Notes from the IBF Venture Conference

I recently attended the IBF Venture Conference at the Palace Hotel in San Francisco where there was enough information on the global technology markets to sink a battleship and one overarching theme:

Global, Global, Global.


Wow! I can't say I had no idea, but the numbers I saw were more staggering than I'd expected.

Here are the numbers for venture investment growth in mature markets in 2007 (B):

• United States grew from $US 27.7 to $US 29.9 (8%)
• Europe grew from €4.5 to €4.6 (2%)

In comparison,

• China grew from $US 1.8 to $US 3.2 (83%) and
• India grew from $US 0.3 to $US 0.9 (195%)

The good news for US companies is that the US remains far and away the largest market for invested venture capital.

The bad news is that as it stands it is much harder for equity holders to find liquidity. Venture backed tech IPOs which were having a nice run: 11 in 2003, 40 in 2004, 27 in 2005, 25 in 2006 and 47 in 2007 look completely stagnant in 2008 (crossing our fingers for one, so far). The median time from initial equity funding to IPO nearly doubling from 4.5 years in 2001 to 8.3 in 2008.

Also both M&A and LBO activity are off significantly in 2008 despite corporate cash balances remaining at an all-time high.

One of the reasons for the significant fallout of the US IPO market is the adoption of the Sarbanes-Oxley Act. One of the panelists said that they don't even think about taking a company public if it's got less than $300M in revenue, maybe a bit extreme, but as Dwight Badger of Advanced Equities artfully put it, the $50-$80M IPO is on constant life support.

IPOs are diversifying around the globe. From 1997 through 2007, as a percentage of global IPO proceeds, the US declined from just under 60% to just under 20%. Japan, China and India all experienced moderate growth while the category of Other expanded from 20% to 40%.

So much for globalization... As Zakaria points out in The Post American World, we promoted capitalism and capital markets around the world and damned if they didn't listen. It's less about us falling as it is about "the rise of the rest" and we've got a lot of work to do, policy-wise and otherwise to keep the pace...

Next post: VC investment trends

Pivotal Labs and Twitter

I hate to do this, but the cat is already out of the bag.



http://tinyurl.com/3v5amd

Our friends at Pivotal Labs are starting a project this week to stabilize one of the highest profile (and now most infamous) web 2.0 offerings, Twitter (www.twitter.com). It's a perfect example of a company building a wildly viral product, then breaking under the strain.

I was in Rob Mee's office, taking a break from the IBF Venture Capital Conference when he found out that the project had been leaked to Venture Beat. "Bummer" was Rob's first comment, not knowing if he wanted the press. His second comment was "they should have developed it in Java!"

Rob hires only the best of the best and is a brilliant developer himself. They'll do fine as long as they don't let the flak jackets and night-vision goggles get in the way.

Like Madonna used to say "any press is good press" Party on, Rob. Party on Pivots.

Why the iPhone

Let me make it clear up front: I am not one of those rabid Apple Computer or Steve Jobs fans. In fact, if anything, I'm more of a Microsoft apologist. While I was growing up in Alaska, they were the "home team", as it were. I spent my tender years rooting for both Microsoft and (in vain) the Seahawks.

This week is the Apple WorldWide Developer's Conference here in San Francisco and you can't get away from the new iPhone. In true Steve style, the ads are plastered in every BART station to announce the coming of the faster, cheaper version of the device.

Yesterday at the IBF Venture Capital Investing Conference a guy came up to me and asked "what is it with the damned iPhone? I'm investing in companies who have limited resources but need a mobile strategy." I told him to bet on the iPhone and here's why.

At the root are software developers. Not the academic, ivory tower developers like me who learned to code in languages like LISP, Smalltalk and C++. I'm talking about the guys out of the dark corners of the development world; the street fighters, the alley cats. The guys who got a job at an ISP, started writing Perl scripts, then cobbled together some systems with PHP and Python and are now moving on to Ruby on Rails.

The great migration started back in March of 2001 with the release of OS X. At the time many software developers were using Windows machines or dual-boot Mac/Yellow Dog Linux boxes. With the move to OS X and its UNIX kernel Apple slowly started the (now 7 year) process of moving these developers off Windows and Linux and on to the Mac.

It's been partly due to the great tools Apple has bundled with OS X and partly due to the lack of good tools for Windows. It is also due to the fact that the systems being used in the data centers to host those applications are running some form of UNIX. Better to learn to navigate one OS rather then two. At this point, virtually all of the developers I know are now using the Mac as their primary development tool.

Fast-forward to March 2008 and the release of the iPhone SDK. Developers who were already using the Mac environment for development were writing iPhone applications in their spare time. People were able to show me interesting iPhone applications within two weeks of the release of the SDK.

So when people ask me what mobile platform they should be spending their development dollars on. When we're planning a mobile strategy for a software application, it's generally for the iPhone. It should be no surprise. Where the best developers go, the customers follow. Microsoft, of all companies, knows this. And unless Apple makes a big misstep, from what I've seen the developers are on the Mac and iPhone to stay.