple, and started 4th Dimension. In this second part we talked about young CEO’s, and the potential acquisition of Yahoo by Microsoft. Guy was an Apple Fellow, has written several books including The Art of the Start, and is a Managing Director of Garage Technology Ventures.

If you were the sole venture investor in Facebook, how long would you let Mark Zuckerberg stay on as CEO before you got rid of him?
I don’t know Mark at all, but let’s talk about any young 23 year old entrepreneur or founder. I think the best model that’s proven to work is the Google or eBay model, where you bring in some adult supervision but you keep the founder as the guy that does the interviews and tells the story of how the company grew to become a market giant. That’s a better story than one where they hired some professional management to grow the company who worked for McKinsey or ran a division of Microsoft. I don’t think any of these young entrepreneurs want 50 direct reports asking them about company policies on maternity leave, and other things that are un-interesting to them. So I think that’s the model. You don’t get rid of them, and those types of people don’t like to run (and probably can’t run) 50,000 people organizations anyway. I think the Steve Jobs, Bill Gates, and Michael Dell’s of the world are the exceptions. Sometimes those founders will leave and come back, like at Apple, Dell, and Yahoo.

My opinion on Yahoo is that it’s a much better company than most people give them credit for. I think in a downturn they are very sustainable because so many different kinds of businesses would have to go wrong for them. They’re not wholly dependent on search. They have Yahoo stores, answers, Flickr, personals, auctions, and more. A lot of things would have to go wrong all at the same time to impact their business.

Do you think the Microsoft style would mesh with the Yahoo style of doing business?
I think they both need each other. In my interview with Steve Ballmer, you can see his intensity. If he says that with his last dying breath he pledges to beat Google, you can’t take that lightly. Microsoft has certainly shown the ability to get up every day and make the business a little better, and then one day suddenly they’re leading the market.

What if instead Microsoft took $45B and tried to invest it in companies that would grow to be the next big thing, rather than trying to dominate search?
They have the ability to invest in whatever they want. Even Kleiner Perkins has a $100M iPhone fund. Steve Ballmer has $100M in the ashtray of his Ford F150. The tricky thing is that you have to understand that the only way to control it is to not be in control. If someone is going to cure cancer by purifying the urine of goats in Afgantastan (for instance), and it’s only a $25K investment to check it out, go for it! You’re going to lose a lot, but it’s not going to move the earnings needle at Microsoft. And you only need 1 to hit.

Preview: Burn Alter Ego

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Burn Alter EgoThe big brands are quickly learning how to market using the social networking tools of the day. Case in point, a new Facebook application namd Alter Ego that is just plain….well….cool. And you can see the Burn branding all over it, which is a Coca Cola brand. In Alter Ego you can create an alter ego for your Facebook account. Your alter ego has a cooler name than you do, has a cool flat to customize with furniture, and goes out every night with your Facebook friends (or just other Alter Egos). The next day the news item posts in your Facebook account talking about what your alter ego did while out on the town, and with whom. Oh, and did I mention there are pictures from your escapades too? The application is the brainchild of Miami-based interactive agency iChameleonGroup. The new Facebook app is launching today. When it gets wildly popular, just remember you heard it here first.

Central Texas Funding Symposium Announced

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If you’re looking into funding for your company, check out the Central Texas Funding Symposium coming up April 18th. Created by Business District Magazine, the event is a one-day conference for entrepreneurs ready to go to the next level of funding.  Early registration is discounted to $95, so take advantage of it now.

The event also includes a fast-pitch competition. If you’ve been trying to get your idea in front of the Central Texas Angel Network, here is your chance to do it. Speakers include Issac Barchas from the Austin Technology Incubator, Edward Cavazos from Fish & Richardson, and Jamie Rhodes from the Central Texas Angel Network.

Mumboe Launches

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Mumboe LogoIt’s official, Mumboe is now out of beta and officially launching. Momboe is a web-based application that helps companies take the mumbo jumbo out of managing their contractual agreements. The company is running with the highly popular “freemium” model, so if you’re interested you can sign up for an account today. The company is presenting at the Under the Radar conference in Mountain View this week.

“Mumboe is part of a new generation of web applications being brought to market by innovative companies such as Salesforce.com, 37 Signals and others that are challenging the notion that business software has to be complex and expensive,” says William Kane, Mumboe’s chief executive officer. “These applications offer the practical functionality businesses need, without the high cost and complexity of their enterprise counterparts.”

In 2008, Mumboe plans to roll out additional functionality including the ability to automatically extract common fields such as effective dates, term duration and responsible parties from agreement documents and display them in the system. Other planned enhancements include further integration with Microsoft Outlook and integration with Salesforce.com.

Interview with Guy Kawasaki (Pt. 1)

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Picture with Guy KawasakiAt the SXSW Interactive festival, I had the chance to sit down with Guy Kawasaki and talk one-on-one about startups, the new VC environment, and his new website Alltop. Guy and I first met at Apple’s first Worldwide Developer Conference in San Jose in (I think) 1987 when he had just left the position of Evangelist at Apple, and started 4th Dimension. In this first part we talked about startups and VC’s. Guy was an Apple Fellow, has written several books including The Art of the Start, and is a Managing Director of Garage Technology Ventures.

Do you think that first mover advantage is a valid concept in today’s marketplace?
It’s so much cheaper to start many kinds of companies these days. Previously, the first mover had the advantage of getting the venture capital that was going into the space and chilling the market because they’ve become the gorilla, it’s that’s just not true anymore. With YouTube there were probably 20 startups with similar ideas. Who would have bet on YouTube versus anything else, but that’s the VC’s problem. I would rather be first to scale than first to move. You could build a case that a fast second is better than a first mover. When I worked for Apple we had a fast second, which was Microsoft. So I learned that lesson. It comes full circle with the iTouch and iPhone, which certainly weren’t the first movers. Google was probably the 10th search engine to the market. Facebook wasn’t the first mover either.

How does Garage deal with the lower capital requirements for startup companies today?
Today people can take $50K of capital to start, and they prototype and launch. The good news is that we get to pick from companies that are somewhat proven. It’s not a prototype, it’s actually working, and maybe there are 100,000 users that have validated the concept. The bad news is that now the valuation is $2.5M, so a $500K investment buys less equity. Years ago you would put in $2.5M on a valuation of $5M, so the economics have really changed. I would love to have a $500M fund, because the management fees would be great. If you were only going to fund early stage software or social media companies at $500,000, even reserving a couple million for each one, that’s a lot of investments. And it’s not that easy to find good companies to invest in. When we find one, the good news is that we found it, but the bad news is that I’m on another board. A typical VC squeezes the trigger 1-2 times per year, so the numbers just don’t add up. I love the YCombinator theory where you throw around $25,000 and you see what sticks. I could almost build the case that you should shut your brain off. As I look back on these big winners, I would have never invested in them. I would have never invested in Google as the 10th search engine. I would have never invested in eBay, a company that sells used printers online.

You’re talking about a venture paradox, where by definition the 100x return idea would be really out there and not worth investing in?
I’ll tell you exactly what it would be. It would be an unproven team of computer science majors from UT, with an unproven technology and an unproven business model. But that is completely contrary to what every VC wants. Which is why you should just shut your eyes and just throw the dart, right?

What is the west coast opinion of Austin emerging technology companies? Does geography matter? Will west coast VC’s invest in Austin-based companies?
Geography is important if you’re beyond the Rockies. There’s a direct flight from San Jose to Austin and back, although these guys have private planes so it doesn’t matter. The ideal situation for a silicon valley VC to invest in an Austin company is if the company is smokin’ hot, and Austin Ventures wants to invest but the startup is hesitant to take the money. The second best case is that Austin Ventures is already going to invest, and we can just jump on the bandwagon. The third best case is where the entrepreneur says that Austin Ventures is not interested, but we’d like to pitch you anyway. We might listen if the entrepreneur is telling us that it’s not right for their portfolio because it’s not an enterprise software play. If that’s true, then that works. But now we’re getting into the dicey area. The bazaar thing is that VC’s say they like to do swashbuckling, visionary, lead the pack deals. On the other hand they’d like to know that someone else thinks so too.

In part 2 we talk about young entrepreneurs filling the CEO position, and his thoughts on Microsoft and Yahoo.

Q&A: eVapt

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eVapt LogoOur Q&A Wednesday today is with Ranjit Nayak, the founder and VP of Marketing for eVapt. It’s an early stage company in the Austin Technology Incubator that is finding ways to make Software as a Service (SaaS) companies more successful.

How did you first get the idea for eVapt?
Having worked for a decade in the enterprise technology sector, we saw that enterprises were having a difficult time keeping track of how various software applications services were being used. We took a ground up approach to solving the problem, which led to formation of eVapt. We developed the idea in the entreprenuership classes during our pursuit of the MBA degree at the UT school of Business. Winning the business plan competition at Carnegie Mellon University last year gave us a boost.

Give us the elevator pitch for the company.
eVapt provides the only on-demand service metering solution that meets the needs of SaaS (Software as a Service) providers seeking to accelerate their revenues and reach optimal operational efficiency. eVapt’s solution integrates painlessly with SaaS offerings, enabling vendors to focus on their core competency. In essence, eVapt enables the pay as you go model and a faster time-to-market of service offerings. Tight integration into the Salesforce.com (a popular Sales force automation tool) platform allows SaaS vendors to incorporate eVapt’s offering easily into their sales workflow.

How long have you been in the incubator, and what was your experience like getting in?
We have been in the incubator since Sept. 2007 and feel priviledged to be associated with it. Two of eVapt’s principals were evening MBA students at UT and therefore aware of the incubator through the Moot Corp program. The application process for ATI, as we like to refer to it, was rigorous. It allowed us to reflect carefully on our plans and make practical adjustments. Most gratifying was receiving the thumbs up signal from software industry executives that the ATI assembled specially to assess our business plan.

How has the company been funded so far? Would additional capital help grow the company faster?
The company was initially funded by the founders, and as of January this year we landed angel funding to keep us on our path of growth. Additional capital is absolutely necessary to help the company grow.

What can we expect to see in the future from eVapt?
There is good reason to believe that the SaaS market will grow inspite of an impending recession. Companies such as eVapt, which provide the backbone and backoffice capabilities for SaaS or on demand businesses, are poised to do very well in this environment.