Sleeping at Night for $5 a month

Several months ago, I confessed to being a Scan Artist. I bought a fantastic, speedy desktop scanner from Fujitsu and converted almost every paper record in my home office into a PDF file. I don't keep hard copies of anything anymore.

There are many virtues to a paper-free life. For those of us living in small Manhattan apartments, the space saved by eliminating paper files was enough, by itself, to motivate my transition to committed scanner.

Remote access is a second virtue that I really enjoy. I have configured my home network to make it easy for me to log on to any of my home PCs from virtually any internet-connected computer. (Eventually, I intend to post more on this to solicit comments on the 'hackability' of my home network. For now, I'll continue to pretend that security through obscurity actually works.)

There is a third benefit of paper-free living that I have been hoping to realize for months, but only last week did it finally become a reality. With all my important home/personal records on paper, a house fire or flood would have been disastrous. With everything stored digitally, I thought it would be trivial to keep an off-site copy of everything. After investigating a number of alternatives, I couldn't find a cheap and reliable way to maintain a backup.

I thought about copying my files onto DVDs, but the manual process is much too laborious. I thought about copying them to my laptop, but I have more than 50 gigabytes of data to backup, and my laptop hard disk doesn't have sufficient capacity. There are dozens of online backup services but none offers what I want:

• At least 100 gigabytes of online storage with the potential to add more as my document library grows.
• A large, profitable company standing behind the online service (or some type of distributed infrastructure that does not depend on the balance sheet of a small company)
  
• A way to encrypt my files, before they leave my desktop, so I can rest assured that my sensitive records will never be read by anyone else.
  

Here's the solution:

• For $25, buy Syncback from a small publisher called 2 Bright Sparks. The product is cheap but fabulous. It is infinitely configurable to back files up from one location to another. The destination can be another local disk or directory or it can be a remote FTP server. You can schedule and group backups with dozens of options including on-the-fly encryption of files into 256-bit AES encrypted ZIP archives.
• For $4.99 a month, get a Home Hosting package from 1and1 Internet. It comes with two free domain name registrations, 100 GB of online disk space accessible via FTP with 1 TB of monthly bandwidth. It also includes some free email accounts.

Syncback runs as a service on my home server and synchronizes all of my documents, photos, and music with an external USB hard drive where it stores the copies in encrypted ZIP form. On a weekly basis, it then sync's the encrypted ZIPs with my 1and1 FTP server.

The only gotcha was the time it took to complete the first backup. My roughly 50GB of data required 22,000 minutes (that's almost 16 days!) for the initial synchronization. Of course from now on, it's just the incremental changes that get copied, so it will be a lot faster. It was a very painful reminder that cable broadband isn't really broadband in the upload direction.

Now if one of my neighbors drops a lit cigarette into the trash and sets my building on fire, I can focus on getting my family to safety without having to grab a hard drive while rushing to the fire escape.

Changing gears

Changing gears -- smoothly and at the right time -- is something that the best venture capitalists do extremely well. By changing gears, I mean shifting from one investment theme to another.

After building expertise in big box retail investing, for example, it's no easy feat to abandon that knowledge to pursue something totally different like communications investing. Yet that is precisely what BVP partner Felda Hardymon accomplished a couple of decades ago. He led Bessemer's early stage investments in companies such as Staples and Sports Authority in the 1980s, but when he felt the trends supporting retail investments were no longer favorable, he pursued other roadmaps. He started learning about networking and communications technologies and used that newly developed expertise to invest in companies including Cascade, Sahara and Sirocco, all of which were phenomenal successes.

It's a daunting task when faced with learning about a new area, but it's a critical part of the venture capital process. Without expertise, it's impossible to make good investments (without getting very lucky), so that means you have to make bets on areas to investigate before making bets on specific teams and companies. Pick the wrong area, and you're screwed. Pen computing in the early 90s is nice example of a bad area to have selected as there isn't a single success to come from that wave of innovation despite quite a few contenders.

My own investments have spanned a number of areas, and each one has required a meaningful amount of study before I felt comfortable making a related investment. I've spent time in the world of consumer electronics (Gracenote), information services (Gerson Lehrman Group), data security (eEye and Determina) and the consumer Internet (Yelp and Wikia) to name a few. I have been working hard on a couple of new roadmaps over the past 6 months, and I hope to blog about investments in those areas later this year.

Many months ago, my colleague Justin Label began pursuit of a roadmap in clean technology. He just started to describe the transition in his new blog Venture Again. I intend to add it to my RSS reader once he gets around to setting up a feed. Justin, here's a hint!

Update: An RSS feed for Venture Again is now live here.

Shorts and Longs (Cont'd)

Several months ago, I wrote my initial "shorts and longs" blog entry covering a few things I'd bet against (shorts) and a few things I like (longs). Here's a new entry in the longs column: the US economy relative to the rest of the world.

There has been a lot of talk about the US losing its leadership position to China and/or India over the next few decades. I think it's going to take a lot longer than that. Here are some interesting facts I read in a David Brooks column in the New York Times.

• The US economy accounted for 30.52% of the world's GDP in 1971. Today it accounts for 30.74%.
• The US accounts for 40% of the world's R&D spending.
• The US produces more engineers per capita than China or India.
  
• US unemployment rates for scientists and engineers are no lower than the rates for other professions, which implies the US has no real shortage of these talents despite countless press references to the contrary.
• At least 22 out of the top 30 universities in the world are American, and more foreign students come to American universities now than before 9/11/01.

There are plenty of problems with the US, and the country's culture of unrelenting consumption will certainly come back to bite the economy at some point. But the US is so far ahead of every other nation on so many dimensions, it's way too early to start even thinking about a global economy led by any other nation.

Howard Dean Started It?

Howard Dean is often credited with being among the first to tap the power of the Internet to further the goals of a political campaign. It didn't end well for Mr. Dean, and I'm not even sure he deserves all the credit he gets for injecting the Internet into politics. I am convinced, however, that he was on to a big idea.

Since the 2004 Presidential race, there has been very little discussion in mainstream media of the Internet's role in politics. An entrepreneur named Jimmy Wales is in the process of changing that.

Jimmy is most well-known for pioneering the Wikipedia, the free online encyclopedia available in dozens of languages with millions of articles. Wikipedia is run by a staff of just two or three full-time employees because all the content is published and edited wiki-style -- i.e., by consumers. More recently, Jimmy launched Wikia, a Bessemer-backed startup. Wikia extends the Wikipedia concept to all types of content, not just the type that belongs in an encyclopedia.

Just last week, Jimmy announced his personal role in leveraging Wikia to provide the broadest, most open platform for politics on the Internet. And like everything Jimmy touches, this latest concept is flourishing quite nicely. The Campaigns Wikia is a place where people truly engage in the democratic process -- sharing ideas and debating political issues. In just a week or so, the site is already loaded with content, and almost 1,000 pundits have signed up to get involved.

It will be very interesting to witness the impact of Campaigns Wikia and other Internet platforms on future elections.

T-Shirts, Pens, Mugs and Belt Buckles

It's not uncommon to see company promotional materials in the form of t-shirts, mugs and pens.

This is my first sighting of a new form of logoware: an imitation diamond-studded belt buckle. Perhaps the start of a new trend?

Not evil, but a pinch of deliberate confusion

I don't have any scientific evidence to back up a full-fledged assertion, but I have always suspected that a key success factor behind the simple text ads that comprise search marketing is their subtleness. They look just like natural search results, and I don't think most consumers actually understand the difference.

I run Google ads on my blog, and last month I received this note from Google:

We're writing to let you know about a coming change to the appearance of your Google ads. Your ads currently display the default Google color palette, Seaside (formerly known as Mother Earth). In the near future, we plan to update the default palette to Open Air, a new palette containing the same set of colors, but without the blue border. We've found that many publishers prefer the cleaner look of this palette and have also seen that a blended color palette performs better for them -- attracting user interest while still maintaining the distinction between ads and content with the 'Ads by Google' label.

Big deal, they changed the default colors. Actually it is a big deal -- they eliminated the blue border. Is it me or is this an attempt to further blur the line between content and advertisements? If we polled 1,000 random Internet users, how many really understand that text links are ads?

Evil? Probably not.

Deliberately confusing? Definitely.

Google's Iron

Until today, I didn't fully appreciate how aggressive Google had become with its desire to own datacenters around the world. Of course I have heard countless stories of the massive server farms Google operates. One rumor even suggested Google built a meaningful single digit percentage of all PCs last year.

Still, I was stunned to learn from a young New York based startup about its recent run-in with a hosting service provider (HSP). As background, this startup serves about 1.5 billion monthly page views out of its single datacenter in New York. That's a lot of data, which makes this company a reasonably attractive HSP customer.

A few months ago, its HSP informed the startup that it would not be able to add any more servers to its cage. There was plenty of physical space in the cage, but the HSP claimed it was out of power. There were not enough volts to power any additional servers.

At first, the startup figured someone at the HSP was going to be fired for making such a stupid miscalcuation. How could they not design the place with enough power to operate cages chock full of servers? It just didn't make sense... until they learned what was really going on.

Google had moved to town. It appears Google is trying to purchase as much datacenter capacity as it can find. It offered a certain New York City HSP so much money that the HSP started mistreating its own customers to get them to leave so Google's appetite could be satisfied.

Let this be a warning to other HSP customers around the globe -- beware the day that Google moves to town.

Giving good phone

Some people have such great phone voices that it's hard not to want to talk to them. A multi-hundred million industry emerged based on that observation. Marketers persuaded consumers to call 1-900 lines (often, though not always, for sex chat) and relied on their operators' ability to give good phone to keep consumers engaged as the bills ran up at the tune of $5 per minute.

Excellent reporters typically give good phone as well. They use the skill to keep their interview subjects engaged beyond the length of time it makes sense to spend talking to a reporter.

Of course sales executives are often blessed with (or develop?) this talent as well. People buy from people they like, and the first step toward liking someone is talking to them for a while. That's why giving good phone comes in quite handy in sales.

I think I give average phone. Not great, but not awful either. A new service from Ether is allowing me to test how good my phone is. I decided to reserve a short period of time during each of the next few weeks to dispense venture capital advice to people I don't know. I'm mostly curious to see if anyone will take me up on it, and if anyone does, I'll be sure to ask them if I give good phone.

I believe Ether handles all the billing and logistics, though I haven't tried it yet, so I'm not entirely sure. If $2.50 per minute doesn't scare you, give me a call. While I cannot guarantee satisfaction, I promise to talk fast.

JeremyVC 1-888-MY-ETHER ext. 01610091

Update: As a further inducement to potential callers, all proceeds will be donated to the East Harlem Tutorial Program.

Scan Artist Population Continues to Grow

MIT Technology Review's Simon Garfinkel has announced he, too, is a Scan Artist. He has good taste in scanners. Welcome to the club, Simon.

Scan Artist Population Continues to Grow

MIT Technology Review's Simon Garfinkel has announced he, too, is a Scan Artist. He has good taste in scanners. Welcome to the club, Simon.

Actually, It's Rupert's Third Try

Rupert Murdoch, the man behind News Corporation, has been both praised and ridiculed in the press for propelling his media empire onto the Internet with the acquisition of MySpace. Newsweek called it "Murdoch's New Groove" and the Techdirt headline mockingly shouted "All Hail Lord Murdoch of the Internet" as if to say he just discovered the Internet, and he's already declared himself king.

Regardless of whether you think News Corp's recent MySpace purchase was brilliant or idiotic, you have to hand it to Rupert Murdoch for his persistence. This is at least his third attempt to figure out what a media company should do online.

He was among the very earliest online pioneers with his 1994 purchase of Delphi Internet Services. That foray did not end well (Delphi eventually faded into obscurity), but Murdoch was obviously paying careful attention to the Internet before most of us even had an email address.

That first failure did not deter him. In early 2000, he purchased a significant equity stake in UpMyStreet, which is still one of the most clever local search sites online (unfortunately, it only works in the United Kingdom). UpMyStreet got caught by the trappings of the bubble and was out of cash by 2003. A cash-flow generating young upstart called USwitch.com acquired the assets and has operated UpMyStreet profitably ever since. The US media giant Scripps took notice and bought Uswitch for $366 million last week. Maybe Murdoch was, perhaps, just a bit too early.

Much more recently, News Corp. ventured back online with the purchase of Scout, a collection of online and offline local sports media properties, and MySpace. Many believe MySpace will fade just as quickly as it ascended from an idea to a top-10 Internet property. Though it is unclear whether Murdoch will ultimately regret his recent purchases, it is crystal clear that he has been thinking about and exploring Internet media for quite some time.

To Yahoo or Not to Yahoo

I use Yahoo every day. It is my Firefox homepage and accounts for more of my web traffic than does any other site on the Internet. I'm clearly not alone. According to this Alexa chart, Yahoo serves almost 3x as many pages as Google.

Seven years ago, I invested the time to customize a My Yahoo page and have incrementally added quite a bit to it since then. It has become my primary RSS aggregator, my sports and finance ticker and my first source of news. (I would even use it for web searches, but for some idiotic reason, the folks at Yahoo have not programmed the page to load with the search box in focus; as long as I have to make an extra click, I might as well click in Firefox's Google box.)

In a piece for Fortune last week, David Kirkpatrick warns Wall Street not to "stare so hard at Google you miss Yahoo." He highlights Yahoo's relatively cheap P/E ratio of 24x (including a bunch of one-time gains last year including the sale of some Google stock) when compared with Google's 67x . He argues that Yahoo is catching up to Google in terms of search quality and has made some smart moves to capitalize on social networking with its Flickr and Delicious acquisitions. He believes Yahoo will soon be considered Google's peer.

My hedge fund friend thinks otherwise. He questions Yahoo's future relevance entirely. His argument goes something like this: AOL was "stage one" of the Internet -- consumers did not even know how to get online in the early days, and AOL's sheltered dial-up service made it accessible.

Yahoo is stage two of my friend's "training wheels for the Internet" theory. As everyone learned to get online, they needed a place to go that conveniently aggregated their media content and introduced new services. Yahoo served that purpose.

In stage three, however, as consumers finally comprehend and master features like bookmarking and RSS aggregating, will Yahoo still have a purpose? Though I'm currently a devoted Yahoo user, I tend to agree with my hedge fund friend. This Alexa graph supports his theory:
In terms of reach, Yahoo is falling behind. The number of consumers relying on Yahoo the way I do is not growing. Google has overtaken Yahoo as the primary Internet home page, and as users like me find superior best-of-breed alternatives to replace the components of their My Yahoo pages, I suspect the flat blue line in the graph will trend downward.

A Helping of my Yelping

In this blog, I have focused on topics related to areas I think are ripe with innovation and, therefore, present fertile ground for venture investing. And I have rambled on about miscellaneous gadgets, technologies and anecdotes that have captured my imagination (or at least my attention). I deliberately shied away from referring to my Bessemer investments to prevent this from becoming a shameless promotional tool. I included the simple link to my investments in the right-hand column and left it at that.

Until now!

If you haven't already explored Yelp, now would be a good time to check it out. If you wait much longer, you'll qualify for luddite status, because the rest of the Internet population will have discovered it before you. This is what one might call a blog brag, but here is Alexa's summary of Yelp's recent traffic growth:
For investors, few things in life are more pleasing than graphs that go up and to the right.

So, why did I invest in Yelp, and what is it?

My investment in Yelp was an outgrowth of my interest in community-oriented, user-generated content, but I'll blog more about that later. Yelp solves what I call "the Citysearch problem." I used to love Citysearch. It showcased what other people thought about everything local -- stores, restaurants, dentists, auto mechanics, etc. But over time it became virtually impossible to find a negative review about anything. All the content read like it had been written by a close relative of the store owner.

Enter Yelp. Yelp reveals who is behind the opinions. It lets you determine whether you share the same sensibilities as each reviewer. And then you can discover other local establishments you otherwise might never have found. Instinctively, we all consult friends for referrals when we're in need of a new doctor, the right restaurant for a special date, or a trustworthy mechanic. Yelp adds the power and scale of the Internet to these word-of-mouth referrals.

Yelp is also trying to become a verb. To Yelp about something is to share one's opinions. Mine accumulate at jeremyl.yelp.com. I have also added a helping of my Yelping to the right-hand column of this blog. Yelp's nifty Maptastic feature plots my reviews on a Google map. You can tell I spend most of my time bouncing between San Francisco and New York.

Yelp's talented team managed to incorporate the user interface je ne seis quoi which makes some sites really slick and fun to use. When you sign up, click Member Search near the top right of the page to search for me and add me as a friend.

Infoworld Agrees with Me

In one of my blog postings from last September (here), I celebrated the arrival of a fabulous new Fujitsu desktop scanner. My colleague James Cham just pointed out that it took Infoworld an extra five months to make the same observation here.

Though meaningless in the scheme of things, it feels good to scoop the tech press.

Comics, topless women or math equations?

In today's New York Times, Nicholas Kristof's editorial outlines the race between China and India to become the world's leading power by the year 2100. He highlights India's demographic advantages (more working-age people) and financial system (China's banks are a mess). And he praises China's impressive infrastructure (India has third-rate roads and ports). In the end, he places his bet on China. His column-ending prediction is not particularly controversial, and besides, very few of us will be around to see if he made the right choice.

That said, his column will have a lasting effect on me because of the paragraph in which he points out a primary driver behind each country's emergence on the world stage -- an emphasis on education. Here is the paragraph that captures the essence (bold added by me) :

Most American newspapers lure readers with comics, and some British tabloids with photos of topless women, but a Calcutta daily newspaper is so shameless that it publishes a column on math equations. Imagine titillating readers with trigonometry!

Living in America where the average adult watches 1,600 hours of television per year, titillation with trigonometry really is hard to imagine.

Shorts and Longs (Digital Livingroom)

At last month's Digital Livingroom conference in San Mateo, my co-panelists (Tim Bajarin, Julie Ask, and Mike Langberg) and I were charged with outlining a "roadmap for the future" of the digital livingroom. I shared my views on these six ideas (three longs, three shorts) and asked the audience for its opinion on each. For what it's worth, they tended to disagree with me, but here are the calls I made.

1. Every consumer electronics device (tvs, clock radios, etc) will be connected to the Internet.
   I'm LONG this idea. This is a great opportunity for hardware companies to get into the recurring revenue stream by selling services and content for their own devices or by charging a gatekeeper fee to others. They will need help with the software to make it all work as they've never had decent software capabilities, and of course Microsoft will try to dominate all these devices. Regardless, we will see networked CE products everywhere.



2. Consumers will continue to pay $100/month bundled cable/content bills.
   I'm SHORT this one. First it will be just fringe content providers, but eventually even ESPN will want direct-to-consumer relationships. With a networked television, you will be able to sign up for a single content provider directly over the Internet. The cable company will provide a pipe and will still offer content bundles, but no one will be paying $100 per month for a boatload of channels they never watch.
3. Mommy and grandma will soon be fighting with the teenage kids for Xbox time.
   LONG. It's going to be a different genre of games -- think Mahjong and Tetris. But with the Internet-connect consoles, new online communities will emerge. Business Week already wrote a story on the Gaming Grannies.
4. We'll all be browsing the web in the kitchen.
   LONG but not in the usual sense. We won't be using a browser on a PC or terminal screen. We'll be looking at dedicated devices designed to communicate specific information. Maybe it's a refrigerator with a handle that changes color when it needs to be re-stocked. Or perhaps we'll have a coffee maker with a small embedded weather forecast display. I doubt all these devices will be using Ambient Devices' network, but I do think Ambient has the right design ideas.



5. We'll consume our living room content "on the go" (a la Sling Devices).

SHORT. We will consume content on the go, but it will be made for our small form factor portable devices. It will be short clips (3 minutes, not 30). Simple "copy and transmit" devices like Sling may be used to watch a PVR-recorded show in the office, but they won't cut it for mobile devices, on which we will watch purpose-built content.


6. With all this precious content (digital photos, purchased digital music and movies) on our PCs, a backup server in the home like Mirra will become a must-have.
   
   SHORT. There is little doubt that backups will become critical as the cost of the content on our hard disks starts to dwarf the cost of the hard disk itself. However, copying content onto another hard disk in the house is not the best solution. Some version of the networked backup services that first emerged in the late 90s (remember the likes of X-Drive?) will return with their sharing and remote access features.
   

   
   

Forget Dolby 7.1, Try 40-Channel Surround Sound

Many of my Bessemer colleagues went to the Consumer Electronics Show in Las Vegas earlier this month. I had attended it in each of the last several years but decided to skip this one. I was slightly disappointed with the small number of new things I saw in 2005 relative to 2004, so I decided to make it an every-other-year event.

Little did I know, my trip to the Museum of Modern Art last week turned out to be a decent substitute for CES. I didn't intend to get an electronics junkie's fix from MOMA, so I was surprised to find two exhibits that conjured up images of CES.

The first exhibit celebrated Pixar's 20 years as an animation studio. It was admittedly annoying to dodge the gaggles of 9-year olds. Half of the parents in New York City decided the Pixar exhibit was a good excuse to schlep their families to the museum. Fortunately, 9-year olds are too short to block the view, so the exhibit was still excellent. I left with a better appreciation for how critical are the talented human artists behind the animation. Computers make it all possible, but the creativity and vision still come from people, not from machines.

Even more impressive than the Pixar stuff was an installation by Janet Cardiff. I wandered into a room devoid of everything but two benches surrounded by 40 speakers configured in a large oval. (Thanks, Washington Post, for the photo.)

Cardiff recorded a 40-person chorus and replicated the sound by channeling each voice through one of the 40 speakers. It was among the most interesting aural experiences I've ever had. You could walk through the room, stopping in front of an individual speaker, and it was as if you were standing nose-to-nose with one member of the chorus. Or you could just sit on the couch in the middle and take it all in. The Washington Post's Blake Gopnik does a fine job describing the piece here, but it is definitely something that needs to be experienced in person, not in print.