Tag Archives: venture capital

Venture Capital and (Ping-Pong) Balls

Google-search-ping-pong-balls

If you’re even slightly interested in protecting your retirement savings from the bursting of the next tech bubble and subsequent stock market crash look no further than sales of ping-pong tables and Pot-A-Shot indoor basketball. It turns out that there is a direct correlation between the sale of indoor recreational gear and the flow of venture capital to Silicon Valley’s next trillion dollar babies (ie., those saving humanity or building the next cool dating app).

From WSJ:

Twitter ’s gloomy quarterly report last week unsettled investors. They might have anticipated trouble more than a year ago had they noticed one key indicator.

Until late 2014, Twitter was regularly ordering ping-pong tables from Billiard Wholesale, a store in San Jose, Calif. Then, suddenly, it wasn’t.

The store’s owner, Simon Ng, figured it either ran out of space “or they’re having company problems.”

Twitter Inc.’s slowing user growth has been unsettling analysts, and the company’s revenue growth was unexpectedly weak in last week’s report. Asked why Twitter stopped buying tables, spokesman Jim Prosser says: “I guess we bought really sturdy ones.” Twitter spokeswoman Natalie Miyake says: “Honestly, we’re more of a Pop-A-Shot company now,” referring to an indoor basketball game.

Is the tech bubble popping? Ping pong offers an answer, and the tables are turning.

“Last year, the first quarter was hot” for tables, says Mr. Ng, who thinks sales track the tech economy. Now “there’s a general slowdown.”

In the first quarter of 2016, his table sales to companies fell 50% from the prior quarter. In that period, U.S. startup funding dropped 25%, says Dow Jones VentureSource, which tracks venture financing.

The table-tennis indicator is a peek into Silicon Valley culture, in which the right to play ping pong on the job is sacrosanct.

“If you don’t have a ping-pong table, you’re not a tech company,” says Sunil Rajasekar, chief technology officer at Lithium Technologies, a San Francisco software startup.

Read the entire story here.

Image courtesy of Google Search.

Can Burning Man Be Saved?

Burning-Man-2015-gallery

I thought it rather appropriate to revisit Burning Man one day after Guy Fawkes Day in the UK. I must say that Burning Man has grown into more of a corporate event compared with the cheesy pyrotechnic festivities in Britain on the 5th of November. So, even though Burners have a bigger, bolder, brasher event please remember-remember, we Brits had the original burning man — by 380 years.

The once-counter-cultural phenomenon known as Burning Man seems to be maturing into an executive-level tech-fest. Let’s face it, if I can read about the festival in the mainstream media it can’t be as revolutionary as it once set out to be. Though, the founders‘ desire to keep the festival radically inclusive means that organizers can’t turn away those who may end up razing Burning Man to the ground due to corporate excess. VCs and the tech elite from Silicon Valley now descend in their hoards, having firmly placed Burning Man on their app-party circuit. Until recently, Burners mingled relatively freely throughout the week-long temporary metropolis in the Nevada desert; now, the nouveau riche arrive on private jets and “camp” in exclusive wagon-circles of luxury RVs catered to by corporate chefs and personal costume designers. It certainly seems like some of Larry Harvey’s 10 Principles delineating Burning Man’s cultural ethos are on shaky ground. Oh well, capitalism ruins another great idea! But, go once before you die.

From NYT:

There are two disciplines in which Silicon Valley entrepreneurs excel above almost everyone else. The first is making exorbitant amounts of money. The second is pretending they don’t care about that money.

To understand this, let’s enter into evidence Exhibit A: the annual Burning Man festival in Black Rock City, Nev.

If you have never been to Burning Man, your perception is likely this: a white-hot desert filled with 50,000 stoned, half-naked hippies doing sun salutations while techno music thumps through the air.

A few years ago, this assumption would have been mostly correct. But now things are a little different. Over the last two years, Burning Man, which this year runs from Aug. 25 to Sept. 1, has been the annual getaway for a new crop of millionaire and billionaire technology moguls, many of whom are one-upping one another in a secret game of I-can-spend-more-money-than-you-can and, some say, ruining it for everyone else.

Some of the biggest names in technology have been making the pilgrimage to the desert for years, happily blending in unnoticed. These include Larry Page and Sergey Brin, the Google founders, and Jeff Bezos, chief executive of Amazon. But now a new set of younger rich techies are heading east, including Mark Zuckerberg of Facebook, employees from Twitter, Zynga and Uber, and a slew of khaki-wearing venture capitalists.

Before I explain just how ridiculous the spending habits of these baby billionaires have become, let’s go over the rules of Burning Man: You bring your own place to sleep (often a tent), food to eat (often ramen noodles) and the strangest clothing possible for the week (often not much). There is no Internet or cell reception. While drugs are technically illegal, they are easier to find than candy on Halloween. And as for money, with the exception of coffee and ice, you cannot buy anything at the festival. Selling things to people is also a strict no-no. Instead, Burners (as they are called) simply give things away. What’s yours is mine. And that often means everything from a meal to saliva.

In recent years, the competition for who in the tech world could outdo who evolved from a need for more luxurious sleeping quarters. People went from spending the night in tents, to renting R.V.s, to building actual structures.

“We used to have R.V.s and precooked meals,” said a man who attends Burning Man with a group of Silicon Valley entrepreneurs. (He asked not to be named so as not to jeopardize those relationships.) “Now, we have the craziest chefs in the world and people who build yurts for us that have beds and air-conditioning.” He added with a sense of amazement, “Yes, air-conditioning in the middle of the desert!”

His camp includes about 100 people from the Valley and Hollywood start-ups, as well as several venture capital firms. And while dues for most non-tech camps run about $300 a person, he said his camp’s fees this year were $25,000 a person. A few people, mostly female models flown in from New York, get to go free, but when all is told, the weekend accommodations will collectively cost the partygoers over $2 million.

This is drastically different from the way most people experience the event. When I attended Burning Man a few years ago, we slept in tents and a U-Haul moving van. We lived on cereal and beef jerky for a week. And while Burning Man was one of the best experiences of my life, using the public Porta-Potty toilets was certainly one of the most revolting experiences thus far. But that’s what makes Burning Man so great: at least you’re all experiencing those gross toilets together.

That is, until recently. Now the rich are spending thousands of dollars to get their own luxury restroom trailers, just like those used on movie sets.

“Anyone who has been going to Burning Man for the last five years is now seeing things on a level of expense or flash that didn’t exist before,” said Brian Doherty, author of the book “This Is Burning Man.” “It does have this feeling that, ‘Oh, look, the rich people have moved into my neighborhood.’ It’s gentrifying.”

For those with even more money to squander, there are camps that come with “Sherpas,” who are essentially paid help.

Tyler Hanson, who started going to Burning Man in 1995, decided a couple of years ago to try working as a paid Sherpa at one of these luxury camps. He described the experience this way: Lavish R.V.s are driven in and connected together to create a private forted area, ensuring that no outsiders can get in. The rich are flown in on private planes, then picked up at the Burning Man airport, driven to their camp and served like kings and queens for a week. (Their meals are prepared by teams of chefs, which can include sushi, lobster boils and steak tartare — yes, in the middle of 110-degree heat.)

“Your food, your drugs, your costumes are all handled for you, so all you have to do is show up,” Mr. Hanson said. “In the camp where I was working, there were about 30 Sherpas for 12 attendees.”

Mr. Hanson said he won’t be going back to Burning Man anytime soon. The Sherpas, the money, the blockaded camps and the tech elite were too much for him. “The tech start-ups now go to Burning Man and eat drugs in search of the next greatest app,” he said. “Burning Man is no longer a counterculture revolution. It’s now become a mirror of society.”

Strangely, the tech elite won’t disagree with Mr. Hanson about it being a reflection of society. This year at the premiere of the HBO show “Silicon Valley,” Elon Musk, an entrepreneur who was a founder of PayPal, complained that Mike Judge, the show’s creator, didn’t get the tech world because — wait for it — he had not attended the annual party in the desert.

“I really feel like Mike Judge has never been to Burning Man, which is Silicon Valley,” Mr. Musk said to a Re/Code reporter, while using a number of expletives to describe the festival. “If you haven’t been, you just don’t get it.”

Read the entire story here.

Image: Burning Man gallery. Courtesy of Burners.

A New Mobile App or Genomic Understanding?

Eyjafjallajökull

Silicon Valley has been a tremendous incubator for some of most our recent inventions: the first integrated transistor chip, which led to Intel; the first true personal computer, which led to Apple. Yet, this esteemed venture capital (VC) community now seems to need a self-medication of innovation. Aren’t we all getting a little jaded from yet another “new, great mobile app” — worth in the tens of billions (but having no revenue model) — courtesy of a bright and young group of 20-somethings?

It is indeed gratifying to see innovators, young and old, rewarded for their creativity and perseverance. Yet, we should be encouraging more of our pioneers to look beyond the next cool smartphone invention. Perhaps our technological and industrial luminaries and their retinues of futurists could do us all a favor if they channeled more of their speculative funds at longer-term and more significant endeavors: cost-effective desalination; cheaper medications; understanding and curing our insidious diseases; antibiotic replacements; more effective recycling; cleaner power; cheaper and stronger infrastructure; more effective education. These are all difficult problems. But therein lies the reward.

Clearly some pioneering businesses are investing in these areas. But isn’t it time we insisted that the majority of our private and public intellectual capital (and financial) should be invested in truly meaningful ways. Here’s an example from Iceland — with their national human genome project.

From ars technica:

An Icelandic genetics firm has sequenced the genomes of 2,636 of its countrymen and women, finding genetic markers for a variety of diseases, as well as a new timeline for the paternal ancestor of all humans.

Iceland is, in many ways, perfectly suited to being a genetic case study. It has a small population with limited genetic diversity, a result of the population descending from a small number of settlers—between 8 and 20 thousand, who arrived just 1100 years ago. It also has an unusually well-documented genealogical history, with information sometimes stretching all the way back to the initial settlement of the country. Combined with excellent medical records, it’s a veritable treasure trove for genetic researchers.

The researchers at genetics firm deCODE compared the complete genomes of participants with historical and medical records, publishing their findings in a series of four papers in Nature Genetics last Wednesday. The wealth of data allowed them to track down genetic mutations that are related to a number of diseases, some of them rare. Although few diseases are caused by a single genetic mutation, a combination of mutations can increase the risk for certain diseases. Having access to a large genetic sample with corresponding medical data can help to pinpoint certain risk-increasing mutations.

Among their headline findings was the identification of the gene ABCA7 as a risk factor for Alzheimer’s disease. Although previous research had established that a gene in this region was involved in Alzheimer’s, this result delivers a new level of precision. The researchers replicated their results in further groups in Europe and the United States.

Also identified was a genetic mutation that causes early-onset atrial fibrillation, a heart condition causing an irregular and often very fast heart rate. It’s the most common cardiac arrhythmia condition, and it’s considered early-onset if it’s diagnosed before the age of 60. The researchers found eight Icelanders diagnosed with the condition, all carrying a mutation in the same gene, MYL4.

The studies also turned up a gene with an unusual pattern of inheritance. It causes increased levels of thyroid stimulation when it’s passed down from the mother, but decreased levels when inherited from the father.

Genetic research in mice often involves “knocking out” or switching off a particular gene to explore the effects. However, mouse genetics aren’t a perfect approximation of human genetics. Obviously, doing this in humans presents all sorts of ethical problems, but a population such as Iceland provides the perfect natural laboratory to explore how knockouts affect human health.

The data showed that eight percent of people in Iceland have the equivalent of a knockout, one gene that isn’t working. This provides an opportunity to look at the data in a different way: rather than only looking for people with a particular diagnosis and finding out what they have in common genetically, the researchers can look for people who have genetic knockouts, and then examine their medical records to see how their missing genes affect their health. It’s then possible to start piecing together the story of how certain genes affect physiology.

Finally, the researchers used the data to explore human history, using Y chromosome data from 753 Icelandic males. Based on knowledge about mutation rates, Y chromosomes can be used to trace the male lineage of human groups, establishing dates of events like migrations. This technique has also been used to work out when the common ancestor of all humans was alive. The maternal ancestor, known as “Mitochondrial Eve,” is thought to have lived 170,000 to 180,000 years ago, while the paternal ancestor had previously been estimated to have lived around 338,000 years ago.

The Icelandic data allowed the researchers to calculate what they suggest is a more accurate mutation rate, placing the father of all humans at around 239,000 years ago. This is the estimate with the greatest likelihood, but the full range falls between 174,000 and 321,000 years ago. This estimate places the paternal ancestor closer in time to the maternal ancestor.

Read the entire story here.

Image: Gígjökull, an outlet glacier extending from Eyjafjallajökull, Iceland. Courtesy of Andreas Tille / Wikipedia.

A Higher Purpose

In a fascinating essay, excerpted below, Michael Malone wonders if the tech gurus of Silicon Valley should be solving bigger problems. We see venture capitalists scrambling over one another to find the next viral, mobile app — perhaps one that automatically writes your tweets, or one that vibrates your smartphone if you say too many bad words. Should our capital markets — now with an attention span of 15 seconds — reward the so-called innovators of these so-called essential apps with millions or even billions in company valuations?

Shouldn’t Silicon Valley be tackling the hard problems? Wouldn’t humanity be better served, not from a new killer SnapChat replacement app, but from more efficient reverse osmosis; mitigation for Alzheimer’s (and all sundry of other chronic ailments); progress with alternative energy sources and more efficient energy sinks; next generation antibiotics; ridding the world of land-mines; growing and delivering nutritious food to those who need it most? Admittedly, these are some hard problems. But, isn’t that the point!

From Technology Review:

The view from Mike Steep’s office on Palo Alto’s Coyote Hill is one of the greatest in Silicon Valley.

Beyond the black and rosewood office furniture, the two large computer monitors, and three Indonesian artifacts to ward off evil spirits, Steep looks out onto a panorama stretching from Redwood City to Santa Clara. This is the historic Silicon Valley, the birthplace of Hewlett-Packard and Fairchild Semiconductor, Intel and Atari, Netscape and Google. This is the home of innovations that have shaped the modern world. So is Steep’s employer: Xerox’s Palo Alto Research Center, or PARC, where personal computing and key computer-­networking technologies were invented, and where he is senior vice president of global business operations.

And yet Mike Steep is disappointed at what he sees out the windows.

“I see a community that acts like it knows where it’s going, but that seems to have its head in the sand,” he says. He gestures towards the Hewlett-Packard headquarters a few blocks away and Hoover Tower at Stanford University. “This town used to think big—the integrated circuit, personal computers, the Internet. Are we really leveraging all that intellectual power and creativity creating Instagram and dating apps? Is this truly going to change the world?”

After spending years at Microsoft, HP, and Apple, Steep joined PARC in 2013 to help the legendary ideas factory better capitalize on its work. As part of the job, he travels around the world visiting R&D executives in dozens of big companies, and increasingly he worries that the Valley will become irrelevant to them. Steep is one of 22 tech executives on a board the mayor of London set up to promote a “smart city”; they advise officials on how to allocate hundreds of millions of pounds for projects that would combine physical infrastructure such as new high-speed rail with sensors, databases, and analytics. “I know for a fact that China and an array of other countries are chasing this project, which will be the template for scores of similar big-city infrastructure projects around the world in years to come,” Steep says. “From the U.S.? IBM. From Silicon Valley? Many in England ask if anyone here has even heard of the London subway project. That’s unbelievable. Why don’t we leverage opportunities like this here in the Valley?”

Steep isn’t alone in asking whether Silicon Valley is devoting far too many resources to easy opportunities in mobile apps and social media at the expense of attacking bigger problems in energy, medicine, and transportation (see Q&A: Peter Thiel). But if you put that argument to many investors and technologists here, you get a reasonable comeback: has Silicon Valley really ever set out to directly address big problems? In fact, the classic Valley approach has been to size up which technologies it can quickly and ambitiously advance, and then let the world make of them what it will. That is how we got Facebook and Google, and it’s why the Valley’s clean-tech affair was a short-lived mismatch. And as many people point out with classic Silicon Valley confidence, the kind of work that made the area great is still going on in abundance.

The next wave

A small group of executives, surrounded by hundreds of bottles of wine, sits in the private dining room at Bella Vita, an Italian restaurant in Los Altos’s picturesque downtown of expensive tiny shops. Within a few miles, one can find the site of the original Fairchild Semiconductor, Steve Jobs’s house, and the saloon where Nolan Bushnell set up the first Atari game. The host of this gathering is Carl Guardino, CEO of the Silicon Valley Leadership Group, an industry association dedicated to the economic health of the Valley. The 400 organizations that belong to the group are mostly companies that were founded long before the mobile-app craze; only 10 percent are startups. That is evident at this dinner, to which Guardino has invited three of his board members: Steve Berglund, CEO of Trimble, a maker of GPS equipment; Tom Werner, CEO of the solar provider SunPower; and Greg Becker, CEO of Silicon Valley Bank.

These are people who, like Steep, spend much of their time meeting with people in governments and other companies. Asked whether the Valley is falling out of touch with what the world really needs, each disagrees, vehemently. They are almost surprised by the question. “This is the most adaptive and flexible business community on the planet,” says Becker. “It is always about innovation—and going where the opportunity leads next. If you’re worried that the Valley is overpursuing one market or another, then just wait a while and it will change direction again. That’s what we are all about.”

“This is the center of world capitalism, and capitalism is always in flux,” Werner adds. “Are there too many social-­networking and app companies out there right now? Probably. But what makes you think it’s going to stay that way for long? We have always undergone corrections. It’s the nature of who we are … But we’ll come out stronger than ever, and in a whole different set of markets and new technologies. This will still be the best place on the planet for innovation.”

Berglund contends that a generational change already under way will reduce the emphasis on apps. “Young people don’t seem to care as much about code as their generational elders,” he says. “They want to build things—stuff like robots and drones. Just go to the Maker Faire and watch them. They’re going to take this valley in a whole different direction.”

Berglund could be right. In the first half of 2014, according to CB Insights, Internet startups were the leading recipient of venture investment in San Francisco and Silicon Valley (the area got half of the U.S. total; New York was second at 10 percent). But investment in the Internet sector accounted for 59 percent of the total, down from a peak of 68 percent in 2011.

Doug Henton, who heads the consulting firm Collaborative Economics and oversaw an upcoming research report on the state of the Valley, argues that since 1950 the area has experienced five technological waves. Each has lasted about 10 to 20 years and encompassed a frenzy followed by a crash and shakeout and then a mature “deployment period.” Henton has identified these waves as defense (1950s and 1960s), integrated circuits (1960s and 1970s), personal computers (1970s and 1980s), Internet (1990s), and social media (2000s and 2010s). By these lights, the social-media wave, however dominant it is in the public eye, soon may be replaced by another wave. Henton suggests that it’s likely to involve the combination of software, hardware, and sensors in wearable devices and the “Internet of things.”

Read the entire essay here.