I spent some time on Comscore this morning looking at US vs Rest Of World traffic for some of the largest web properties. Here are the stats for Feb 2010:

Google: 890mm worldwide visitors, 745mm non US - 84% non US

Facebook: 471mm worldwide visitors, 370mm non US - 78% non US

Twitter: 74mm worldwide users, 53mm non US - 72% non US

I suspect Facebook and Twitter will both end up north of 80% once their internationalization efforts are fully realized. Facebook is a lot farther along that path than Twitter but it seems like Twitter is growing like a weed outside the US right now. This is a Comscore chart of Twitter's non-US traffic through February 2010.

The conventional wisdom is that international usage cannot be monetized as well as US traffic and that is certainly true. But with >80% of your potential users outside of the US, I think the web sector needs to start working harder on international monetization.

Even if international traffic could only be monetized 25% as well as US traffic, when your international traffic is 80% of your total traffic, you would make as much money internationally as domestically. So that's a lot of potential out there to be tapped.

And of course, not every international market is equal when it comes to monetization. Markets like western europe and japan monetize very well today. Emerging markets like the BRIC countries (Brazil, Russia, China, and India) should be big opportunities for monetization this decade. Other markets may be tough for years to come.

What this means to me is that web services that are highly international today should invest in fully localizing their user experience and then start thinking about monetizing outside of the US. Start with local partners and then start putting people on the ground in your best international markets.

There's a lot of money "rest of world" and I suspect that will only be more and more true over time. So we should start building web businesses with that in mind.

There is a big banking reform bill working its way through the Senate right now. It is sponsored by Chris Dodd, Chairman of the Senate Banking Committee. It has a long name I can't remember, so I'll call it the Dodd Banking Bill.

What does a bill attempting to regulate the banking industry have to do with startups? Well unfortunately, it contains two provisions that are quite problematic and hurtful to entrepreneurs and startups. They are:

1) Changing the definition of a "qualified investor" in angel and venture deals. Not just anyone can invest in a startup company. You have to be a qualified investor. A qualified investor is currently defined as anyone with a net worth of over $1mm or net income of over $250k. Dodd's bill would increase that to $2.3mm and $450k respectively. And then index those numbers to inflation.

2) Eliminate the existing federal pre-emption over state regulation of "accredited offerings." Angel and venture financings could be regulated state by state creating a fairly burdensome set of rules  and regulations that each financing would need to be subject to. Currently there is a federal pre-emption that makes getting these kinds of deals done fairly easy.

I have no idea why either of these provisions ended up in a bill designed to regulate the banking industry. Entrepreneurs and startups don't use banks to finance them. They get their initial capital from angel investors and then VCs as they grow. This system works well, did not blow up in 2008, and is not in need of reform of the type Dodd wants to throw at us.

In fact, what we need is to eliminate all accredited investor requirements for small investments of up to $25k. Why does someone have to be a millionaire to invest in a friend's startup? I understand that we don't want someone mortgaging their home, or betting their entire life's savings on a startup. But for a small amount, like $25k, we should not be regulating angel investing.

My dad sent me an email the other day pointing out a news story about an incubator in Texas that was cranking out startups and creating jobs. He told me that he believes that the work entrepreneurs and the people who work with them (ie me) are doing is incredibly important to the health of our economy. He's right and we need to explain that to Chris Dodd and his friends in the Senate. If they are going to reform accredited investor regulations, they should liberalize them, not constrain them further.

I'll get on the phone and call my Senators and Representatives. Hopefully you'll do the same. This is nonsense.

I'm on vacation this week and trying to keep work to a minimum. And I've got a post up on the USV blog today bidding goodbye to our colleague Andrew Parker. So I simply going to link to that post.

It's an interesting post because in addition to talking about how great it has been to work with Andrew, I explain a bit about how we think about staffing our firm. If you have any comments, please leave them on the USV post.

I'm on vacation this week skiing with my family. I got back from the mountain yesterday afternoon, checked in on email, made a few phone calls, and took a quick look at Techmeme. I saw a headline that said "The Startup Visa Act Must Be Stopped" and I noticed that the post was written by a member of the AVC community, Pascal-Emmanuel Gobry, and that is was running on Business Insider.

I know Pascal. We met once briefly and I engage with him regularly here and also on Tumblr. He's a smart and thoughtful person. So I read his post carefully, thought about it, and slept on it.

Pascal's arguments against the Startup Visa Act are:

1) You have to find investors to get a Startup Visa

2) Once you've obtained a Startup Visa, your personal founder's risk goes up

3) It's bad for investors because the best foriegn entrepreneurs will self select out of this program

Those are all valid arguments and I appreciate that he is raising them. But to suggest that the Startup Visa Act "must be stopped" because of them is ridiculous.

Let me tell you a story. In the summer of 2008 I met one of the founders of Zemanta in London. I heard the story about how two of the founders had won 2007 Seedcamp and how they had started a company in Ljubjiana Slovenia with the funds they secured from Seedcamp. I was by that time already a Zemanta user and really liked the product. Seedcamp and the other seed investors offered our firm the opportunity to join the seed round and we did in the fall of 2008.

In early 2009, I suggested that the two founders move, at least temporarily, to the US so that they could build out the business side of the company here. They did so, but only on a tourist visa. And when that tourist visa ran out, both of them had to go back to Slovenia and wait a long time to get a more permanent visa. Both are now back in the US building the business, but the time they were kept out of the US was a critical time in the business and the company suffered from having them away. Time was lost and you can't get that back.

Had the startup visa act been the law of the land, they could simply have applied for and been awarded a startup visa right after securing their seed funding. None of this would have been an issue.

The startup visa is not just for entrepreneurs, like Pascal, who are thinking of starting a company in the US. It is also for the entrepreneurs who have already started a company and want to build their company, or part of it, in the US.

Pascal is thinking about this a binary choice and it is not. We have a suboptimal visa system here in the US for entrepreneurs. The startup visa will not solve all the problems. It is not a perfect solution. But it is a very good idea and it should not be "stopped." It should be made into law. Then entrepreneurs like Pascal can decide if they want to take advantage of it or not.

While I do not appreciate the headline that Business Insider put on Pascal's post (much as I don't like the headlines they sometimes put on my posts when the re-run them), I do appreciate the debate over the Startup Visa Act. Anything that is going to become the law of the land should be subject to debate.

So in the spirit of debate, here are some more posts on the startup visa act:

Yochai Benkler is one of a handful of people who our firm regards as inspirators. We've read everything he's written and find ourselves quoting him regularly in meetings. This is a picture of Yochai making a point at our first Union Square Sessions event on peer production.

So when I came across Yochai's op-ed today in the NY TImes on the National Broadband Plan, I stopped skimming and focused, I read it twice.

Yochai agrees with many in the tech industry, me included, that we need a National Broadband Plan. But in classic Yochai fashion, he doesn't think it goes far enough. He says:

Take the commission’s “100 Squared Initiative,” which aims to get 100 megabits-per-second service to 100 million households, at affordable rates, by 2020. Meeting the speed target shouldn’t be difficult; industry is well on track to achieve it within the decade.

Affordability is the hard part — because there is no competition pushing down prices. The plan acknowledges that only 15 percent of homes will have a choice in providers, and then only between Verizon’s FiOS fiber-optic network and the local cable company. (AT&T’s “fiber” offering is merely souped-up DSL transmitted partly over its old copper wires, which can’t compete at these higher speeds.) The remaining 85 percent will have no choice at all.

This is the problem. There isn't enough competition on the access side of the Internet, both wireline and broadband. The rest of the Internet stack is hypercompetitive and is innovating at a mile a minute. But in access, we have monopolies who go at whatever speed suits them. There's nothing pushing them to go faster.

Yochai ends a fantastic op-ed with this point:

If we stay the present course, the commission’s new policy will build a better wireless network around a more entrenched monopoly system, lodging an insurmountable obstacle in the path toward bringing America’s broadband network up to speed with the rest of the world.

That's a sobering thought.

Ben Horowitz has a post called The Case For The Fat Startup on the All Things D blog. I don't agree with Ben's take on this issue but I have enormous respect for Ben and his partner Marc Andreessen. They have started and built multiple successful businesses and all I do is write checks. So take everything I have to say with that in mind.

I'd also like to say that my comments are only related to software-based businesses. I don't think it is applicable to greentech or biotech. Those sectors are much more capital intensive than software.

In short, since I started investing in the web in '93/'94, I have invested in about 100 software-based web companies. And the success rate of fat companies versus lean companies is stark. I have never, not once, been successful with an investment in a company that raised a boatload of money before it found traction and product market fit with its primary product.

Boatload is a subjective term. So is traction. So is product market fit. And so is successful. So let me try to define them in the way that I think about them. A boatload of cash is more than $20mm of invested capital. A boatload of cash is monthly burn rates of tens of millions of dollars. Traction and product market fit are customers or users buying or using your product in droves. It is the realization that you've found the sweet spot of the market you were going for. And successful is an investment that pays out multiples of the dollars we invested in it. Getting our money back is not successful in my book. Getting three times our money back is good. More than that is great.

Let me say it again. I have never been involved in a successful software-based web service that raised and spent boatloads of money before it found it's sweet spot. But it has happened. The Loudcloud story that Ben lived and tells in the All Things D post is proof that it can happen.

You can also win the lottery. The odds aren't great that you will. But millions of people play it every day. I don't.

The very best investments that I have been involved in established product market fit before raising a lot of money. That's how Geocities did it. That's how Twitter did it. That's how Zynga did it. That's how every single one of my top twenty web investments in my career did it.

Many of them also went on to raise and spend a boatload of money on the way to getting profitable. Not all of them needed to do that. But the thing that is true about every single one of the twenty most successful web software investments I've been involved in is that they had significant user or customer adoption before ramping up hiring and spend.

I think there are a number of reasons why that is true. Although Loudcloud was able to reinvent itself with hundreds of engineers on the payroll, I think it is very hard to be nimble and quick when you have hundreds (or even dozens) of engineers and other employees. It helps to be lean and agile when you are trying to fit your product to the market. It is also nearly impossible to pull off the kind of funding history that Loudcloud pulled off when you are not successful with your initial product. Ben explains that Loudcloud raised $350mm in four rounds of financing (including an IPO) in the first 15 months of its life. Marc Andreessen and Ben Horowitz can do that. Most of you can not.

All of this said, I think Ben does a service to point out that raising a lot of cash and making a large investment in the business is a big positive. But in my opinion you only want to do that once you are 100% sure and have ample evidence that your product has hit its stride, you've got yourself in the place you want to be in your market, and you can raise the capital without taking much dilution. If all of those boxes are checked yes, then go for it. But please spend it wisely.

There were elevated transit lines in NYC dating back to the 1870s, but the first underground line opened in 1904. At that time, the NYC subway system was operated by two privately held companies, the BRT (Brooklyn Rapid Transit) which became the BMT (Brooklyn Manhattan Transit) and the IRT (Interborough Rapid Transit). These privately held companies raised capital to build the subway lines and operated with the city's blessing. Starting in 1913, the city starting building the tunnels and leased them to these privately held companies.

Then in 1932, the city started to compete with these two privately held companies, and in 1940, they were bought and consolidated into the MTA (Metropolitan Transit Authority).

I ride the subways every day and will head to the L train shortly to get to work. Every time I ride on this system, I am amazed at how it got built given the cost and complexity involved.

The fact that it started out as a private enterprise is not surprising. There is something incredibly powerful about entrepreneurs backed by speculative capital. The entrepreneurs laid the first tunnels, operated the first lines, and showed that it was a profitable enterprise.

At some point the city stepped in and turned it into a public utility. Say what you want about government's ability (or inability) to operate effectively, I will tell you that the NYC subway system works pretty damn well.

So all the debates, including the one I waded into yesterday about mobile broadband infrastructure, about private enterprise versus public spending are like most things - fringe debates. There is a third way which is public private partnerships and I think that is the best way.

I went down to Washington, DC yesterday to participate in an event that celebrated the 25th anniversary of .com. I spoke on a panel (yes a hated panel) moderated by Kara Swisher and including Aneesh Chopra, CTO of the Federal Government, Arianna Huffington, and Ken Silva, CTO of Verisign.

Kara started out the discussion by holding up a binder that included the FCC's National Broadband Plan that was submitted to congress this week. She had a lot of fun with the fact that our nation's broadband plan was being distributed to congress and the media in paper form in a binder.

Notwithstanding the packaging of the plan, I am a big fan of the effort by our administration, led by the FCC, to change our country's lackluster performance in the area of broadband infrastructure. John Chambers, CEO of Cisco, is also a fan and he just wrote this in Business Week:

If the U.S. military ranked 17th in the world, you can bet that as a nation we would make strengthening our armed forces a national priority. Yet that's just how the U.S. stacks up against the rest of the world in terms of access to high-speed Internet connections. The vital communications systems that make our economy work and serve as a platform for business innovation and social interactions are second-class.

I said to the panel, the audience, and our government's CTO yesterday that I believe the most important thing we can do in the area of broadband infrastructure is to increase the amount of wireless spectrum available for broadband internet. The fact is that wires, fiber, and cable aren't going to get us where we need to go. We can spend billions laying more and it will be a waste of money. We can't get to the speeds, capacity, and coverage we need with last century's technology. We need to lead the world in the development of new technology and we need to deploy it here first.

The national broadband plan does call for another 500mhz of hiqh quality spectrum to be used for "terrestrial broadband services" over the next decade. This blog post explains how that is proposed to happen. It appears that most of this 500mhz, if not all of it, will come from the broadcast television industry.

That seems to be politically realistic but there is a whole lot more excellent spectrum out there in the hands of industry, from broadcast TV, to broadcast radio, to wireless carriers that is locked up in the hands of one single provider. And that's huge problem.

As I explained yesterday on the panel, there's huge difference between the efficiencies of circuit switched networks where the bandwidth is allocated entirely to one connection, and packet switched networks where the bandwidth is shared amount many connections. The same is true of wireless spectrum and the unregulated band where wifi devices operate is the best example of this. We have witnessed massive innovation and bandwitdth improvement in wifi devices over the past decade. This is due to the development of new standards, new hardware technologies, and new software technologies. When you take a technology and unregulate it and let the market operate, you'll get way better results than when you lock a technology up in the hands of one owner.

So what I'd like to see in the National Broadband Plan is to make that entire 500mhz available as unregulated spectrum where anyone and everyone can build technologies, devices, markets, and businesses in it. I believe if we did that, instead of auctioning it off to several large established wireless carriers, we would see the kinds of gains our country needs to improve our broadband infrastructure. We'd also lead the world in the development of these new wireless technologies and create a boatload of jobs in the process.

It is about an exercise I've been going through since the beginning of the year. I've always walked around with hardly any money on me. It drives the Gotham Gal nuts, but it's who I am. I don't like carrying cash and never have.

But the past few months, I've been walking around with no cash, not a dime. I carry a host of stored value cards and credit cards on me. The picture at the top of this post is my wallet. The black cord is my daughter Emily's hairband. In that stack is a metrocard, my drivers license, a parking pass for my garage, several american express cards for various personal and business entities, a visa card, and several debit cards. That's it.

I've gone without a wallet for years and this stack of cards has been my system for the past decade. But I've always supplemented it with some cash in my pocket as well. Not anymore.

What this exercise has taught me is that cash is almost unnecessary these days. Almost is the operative word. You have to work a little bit to operate without cash. I avoid the $2 or $3 purchase. I've never been much for the $2 or $3 purchase, but it does happen. Earlier this week I stopped at Joe, The Art Of Coffee for an espresso on the way to work. I forgot that Joe is cash only. Fortunately Joe gave me the espresso and took an IOU from me. I felt bad about that and now I have to figure out how to pay him back without breaking my no cash diet.

The thing that was holding me back from going no cash was the time it took to check out with credit or debit. But in the past year or two, most merchants have moved to a no signature required on transactions less than $20. If no signature is required, a credit or debit transaction is faster than a cash transaction.

And then there's cabs. It took me until this year to give up my 25 year habit of paying cabbies in cash. I thought the credit transaction would take too long or be unreliable. My kids told me I was being foolish and to give it a try. And I was sold in the first day. Paying cabbies with a credit card is simply a superior experience. It's fast, there's no waiting for change, and tipping is easier and I find myself being more generous. All in all it is much better.

So I believe we are on the verge of a cashless society, at least in NYC. I may be on the bleeding edge of it, but if I can go cashless, so can others.

The other thing this cashless exercise has taught me is walking around with plastic cards wrapped in a hairband is silly. We need to take the next step which I am sure is the phone. I've always got my mobile phone on me unless I am home. It would be so nice if I could simply enter all those stored value cards, credit and debit cards into my phone and stop with the stack of plastic entirely.

I hope to continue this cashless exercise going, at least when I am in NYC and not traveling. I honestly think I can do that. And as for the stack of cards in my pocket, well I'd like to get rid of them too.

Mark Suster just keeps putting out great stuff on his blog. Last night he posted about the tricky issue of transitioning from one job to another. Mark writes the post from the perspective of the entrepreneur/executive hiring someone who is currently working for another company. I love this part:

I operate on the principal that you’re most vulnerable in any deal immediately after you’ve won.  I believe the same is true in recruiting.  So your goal is to get the employee working in your company as quickly as possible and with the least amount of collateral damage.

But there are three parties to these situations; the employee, the current employer, and the future employer. I'd like to talk about all three and how each should behave.

First, I think it is important to recognize that most of the time you'll want to hire someone who is currently working for another company. There are times when you can hire someone who is unemployed or is doing consulting work (which is often the same thing as being unemployed). But most of the time, you'll find yourself in the situation of hiring someone who is currently employed by someone else.

Let's start with the employee. If you plan to leave the company you are currently working for and are actively searching for a new position, I think it is best to do your search out in the open with the knowledge of your employer. That allows your current employer to plan for your departure and allows you to do your job search out in the open. Many employees worry that if they disclose their intention to leave, they'll be fired. That does happen and is a reasonable concern. But more often, the employer appreciates the notice and rewards the employee giving notice with an extended transition period. That's the ideal scenario.

But not every person who leaves a company was looking to leave. It's very common in the tech startup world to approach employees who are happy in their current jobs with an opportunity that is simply better. And then they decide to leave and there is a tricky transition situation.

Mark advises the hiring company to push for the employee to leave quickly. But I have found myself on the opposite side of this situation, in a small startup with a key employee leaving who is being pressured to leave quickly. And of course, in that situation the company who is losing the key person wants them to stay for the longest transition possible.

The problem with the long transition for the key employee is that it often takes two to three months to find a replacement for a key employee. And it is generally not reasonable to ask an employee to stick around for a two to three month transition.

One option is the "battlefield promotion" of someone else on the team to assume the job of the person who is leaving. If you can do that promotion permanently, then it is a good option. If you plan to do the promotion temporarily, it can be problematic. Once promoted, many people bristle at going back to their old role and working for someone new. 

Losing a key employee in a small company is really one of the most difficult situations you'll have to deal with as an entrepreneur/startup executive. One thing I do not recommend is trying to retain the person who is leaving. If they've shown the willingness or desire to leave, you have to let them go. There is no such thing as indentured servitude in startup land and when someone shows that they are mentally out, they should not stick around except to insure a smooth transition.

So to summarize, if you are the employee, it is best to give as much notice as you can comfortably give to your current employer without putting yourself in a vulnerable position. If you are the hiring company, you want to get the new employee onboard as quickly as possible, but don't put the person you are hiring in an awkward and damaging position. And if you are the company losing the employee, get a reasonable transition time, find some way to manage without the person, and don't try to keep them once they've shown a desire to leave.

For all three parties, if you are struggling with this issue, reach out and get advice. You aren't the first person to go through this situation. It happens all the time and others who have lived through it can help you deal. 

I really like how Tumblr publishes some key stats publicly every month in their own stylized dashboard.

I also like the way they foreshadow upcoming product features:

As the old saying goes, a picture is worth a thousand words.
 

After the workshop was over, Ryan Carson, the founder of Carsonified which puts on FOWA and a number of other interesting events, asked me if he could post the 3.5 hour workshop video. My immediate reaction was "hell no" but instead I said, "let me look at it first." 

On Friday I posted two videos that came from the talk I gave at InSITE last wednesday. The entire 1.5 hours of conversation was recorded and is available here. Again, I did not know that the entire talk including Q&A was going to be posted on the web and friday morning, I spent 1.5 hours of time I did not have watching each and every minute of that video to make sure it was cool to have it on the web.

If I seem paranoid about this stuff, I am. I watched what happened to my friend Mark Pincus when he said something highly candid and off the cuff last year in an impromptu talk to entrepreneurs that was unfortunately being filmed. Some entrepreneur asked Mark about keeping control of your startup and Mark said that the only sure way to do that is get revenues early. He went on to say that they were so focused on revenues in the early days of Zynga that they did some things he didn't like. He then mentioned the Zwinky toolbar and said he installed it on his machine and couldn't get it off. And then went on to say that he told his developer to take that lead gen offer down.

Of course, that's not what everyone saw when TechCrunch posted a clip from that unfortunate video. They just saw the comment about the Zwinky toolbar without the context. 

So when I see a video of me on the web, I watch the entire thing and look at every minute in that light. I am paranoid about someone taking a 30 second clip and leaving out the rest. If I see anything that is risky in that way, I ask them to take down the video or better yet I ask them not to put it up.

That's why I wasted 1.5 hours of my time on Friday morning at 5am watching a video of myself. And that's why I may have to waste 3.5 hours of my time watching my FOWA workshop at some point. I was highly candid in that FOWA workshop and asked people not to Twitter some things I said. That's how I can provide the most value to the people in attendance (as Mark was trying to do). So that FOWA workshop video is risky in my mind.

Of course, I can simply ask people not to videotape me or ask them not to post it on the web. But that's not a great option either. There were thirty or forty people in the room at the InSITE talk the other night. Almost 1000 people have watched the first video on YouTube and over fifty have watched every single one of them. That's the power of the web, to reach way more people that can attend in person.

So that's the world we have to live in now. One that assumes when you talk in public, it will be recorded and posted on the web. One that assumes that someone will look at that video and seek an opportunity to pull a clip out of context and post it. And so if you do a lot of public speaking, you simply need to speak with that in mind. It makes me feel like a politician to tell you the truth. It's a horrible feeling but honestly I don't know if there is any other way.

At the end of last year, there was a fight between Fox and Time Warner Cable that made some headlines. It was settled on new year's day.

The latest spat is between ABC/Disney and Cablevision and it has turned personal, pitting Disney's chief Bob Iger against Cablevision's chief James Dolan. 

Of course, the losers in all of these spats are the consumers who get jerked around and risk missing things they love like the college bowl games or the Oscars. Most of these spats get settled at the last minute, but the whole exercise gives everyone a black eye.

The reason we have to put up with nonsense like this is that cable providers are still operating near monopolies. There are other options like satellite TV or services like Verizon FIOS. But most consumers get their video services from the incumbent cable provider.

And when a content provider, like ABC or Fox, wants to get more money for its programming and the cable company balks, it is the cable company's customers who are stuck.

There's a better way and we'll have it someday, but not soon enough for me. We'll go "over the top" for our video programming, getting it via a broadband connection to the Internet. Content owners like Fox and ABC will negotiate distribution deals with dozens, maybe hundreds of providers. And we'll be able to subscribe to one or more of those providers over the internet through platforms like Apple TV, our portfolio company Boxee, and many others.

When ABC wants more money from it's distribution partners in this scenario, some will pay up and others will not. And if you want to watch the Oscars, you'll simply be able to drop your subscription to one provider, light up another, and/or possibly get it directly from ABC if you want to.

Most industries work that way today. Walmart might stop carrying Puma Sneakers but you can certainly find them in hundreds of other physical and online stores if you want a sweet pair of Clydes. A three tier distribution model from the manufacturer to the distributor to the retailer works very well to insure that there is always product available in the market to customers who want it. And I believe we are going to see that model develop in the TV (and Film) business soon.

Mark Suster, who writes the best VC blog out there right now, has a post about sitting on panels. He gives the following advice:

• Educate
• Entertain
• Discuss and Debate (have a dialog)
• Build Awareness of your firm/company/brand
• Make connections with your other panelists and follow-up with them
• Avoid panels that are too big
• Don't over promote
• Don't give a long winded intro
• Don't hog the microphone
• Don't try to moderate the panel

Excellent advice Mark. I agree with all of it. Read Mark's post for the details.

All that said, I really hate panels. I hate watching them and I hate being on them even more. I think it's a lazy way to participate in a conference. You show up, answer a few questions, sit up on the stage with a bunch of other people, and then go home.

I much prefer the 15-20 minute talk with Q&A afterward. I think I'd prefer even more a 10 minute talk with longer Q&A afterward.

Panels rarely turn into interesting discussions. If you want an interesting discussion, have someone good do an on-stage interview. I've done on stage interviews with people like John Battelle, John Heilemann, and Alan Murray and they are fantastic discussions. I'd like to do more of them.

I'm on record that I don't like big time conferences. Now I'm on record that I don't like panels.

But I do like small conferences focused on a particular group or sector. And I do like to see a short presentation or a well done interview and I also like to deliver them as well. I'd love to see more of all of those things.

There was a lot of noise in VC/startup land earlier this week about the Series Seed documents that can be used to close a seed round. Marc Andreessen told PE Hub:

It’s like open source software. If it’s developed by IBM, there’s no reason for another company not to use it. The documents aren’t owned or controlled by Fenwick. Fenwick isn’t getting paid for them. I don’t think there’s a reason for another attorney not to use them, except if they’re concerned over reduced billings. Lawyers have a financial incentive to make things more complicated because they are paid more.

I'd like to differ with Marc on this one. First, as Brad Feld points out, there are now four sets of "open source seed documents:

• TechStars Model Seed Funding Documents (by Cooley)
• Y Combinator Series AA Equity Financing Documents (by WSGR)
• Founders Institute Plain Preferred Term Sheet (by WSGR)
• Series Seed Financing Documents (by Fenwick & West)

There are no shortage of "standard forms" out there. TechStars uses one set. Y Combinator uses another. Founders Institute uses a third. Andreessen Horowitz uses a fourth. And USV and other firms uses a fifth.

The problem, as Brad Feld points out, is that nobody has done the work to get all the various players in the room and standardize on one form. Ted Wang showed me the Series Seed documents last year and while I am hugely supportive of his intent here, I can't and won't get behind the Series Seed forms because they leave out some critical stuff that we simply won't do a deal without.

I guess it's like open source software in that there are many flavors of it out there. One project might choose MongoDB for their project. Another might choose Cassandra. A third might choose Hadoop. All will get the job done and all are open source. But each one has its strengths and weaknesses and there is no standard. That's ok with me as long as everyone understands it.

I posted about The Blue Sweater recently and said:

I have always believed in the power of entrepreneurs and for profit initiatives to change the world.

The event is being put on by goodcompany ventures, an incubator for "socially conscious entrepreneurs" and it will be held at Green Spaces, a co-working space in Tribeca for "environmental entrepreneurs."

If you'd like to attend, here's a link to the RSVP page. Tickets are $35. I hope to see some of you there. Should be an interesting discussion.

Facebook has received a patent on the idea of "Dynamically providing a news feed about a user of a social network."

As if this was a novel idea whenever the patent was filed. 

Here's a comment I read on the story linked to above:

This is weird news. I run a small local social community and also use some kind of newsfeed system. Yet the earliest version of my newsfeed dates from 2003, way before facebook’s feed. If they wanted to, they could easily crush me with this patent as I dont have the judical knowledge and financial power to enter a legal battle with facebook. The could close me down, although everyone would know that it’s only because they have this patent, not because I copied the newsfeed from them.

Software patents make no sense. Like music, art, and other creative pursuits, software is almost always derivative work. There is not a chance in hell that Facebook invented this idea. I am certain there have been social news feeds around for at least a decade or more. I am not going to spend the time finding all the prior art, but I am sure there are patent lawyers doing that already for various social networks who are now potential subjects of patent litigation from Facebook.

Don't take this post as a slam on Facebook. They have done an incredible job of executing on an entirely obvious idea. I was chatting this past week with a tech journalist who was in college when Facebook launched. She was not at Harvard but at another ivy league school. She told me that there were "facebooks" launching all over the ivy league that year. Facebook out executed everyone and took the market. That's how it is done. But they did not come up with the idea that "we should take a facebook and put it online". They simply did it better.

Same with social news feeds. They are the dominant provider of social news feeds in the world. Because they out executed everyone else. But not because they invented the idea. Giving them a patent on this idea is lunacy. But the whole idea of software patents is lunacy. We need to eliminate software patents and we need to do it now.

There's a reason why radio and outdoor (billboard) advertising together became a $30bn to $50bn annual domestic market. When people are mobile, like driving a car, they are not reading, they are not watching video, they are not opening email. At least they should not be doing those sorts of things while driving a car.

While radio and billboards will still be attractive advertising opportunities for some time to come, there is a new way to reach the mobile consumer - on his or her phone.

I'm not talking about calling you or text messaging you on your phone. I am talking about when you connect your android phone into your car's audio jack or when you put on your iPhone headphones and hop on the treadmill at the gym.

In these situations, you are likely listening to audio and increasingly streaming audio. That audio stream can contain commercial messaging if it is done right. And because the phone, as opposed to the car radio or the billboard, knows a lot about you, including where you are, the messaging can be targeted (ie made relevant).

This is the opportunity our portfolio company TargetSpot was built to go after. When the company was started, it decided to focus on terrestrial radio companies and help them monetize their internet streams. It is the leader in that market today. Then it added "pure play internet radio" providers like Yahoo! Music, MySpace Music, and AOL Radio to it's network and further solidified its lead.

And today, TargetSpot is rolling out its first mobile audio advertising service, in partnership with Slacker. If you want to reach people who are listening to streaming audio via their phones in their cars, in the gym, at work, and at home you now can do that via TargetSpot.

Slacker is one of several streaming audio companies focused on the mobile phone. Others include Pandora and Last.fm. I expect we'll see hundreds of providers over time.

And I expect that we'll find out that the audio format is one of the most powerful forms of mobile advertising. Just like it has been in the offline world for the past century.

My partner Brad Burnham wrote a post today explaining why he disagrees with Nathan Myhrvold's recent Harvard Business Review piece in defense his patent holding company,Intellectual Ventures.

In the post, Brad talks about the power of "permissionless innovation" and says:

The real reason the independent software industry emerged is that operating systems and APIs made it possible for independent software vendors to develop applications independently. They no longer had to ask permission of the hardware vendors. This same characteristic of permissionless innovation led to the explosion of independently created services on the internet. The rampant abuse of the patent system has created the opposite condition for the creators of software and web services today.

We have all benefited from the extraordinary innovation delivered first by the independent software industry and more recently by the web services industry. In both cases, this innovation was a direct result of the ability to innovate without permission. Nathan proposes to replace this world of decentralized innovation on open platforms with one dominated by a new gatekeeper, "intellectual property market makers". In this world, young companies, may not need to ask permission of Dell, Microsoft, or Verizon, before they launch a new web service, but they will have to negotiate with Nathan's firm to as he puts it "get all the patents they need to roll out an innovative product faster and at the same time reduce the risk that they'll miss a necessary license and get blindsided by an infringement suit"

I went down to Philly yesterday and spent the afternoon with students and faculty at Wharton Entrepreneurial Programs, the entity that administers the entrepreneurship major/courses at Wharton and runs a bunch of fantastic "outreach" programs like the Venture Initiation Program. 

WEP is run by Professor Raffi Amit and as we were making our way from one meeting to another, I said to Raffi that "you can't teach people to be entrepreneurs but you can teach entrepreneurs business." He replied to me that his research into the topic suggests that "there are no unique and defining characteristics of entrepreneurs" which leads him to believe that you can in fact teach people to be entrepreneurs.

That threw me and I've been ruminating on his conclusion ever since. I've been working with entrepreneurs for almost 25 years now and it is ingrained in my mind that someone is either born an entrepreneur or is not.

And I also believe that there are "unique and defining characteristics of entrepreneurs." Here are some of the ones I observe most frequently:

1) A stubborn belief in one's self

2) A confidence bordering on arrogance

3) A desire to accept risk and ambiguity, and the ability to live with them

4) An ability to construct a vision and sell it to many others

5) A magnet for talent

I accept that Raffi may be right. I will get my hands on his research and read it. And maybe it will change my mind on this topic. 

Venture Capital is a lot about pattern recognition. You learn to make quick judgements based on things you've observed in the past. And judgements about people are among the most important decisions we make. So this is a very important topic to me.

Well it is happening this summer, courtesy of the city's own NYC Seed fund.

The program is called SeedStart. The program mirrors much of what the pioneer in this sector, Y Combinator, does. It is an eight week summer program. They will select up to ten teams who will get $20k in funding, space to work, and mentorship in return for 5% equity in the business and the opportunity to launch at the end of the program to a large audience.

If you are interested, you need to hurry. The application deadline is the end of the month, February 28th. The acceptances will be made on March 15th. If this is for you, apply here.

This is a great thing for NYC and the first time entrepreneurs who really benefit from this kind of accelerator program. I am really thankful for Owen Davis' leadership in making this happen. I am also grateful to our colleagues at Contour Ventures, IA Ventures, Polaris, and RRE for their support of this effort.

We had a very interesting discussion about Chatroulette here last week. Since then, reporters at the NY Times got the founder to talk and they posted the email exchange here.

Here are some interesting facts from the NY Times piece:

• The founder, Andrey Ternovskiy, is a 17 year old high school student who lives in Moscow
• He created the site for "fun" and had no "business goals" for it
• It was inspired by his extensive use of Skype web chat with his friends
• It spread entirely by word of mouth
• He's had to rewrite the code several times in order to allow it to scale
• His relatives invested some "funds" so he could buy more servers
• Right now, he's doing it all himself
• Chatroulette runs on seven servers in Frankfurt, Germany
• He is planning to add more servers in new geographic locations
• Andrey has never been to the USA but would love to visit
• He has ideas for more "weird in a good sense" features
• He's not sure what Chatroulette is any more
• He thinks it would be best to "found Chatroulette" as a US-based company

I'll state right up front that there are elements of Buzz that are derivative of Twitter, Tumblr, Disqus, and Foursquare (and many other services) and being that our firm is invested in some of those services, I can't be and won't be unbiased in my views of Buzz.

I think Buzz is Google's finest implementation of "social" to date. It is a given in the web/tech circles that "google doesn't get social". So maybe the most important thing about Buzz is that it puts that idea to rest. 

I also think that the decision to place Buzz into gmail was a smart move. Every time I move to my gmail tabs (I keep gmail open in two to three tabs at all times), I see something like this:

That's quite a temptation to click on Buzz and see what those 42 messages are about. And I've done that at least a dozen times the past couple days.

But that is also one of my big issues with Buzz. That (42) number includes replies to buzzes (can I call them tweets?) that the people I am following leave. Buzz copies the FriendFeed user experience for the most part. And as much as I admire FriendFeed and the people who built it, I don't believe that is a compelling experience for the mainstream user.

When I follow Pete Cashmore in Buzz, I'm basically following all of his fans. And my Buzz timeline is filled with all of their replies to his posts. I think that user experience works well in something like this blog and the comments. I don't think it works well in a mass medium where I want to follow hundreds of people.

Like FriendFeed, Buzz allows me to "pump my data into it". It is an aggregator as well as a updating service. But that poses a problem in some ways. What does this service want to be? Once I pumped this blog, my tumblog, and my twitter into Buzz, I was done. You can all follow me in Buzz here.

I've updated Buzz once or twice since then, but since I can update Buzz via this blog, twitter, and tumblr, I think that will be my favored approach. That's what I do with Facebook and that's what I did with FriendFeeed. 

I'm not saying that everyone will do that. Clearly that is not the case. But of the 9 million posts and comments that people have submitted to Buzz since it launched, how many of those were brand new status updates and how many were items automatically pumped into Buzz and how many were comments?

I believe the most compelling experiences on the Internet do one thing and do it very well and then open themselves up to other services via an API. Buzz is trying to do way too much in my opinion and while that may work for many people, it does't work that well for me.

I think mobile presents some amazing opportunities for Google and Buzz. You can already see Buzzes near you on Google Maps on Android (via a layer in the map). I think that's a very interesting place and way to receive Buzzes. And when you search for and select a specific place on Google Maps on Android, you can "buzz about that place." I did that the other day using my Google phone in my office. That's like a Foursquare checkin and you know that I think mobile checkins are a fantastic way to create social utility.

My partner Albert who still builds web apps, posted about Buzz and he had some favorable things to say about the Buzz API. If third party app developers start building Buzz apps, or building Buzz into their existing mobile apps, that will be a big plus. I'm sure it will happen.

So in summary, Buzz doesn't really do it for me but I think it's an important new entrant in the world of social media and given that it's from google, it's in gmail, it's nicely integrated into their mobile offerings, it has an excellent API, and it will be constantly improved, it's likely that Buzz will turn out to be an important player in the social media world.

Startl is a very interesting new project based here in NYC. It's a startup accelerator (like Y Combinator, TechStars, Seedcamp, etc) but focused entirely on entrepreneurs working in education. It's a non-profit backed by the Hewlett, MacArthur, and Gates foundations which is quite a collection if you ask me. 

Another thing that makes Startl interesting is the partnerships it has with IDEO, DreamIT Ventures, and Berkeley & Noyes (leading investment bankers in education).

Startl has two programs that anyone working on "hacking education" should be interested in:

Design Boost is a five day bootcamp here in NYC from March 15th to 19th. This first Design Boost will focus on the design of mobile apps for learning and will feature designers from IDEO who will help the selected teams with their design and development process. Up to 15 teams will be selected for Design Boost. Details on how to apply are here. The application deadline for Design Boost is February 22nd.

Accelerator is part of the DreamIT Ventures summer program in Philadelphia from May to August. Startl will select five "learning companies" to participate in the regular DreamIT Ventures program. Details on how to apply are here. The application deadline for Accelerator is March 15th.

Startl was started by two friends of mine and our firm, Diana Rhoten and Laurie Racine, and their colleague Phoenix Wang. We've known Diana and Laurie for a long time, they are committed to the concept that the innovation/startup world can have a big social impact, particularly on education. I am excited by their work on Startl and hope that some of you will apply and take advantage of these two programs.

While everyone was on the holiday break at the end of last year, Twilio wrote a blog post that very few people noticed. They announced that our firm, Union Square Ventures, had become an investor in Twilio.

Twilio is not a services for the masses. Yet. 

It's a service that web developers can use to build telephony apps or build telephony into their app. This image on Twilio's home page says it all.

In the "Areas of Interest" post that I wrote at the start of the year, I wrote:

Developers are the new power users. If you cater to them, you can build a large user base with significant network effects.

When we first met Twilio, the founder Jeff Lawson blew me away when he told me that the entire service was built on five API calls; <say>, <play>, <gather>, <record>, and <dial>. Clearly they've added a few more, like <conference> highlighted above.

Today, Twilio is announcing they've added SMS to the service, with <sms>. Now you can easily allow users to access your web app via SMS without having to set up shortcodes, dealing with aggregators, doing the configurations, etc. TechCrunch has the details.

My partner Albert led this investment for us. He's a web developer himself and has already saved himself countless hours with Twilio. Albert wrote a post about Twilio on the USV blog today. If you are a developer of web apps and are interested in adding telephony, you should check out Twilio.

About a year ago, I wrote a post about Apple's "blind spot" for Flash. I took more heat for that post than anything else I've written here other than political posts. It opened my eyes to the fact that Flash vs HTML5 is one of the most politically heated topics in the tech business. The third rail, as it were.

The choice of what technology web developers use to produce rich browser based applications is a big deal with a lot of important ramifications for companies, investors, and most importantly users. Jeremy Allaire, creator of ColdFusion and Brightcove, addresses this issue today on TechCrunch.

It's an excellent post full of great facts and insights, including this one:

What few people realize is that while H.264 appears to be an open and free standard, in actuality it is not. It is a standard provided by the MPEG-LA consortsia, and is governed by commercial and IP restrictions, which will in 2014 impose a royalty and license requirement on all users of the technology. How can the open Web adopt a format that has such restrictions? It can’t.

If you are a web developer, entrepreneur, or investor, I suggest you go read Jeremy's post in full. It's very good.

If you don't plan to read it, I'll summarize. Jeremy makes two big points. The first is that HTML5 vs Flash is not a winner take all battle (at least for many years). He predicts that for web apps, we'll see more and more developers move to HTLM5. But for video, gaming, and other "immersive" applications, we'll see developers sticking with Flash for a long time.

His second point is that the desktop web and the mobile web are going to play out very differently. He says:

in the context of hand-held computing, where Apple is politically motivated to block the Flash runtime, it is apparent video publishers will be driven to build and operate solutions that leverage HTML5 Video on mobile and iPad browsing environments.

Jeremy outlines the political agendas of two of the big players in this battle:

a web-centric, HTML5-centric handheld world favors Google because it can leverage it’s existing dominance in search and web advertising. A proprietary App-centric universe favors Apple because it can become the primary gatekeeper to reaching the mobile audience and already has a pole position in integrating payments and advertising into content applications.

Someday soon, I'll be reading a blog on my Google phone and I'll come upon a video in a Flash player and I'll be able to hit play and watch it on my phone. That's apparently not going to happen in Apple's "proprietary app centric universe". 

The good news for all of us is that no one company is going to dictate how this plays out. Jeremy says in the wrapup of his post:

it is evident that the competing interests of platform vendors, consumers and app and content publishers will ensure that this remains a fragmented and competitive environment for many years to come

I was at a board meeting of a non profit this week and the talk turned to "advocacy" and whether or not the non profit should be doing any of that. I had to ask what the definition of advocacy was just to be clear what we were talking about. It's not something I've traditionally been involved in.

When I think of advocacy, I think of politics, lobbying, public relations, and a bunch of other "heavyweight" behaviors that I abhor. Wikipedia's definition of advocacy is:

Advocacy is the pursuit of influencing outcomes — including public-policy and resource allocation decisions within political, economic, and social systems and institutions — that directly affect people’s current lives. (Cohen, 2001)

Later in the week, I read Brad Feld's blog post urging immigrant startup founders to tell their story. The "startup visa working group" which I am a member of is recruiting immigrant startup founders to tell their story online here. If you are an immigrant startup founder, I urge you to go do that. It won't take long and will be incredibly valuable "advocacy" on an important issue.

And it occurred to me that the "startup visa movement" is a case study in lightweight advocacy.

The problem is relatively simple and should be easy to fix. If you are an immigrant starting a company here in the US, you can get kicked out of the country if you don't have the right visa. I've seen it happen a couple times in the past year to founders in our portfolio.

And these are people starting new companies here in the US who are hiring people and creating new jobs, and not just any job, but high paying jobs. It makes no sense to kick these people out of the country. It's hurtful to them, their companies, and our country and economy.

So last September, Brad Feld wrote a post about this issue on his blog. It attracted a fair bit of interest in the VC and entrepreneur community, got a lot of comments, and got some people talking to each other. Brad's post was inspired by an essay Paul Graham had written last spring.

As a result of Brad's post, we formed a working group of a few VCs and a few entrepreneurs that we call the "startup visa group." We've continued to blog about this issue, but more importantly, we've started calling and talking to our elected officials and their staffs. We have a plan and we have a legislative proposal to fix this issue.

Now we are collecting the stories that we need to galvanize the elected officials to act. When that is done, the group is headed to Washington to push this forward.

There are no lobbyists involved. There is no PR firm involved. No campaign contributions have been made. No PACs or other advocacy groups have been formed.

Everyone involved has a full time job either starting and running a company or building and managing a portfolio of companies. We are doing this "nights and weekends."

And we can do that because this is "lightweight advocacy". We are using our blogs, the internet, social media, and our relationships with our elected officials to move this issue forward. We'll see if we are effective. I sure hope we will be. It will fix an important issue in the startup economy and it will be yet another example of the internet is providing tools to do things the way they should be done.

My family is tired of hearing me talk about "The Cone Of Silence". This is an electronics product I'd love to have. I am not sure if it can be built with the current state of noise canceling technology, but here is how it would work.

The Cone Of Silence is a small electronics product that you can bring to a restaurant in your pocket, place on the table, and create a "noise cancelled zone" around the table you and your friends are sitting at.

But I am not giving up. Last week I was introduced to Quirky, a community of product enthusiasts where people submit product ideas and the community develops them together. Each week one product is selected to build and launch in a pre-sale to the community. If enough of the product is sold to break even on the production costs, it is built and sold and then launched commercially.

Quirky has been doing this for about six months now and they've developed 30 products together and launched about six commercially. You can see the products that have launched commercially on the front page of the Quirky website. Some of these products are also available in offline retail.

So as you might expect, I submitted The Cone Of Silence idea to Quirky last weekend and it is one of 27 candidates to be selected to be "product 0031". The idea has generated some comments and, like my dad and father in law, a few people think its not possible to build the way I want it to work. We will see if any good ideas emerge.

Even if the Quirky community doesn't figure out how to build The Cone Of Silence, I am not giving up on the idea. I'm not giving up on teleportation either.

And I think the idea behind Quirky is great. We've seen communities like Threadless, Etsy, Kickstarter, and others do amazing things. There's certainly room for a community to build people powered products. Check out Quirky (and The Cone Of Silence) and let me know what you think.

Mark Pincus, founder/CEO of our portfolio company Zynga, is interviewed in today's NY Times on the topic of leadership. The part about empowering and scaling the team is really great.

You can manage 50 people through the strength of your personality and lack of sleep. You can touch them all in a week and make sure they’re all pointed in the right direction. By 150, it’s clear that that’s not going to scale, and you’ve got to find some way to keep everybody going in productive directions when you’re not in the room.

Mark says "make everyone the CEO of something."

I’d turn people into C.E.O.’s. One thing I did at my second company was to put white sticky sheets on the wall, and I put everyone’s name on one of the sheets, and I said, “By the end of the week, everybody needs to write what you’re C.E.O. of, and it needs to be something really meaningful.” And that way, everyone knows who’s C.E.O. of what and they know whom to ask instead of me. And it was really effective. People liked it. And there was nowhere to hide.

I've written before about CEO coaches. I'm a big fan of the work they do and how they can help entrepreneurs work on things that are holding them back from being the best leaders they can be. There are a bunch of CEO coaches I can recommend. But my favorite CEO coach is my former partner at Flatiron Partners Jerry Colonna.

Jerry is a special person. He's had three careers before the age of 50. He's been a hugely successful journalist, venture capitalist, and now CEO coach. At his core he is a "people person." When Jerry and I started Flatiron, I was all about the technology and the deal. Jerry taught me to focus on the people, not only who they are and what they've done, but what makes them tick.

And now Jerry has a blog. He's tried blogging before but has never stuck with it in the past. I hope that's not the case this time because a morning dose of Jerry would be good for all of us.

He calls it The Monster In Your Head. As Cameron, founder of Blogrollr, said to me yesterday "that's a great name for a blog". Yes it is. I suggest you all check it out, not just today but on a regular basis.

As I look over the business plans and projections that these entrepreneurs share with us, one thing I constantly see is a lack of sophistication in calculating the investor's return.

Here's the typical presentation I see:

The entrepreneur needs $400k to start the business, believes he/she can return to the investors $100k per year, and therefore will generate a 25% return on investment. That is correct if the business lasts forever and produces $100k for the investors year after year after year.

But many businesses, probably most businesses, have a finite life. A restaurant may have a few good years but then lose its clientele and go out of business. A media product might do well for a decade but then lose its way and fold.

And most businesses are unlikely to produce exactly $100k every year to the investors. Some businesses will grow the profits year after year. Others might see the profits decline as the business matures and heads out of business.

So the proper way to calculate a return is using the "cash flow method". Here's how you do it. 

1) Get a spreadsheet, excel will do, although increasingly I recommend google docs spreadsheet because it's simpler to share with others. 

2) Lay out along a single row a number of years. I would suggest ten years to start.

3) In the first year show the total investment required as a negative number (because the investors are sending their money to you).

4) In the first through tenth years, show the returns to the investors (after your share). This should be a positive number.

5) Then add those two rows together to get a "net cash flow" number.

6) Sum up the totals of all ten years to get total money in, total money back, and net profit.

7) Then calculate two numbers. The "multiple" is the total money back divided by the total money in. And then using the "IRR" function, calculate an annual return number.

Here's what it should look like:

Here's a link to google docs where  I've posted this example. It is public so everyone can play around with it and see how the formulas work.

It's worth looking for a minute at the theoretical example. The investors put in $400k, get $100k back for four years in a row (which gets them their money back), but then the business declines and eventually goes out of business in its seventh year. The annual rate of return on the $400k turns out to be 14% and the total multiple is 1.3x.

That's not a bad outcome for a personal investment in a local business you want to support. It sure beats the returns you'll get on a money market fund. But it is not a 25% return and should not be marketed as such.

I hope this helps. You don't need to get a finance MBA to be able to do this kind of thing. It's actually not that hard once you do it a few times.

Yesterday I blogged about girls basketball and role models. Today I'm going to blog about football coaches and leaders. I guess I've got sports on my brain this weekend (for good reason).

The NY Times has a nice front page article this morning about Rex Ryan, the rookie coach of the NY Jets. Here are a few quotes:

In Ryan’s first season as coach, he changed the Jets’ second-class existence through the sheer force of his bold and brash personality. He spoke loudly and often about the talent that surrounded him, until the players believed every word he said.

Ryan turned one of the N.F.L.’s most clandestine operations in into an open book. The Jets collapsed at the end of 2008 in part because of the tense atmosphere. Ryan changed that, changed a culture, changed the way people felt about coming to work.

But it's the last line of the second quote that is the biggest deal, he "changed the way people felt about coming to work." That's what great CEOs do. They inspire people to come to work with a bounce in their step and a desire to do great work.

And that is largely about people skills. We all know people who have the special touch with people. They make people laugh, smile, and feel good. Those people make great CEOs, leaders, and football coaches.

But it is not enough to be a cheerleader. You also need to have a plan, you need to be close to the product, you need to know where to lead people. Here's another couple quotes from the Times article:

Instead of operating from a tower like a dictator, Ryan walks the hallways, massaging egos, cooking up defensive plans.

"Beneath it all, he’s super, super intelligent,” Pettine said. “Like the guy in the movie ‘A Beautiful Mind.’ The things that come out of his mouth are not being shot from the hip. There’s a plan behind all of it.”

1) Knows how to connect to the team and make them feel good about their work

2) Someone who walks the halls and works on the product with the team

3) Has the intellect to make the right decisions

4) Has a plan

We'll see how well Rex Ryan and the Jets do today against the Colts. They are big underdogs and rightly so. I'll be rooting hard for them and I'm sure the Jets will give it all today.

But win or lose, Rex Ryan has impressed me very much in his rookie season. I look forward to watching him work the sidelines of Jets games for many years to come.

 My 16 year old daughter (in the orange sweater with a player on her lap in the photo) and her friend got up at 9:15am this morning, about three hours earlier than they'd ordinarily get up on a saturday morning, and headed over to the local public school to be assistant coaches in the Greenwich Village girls basketball league.

Both of my girls played in this league in their middle school years and then assistant coached in it during their high school years. The skills and experience they developed playing in this league allowed them to be leaders and top players on their high school team.

Earlier this week, when I showed up at my daughter's high school game, I saw one of the younger girls on her Greenwich Village team in the stands cheering her on. 

As I sat there this morning watching these little girls play basketball, I was thinking about role models. I talked a bit about role models in the Fast Company interview I did last month.

We can back first-time entrepreneurs and have mentors and role models for them and we have those role models in their second, third, and fourth startups and that's the magic--that creates a sustainable startup economy that Silicon Valley has had for four decades now.

The same thing plays out in startup land. The young entrepreneurs who are starting companies for the first time are best served by seeking out and getting experienced serial entrepreneurs as angel investors, board members, and mentors. We encourage all of the first time entrepreneurs we work with to do this. And the serial entrepreneurs who work with young founders get something out of it too (in addition to equity). It is a truism that the best way to learn is to teach. I know a bunch of seasoned entrepreneurs who love working with young first time entrepreneurs because they learn quite a bit from it. Matt Blumberg, founder and CEO of Return Path, wrote a great post about this last summer.

One of the best things about the startup programs like Y Combinator, Seedcamp, Techstars, and many others is that they provide a vehicle for young entrepreneurs to connect to experienced entrepreneurs. Mentoring is a big part of these programs.

But not every young entrepreneur gets to participate in one of these programs. I'd like to see more vehicles emerge, not just here in NYC but in every startup community, to connect first time entrepreneurs with mentors and role models. Everyone would benefit from more role models, mentoring, and coaching.

The 2009 data on venture capital investments is out now. PWC, along with its partners the NVCA and Thomson Reuters, report that VCs invested $17.7bn in 2009 in the "Money Tree Report."

I think that's a pretty healthy number. I've written in the past that $15bn per year is a good number given the "Venture Capital Math Problem."

My concern is that investing went up in the second half of the year to a $5bn/quarter rate, which is $20bn run rate, a bit above the number that I think is optimal for the industry's returns.

2010 will be an interesting year. If VC investments go back up to $25bn to $30bn per year, then the diet didn't stick and we are back to an overfunded industry that will produce subpar returns on average.

If, on the other hand, the new normal is $15bn to $20bn per year, then the diet worked and we've scaled back the business to healthy levels.

Stay tuned and find out which one it is.

Our portfolio company Boxee announced its payments service this morning with this line:

Users want to see more content on Boxee. Content owners want to be paid for what they produce (whether that’s TV Shows, movies, music, or applications). We don’t believe these are conflicting interests.

Here's how it will work:

users will be able to make purchases with one click on the remote. The content partners we launch with will offer shows, movies and channels that were previously not available to Boxee users. The content owners will be able to package and price as they wish, including pay-per-view and subscription. Content partners will have the flexibility to decide what they make available, whether it’s premium content, content from their existing library, or extras that will never make it “on air”.... Boxee will charge a small fee (i.e. lower than the 30% charged by many app stores) for transactions which we enable. 

I watch my kids and here's what I've seen. There is almost no difference between a laptop and a TV to them. They move seamlessly between the two. The only difference is what content is available on each. What do they want? They want all the content in the entire world available to them on their laptop and their TV. They want them to be the same thing. And they are very willing to pay for content. What they are not accepting of is content owners prohibiting them to watch what they want to watch where they want to watch it.

The new model for entertainment is "over the top" and it's going to happen. As Avner Ronen says in the Boxee payments blog post:

It’s our belief that the Internet is ready to become the 4th method of distribution for broadcast & premium content after Cable, Satellite, and IPTV (FiOS, u-Verse, etc.). In the case of Satellite and IPTV, it took an act of congress to open up these delivery methods. This time it’s people who are demanding this change.

Part two was published yesterday and is about NYC. I talked to Laura Rich last month and she did a great job of capturing my thoughts on why you should start a company in NYC.

If you are in the startup sector in NYC or are thinking of relocating here to do a startup, you should read the piece.

I'd like to highlight one part of the article. Startup hubs take time to develop. You do need infrastructure and that takes time to build, but more importantly, you need mentors and role models. And that's what we have now in NYC that we didn't have ten years ago:

we're into the second decade now, and what the second decade is really turning out to be is serial entrepreneurs who've done it one, two, three, sometimes four times now, who can bring teams together very quickly, often teams that have worked together very quickly, can get on opportunities fast, can get money raised fast, can build companies pretty fast.

And now you have role models. So the first time entrepreneurs can find angel investors. It's exactly what has been going on in Silicon Valley for three, four decades now. Marc Andreessen becomes hugely successful, makes a bunch of money, becomes an angel investor, backs a bunch of people, mentors them, becomes a VC. That migration path is now playing out here in New York, and so most of the investments we do at the first angel-round stage is ourselves and a bunch of serial entrepreneurs in New York who are now making twenty-five- to fifty-thousand dollar investments as angels in these companies, sometimes acting as informal advisers and mentors to the first-time entrepreneurs.

So now we have the best of both worlds. We can back first-time entrepreneurs and have mentors and role models for them and we have those role models in their second, third, and fourth startups and that's the magic--that creates a sustainable startup economy that Silicon Valley has had for four decades now. We're three or four years into our second decade and I think it's going to be a great period for New York. I feel like we have just taken it to another level sometime in the past couple of years.

I'm very pleased to see Fast Company highlight startup hubs like NYC, Seattle, and Boulder. All three cities have nicely developing startup communities that are poised to produce some big companies in the coming years. Entrepreneurs and developers don't have to move to Silicon Valley to chase their dreams anymore. They've got options to fit their work to their lifestyle. And that's a good thing.

For a while the big companies were winning. From the internet bubble burst until recently, most every hot company to come out of the Internet startup scene was acquired or at least seriously considered being acquired by a big company. Skype is the iconic transaction. Yahoo!'s failed bid for Facebook also comes to mind. But it appears that VCs are making a strong comeback led by newly energized later stage investors and even some hedge funds.

The innovator in this trend is a russian investment firm called DST, which did a $200mm financing for Facebook last May. That financing was a combination of primary (money went into the company) and secondary (money went to buy shares from employees and existing shareholders). Since then DST has also done a similar transaction in our portfolio company Zynga.

But there's something new going on that bears mentioning. VCs are starting to compete directly with the M&A market. 

Last winter, when word broke that our portfolio company Twitter had rebuffed a $500mm acquisition offer from Facebook, I received several calls from late stage VCs who essentially said "well if that didn't work for you, how about an investment'? I introduced those VCs to Twitter who did two rounds of financing in 2009.

And now comes word that Elevation Partners is doing a $50mm round (primary and secondary) in Yelp in the wake of Yelp's rebuff of the Google purchase offer. Apparently these kinds of deals are being called "DST deals". Silicon Valley is all about recognizing a good idea and running with it. And I expect we'll see a lot more "DST deals" coming.

I was discussing this trend with the CFO of a large public company last friday morning. He asked the right question, "will DST and the others make a good return doing this"? I told him we'll know in three to five years.

The reason that is such a good question is it gets to the sustainability of this model. M&A is and will always be a sustainable exit model for entrepreneurs and VCs because big companies are always in need of new products and technologies and don't always need to be able to extract a cash flow stream from their acquisitions.

But companies like Facebook, Zynga, Twitter, Yelp, etc, etc will need to go on to become large profitable public companies in order to justify these financings. 

Of course, it is possible that these late stage deals are simply prolonging the time before these companies are bought. That would be the natural outcome if any one of these companies concludes the "go it alone" strategy is not going to work. In that scenario, there may still be good returns for these late stage investors. But there may not be.

Left out of this discussion is the IPO. I do think we will see a resurgent IPO market this year and going forward. But entrepreneurs are waiting longer to take their companies public and that's a very good thing for everyone. With the emergence of this new layer of late stage/primary+secondary capital, we can all wait a bit longer. And not sell out. And that's a very good thing.

I've long noticed that the most innovative, decisive, and risk taking companies are led by founders or at a minimum have their founders actively engaged in all key strategic decisions. There are many examples. One could point to Richard Branson, Steve Jobs, and Rupert Murdoch. It's also noteworthy to look at the difference between Microsoft when Bill Gates was highly engaged and since he's largely moved on.

I was thinking of that today as I was reading Jessica Vascellaro's account of Google's decision making on the China situation. According to Jessica, Eric Schmidt prefers to see Google stay in China. And Sergey Brin prefers to see Google leave.

Google's statement on China is pretty extraordinary. That they are even considering leaving the largest growth market in the world is a stunning revelation. And it is unlikely that hired and professional management would make such a decision. Management's primary job is to build value for shareholders and it would seem that leaving the largest growth market in the world is not in the shareholder's interest.

However, when the largest shareholders happen to be the founders, such decisions take on a different light. And it may well be that leaving China is the best thing for Google, its employees, its customers and users, and its shareholders. Only time will tell what Google will do and what impact it will have on the company.

I am very impressed with Google and have been for a long time. I think that many of the reasons it is such an amazing company result from having its founders engaged and involved in the key strategic decisions the business faces. The founder factor is a huge intangible force in companies and is most often for the best.

Almost a third of our portfolio is under attack by patent trolls. Is it possible that one third of the engineering teams in our portfolio unethically misappropriated technology from someone else and then made that the basis of their web services? No! That's not what is happening. Our companies are driven by imaginative and innovative engineering teams that are focused on creating social value by bringing innovative new services to market. Our portfolio companies are being attacked by companies that were not even in the same market, very often by companies they did not even know existed.

We can argue about software patents or patents in general. I'm not a fan. I don't think they encourage innovation in many sectors, maybe most sectors. But I recognize that they play a role in protecting inventors from others blatantly stealing their innovations.

But anyone who has spent a significant time in technology based businesses will understand that two groups working completely independently from each other will often solve a problem similarly. One group is not copying or ripping off the other group. They are simply coming to similar conclusions about how to get something done.

In these cases, it makes no sense to protect one group from the other. Nobody has taken anyone's "intellectual property." Both groups should own their inventions outright without having to license technology from the other.

That's not how it works today and as a result, our portfolio companies and entrepreneurs and startups all over this country are paying a very high tax on innovation. Read Brad's post for more details on the costs of bad patent policy and what we should do about it.

Our portfolio company Boxee has been having a great CES. First they generated a ton of buzz with this cool TV remote with a full QWERTY keyboard.

But that was just the warmup to the big announcement yesterday in which they released the beta version of Boxee to everyone. The beta version of Boxee is available on Mac, Windows, and Ubuntu Linux (including 64 bit). It will be available for Apple TV shortly. The beta includes a ton of new content, a more stable code base, and an entirely new UI. Here's a screen shot of the main screen which showcases the new UI.

You can download the beta version of Boxee here.

And Boxee announced that the "Boxee Box" that is built by D-Link is powered by the Nvidia Tegra 2 (T20) processor, the first of its kind to run flash and a few more details of what is inside. If you are a hardware geek, click here and see what's inside.

But as exciting as all of that is, I am most excited about a smallish announcement they made yesterday that might get lost in all of this other stuff. Boxee has a bookmarklet that you can put in any browser toolbar. Drag this link (add to boxee) to your browswer toolbar and you'll be adding videos you find around the internet to you Boxee. Right now the bookmarklet supports thirteen different video sites but Boxee will be adding more soon.

Last June, on this blog, I promoted the concept of a "watch later" service and a number of developers responded to the call with various services. Many of them included Boxee apps. But now with the Boxee bookmarklet and queue, this concept of "watch later" will be native in the Boxee service. I'm really quite excited by this.

If you are like me, you are seeing links to videos in email, twitter, facebook, blogs, etc all day long. It's time consuming to stop what you are doing to watch them. Now you can simply click on the boxee bookmarklet and watch them at home on your TV set after dinner while you are winding down from the day. It's a killer concept. Thanks Boxee.

In mid December as holiday gifts and cards were arriving daily in our office, I received a gift from Google. It was a Nexus One. I have been using it since that day as my primary phone. In the box was a note from Google asking me to keep quiet about the phone until Jan 5th. Well today is Jan 5th and so I can tell you what I think. So here goes

This is not going to be a hard core review of the phone. Engadget has one of those up this morning. Thus is about how I use it and why I'll most likely stick with this phone for a while longer.

I'm at the gym on elliptical trainer typing this into the Android browser. I connected to the gym's wifi without hassle, something my security obsessed blackberry fails at regularly. Then I checked in with the awesome android Foursquare app. Then I put on last.fm "my library radio". Then I launched the killer android browser and went to typepad and started writing this.

I could have done all of that on the iPhone except the part about running multiple apps the same time. Which is a big deal by the way.

The Google phone isn't much different than the iPhone. Its basically an Android clone of the iPhone. I have to type on the screen on this phone and I'm struggling mightily to do that fast and well. If this post has errors in it I wont be surprised.

There are a few inferiorities vs the iPhone to note. The on screen keyboard is good but not as good as the iPhone. And the ability to pinch and flick (called multitouch?) is missing.

I miss these gestures the most in the browser. But having a real browser that can remember passwords and such is such a godsend. RIM must be blind to miss that.

I also like the way the Google apps run natively on Android. Gmail/Cal/Contacts work so well on this phone. Of you use the Google app suite, you should really be on Android.

I also love the openness of Android. If I decide I really need a keyboard (I think I do), I'm pretty confident that some handset manufacturer will build the ideal hardware configuration for me soon.

And I love that apps can auto update without having to go through the app store approval process. Android apps can get better quickly, like web apps can.

And I love that I can carry a second battery with me like I do with my blackberry.

All in all the Google phone is a mighty fine phone and I'm staying on it for now. Thanks Google.

UPDATE: After posting this, I realized I didn't mention the phone features. I don't really use a phone for voice very much. I've made a total of a dozen calls on this phone in the two plus weeks I've been using it, mostly to the Gotham Gal. But the phone seems to work great.

UPDATE #2: Something is not right with the disqus comments on this post. I'm looking into it. In the meantime, typepad's comment system is operating instead. Sorry about that.

The submittal part of the competition is over and 85 different apps have been submitted. They are all listed here. I am slowly working my way through them. It's quite an effort to look at 85 different apps. Some run on the web. Some run on iPhones. Some run on Android. Some run on SMS.

I thought I'd open this up a bit and let all of you have some say in my judging. If you want to weigh in on my voting, please take a look at the apps and highlight any of them you think merit serious consideration by me in the comments to this post.

However, it is critical that you disclose to me if you have any vested interest in this competition. I don't have any problem with someone leaving a comment that says "my app is called ....., and here's why I think you should vote for it". I do have a big problem with a comment promoting your app if you don't disclose that it is yours.

I am judging these apps on multiple criteria, including usefulness, inventiveness, the visual look and feel, how far it has been commercialized to date, and most importantly in my mind, how much government transparency it provides.

I'll end with a screenshot of one app that I spent time on this morning that I like called Playaround which maps playgrounds by neighborhood. Very nicely done.

A few days ago, I exchanged emails with a journalist friend. She said the following, "I'm just wondering which sectors/investment areas/types of start-ups you think will be exciting investments in 2010, and which you're staying away from because they're over-hyped, not yet ready, etc." 

Today I sent a friend in the VC business an email outlining some areas I wanted to focus on this year so we could find some things to work on together.

In thinking about those two events, I decided I should just post the answers right here. So here goes:

I should say that this is my view, it probably reflects the views of my partners but I haven't shared this with them so I can't be sure. This is not an attempt to guess what my colleagues in the venture business are looking at. I don't think very much about that anyway. Every partner and every firm has their own investment thesis and that's great. I don't think it makes much sense to think very much about what others are doing. Focus on what you are doing. This is what I'd like to be doing in 2010:

1) Mobile: I am very excited about Android. As much as the iPhone has been transformative, it is still a tightly controlled environment. Android opens up mobile in a way that it can begin to look and feel like the web. Android will be on many handsets and many carriers. Developers can work with the source code if they want to. Apps don't have to be cleared by Google to run on Android phones. I could go on and on. These might not seem like big things but they are huge. Mary Meeker said in her mobile internet report that the mobile internet will likely be at least twice as big as the desktop internet. I think that's a safe bet and I would venture that it could be well north of that.

2) Mobile What?: We believe that we should focus on things you can do with a mobile web service that you cannot do on a wired web service. My partner Albert wrote a post about this last year and the conversation/comments on it are very enlightening. Go read his post and the comments and you'll see what kinds of things we are thinking about/looking at in mobile.

3) Gaming: I believe gaming is the most powerful form of entertainment and education right now. I see it with my kids every day. Gaming is becoming social and our portfolio company Zynga is the leader in social gaming. Gaming is also becoming mobile and the most popular apps across all app stores and operating systems are games. One area of gaming I am particularly excited about is augmented reality games. Augmented reality according to wikipedia is "a term for a live direct or indirect view of a physical real-world environment whose elements are merged with (or augmented by) virtual computer-generated imagery - creating a mixed reality." When I explained augmented reality to my son Josh, he said "do you mean me and my friends could run around the park shooting each other with our iPhones?". Well I hope we can come up with better augmented reality games than Tag and real life Call Of Duty but that's the idea for sure.

4) New forms of commerce and currency: I wrote a post last week about Etsy and the San Telmo markets in Buenos Aires that explains how the current e-commerce model on the internet is limiting and outlining the work we have yet to do to realize the potential of commerce on the web. Etsy is doing its part to move the commerce model forward and I am proud of that company and our investment in it. But there is so much more commerce that needs to be brought natively onto the web. Some of that will be new forms of commerce and some of that will be new forms of currency. I am excited about both.

5) Cloud based platforms and APIs - Many web services have APIs today. A good example is the Twitter API. These APIs have become development platforms in their own right. On top of that, Amazon and others are offering very robust cloud based platforms for developers. The combination of these two trends means that modern web and mobile development is being done on top of cloud based services and APIs. Until recently, we had not been interested in services aimed at developers but the emergence of cloud based platforms and open APIs is changing that. We've made two investments in this sector to date, MongoDB, a cloud based open source datastore, and Twilio, an API that allows web developers to access telephony resources from the cloud. Developers are the new power users. If you cater to them, you can build a large user base with significant network effects. And that is one of the key things we look for in our investments.

6) Education and the Energy/Environment: We've been looking at these two verticals for the past year. We've only made one investment to date, AMEE, which is a cloud based API for recording and measuring energy and carbon consumption. But we have not lost any of our interest in these verticals, which we believe are being impacted by the global open internet. We don't believe in making investments until we have done our homework, analyzed the sectors, and developed a thesis about where we want to invest. We are well on our way to doing that and I hope we'll do more in these two verticals in 2010.

So these are the six areas I'll be looking closely at in 2010. The first two are really one and the same, so it's five areas; mobile, gaming, commerce/currency, cloud platforms/APIs, and eduction/energy/environment.

In the six years we've been actively investing under the Union Square Ventures brand/platform, I've led/managed thirteen investments. So that's about two per year and that's the pace I like to work on. So five sectors, two investments means I won't be making an investment in each sector this year. We have three partners in our firm and we generally make six to eight investments per year as a firm. We may be able to make at least one investment in each sector as a firm. That would be a nice goal.