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3 WISE PEOPLE — Investors & Visionaries Wrap Up the Year For Us

My notes from this mornings iBreakfast: 3 WISE PEOPLE — Investors & Visionaries Wrap Up the Year For Us

Tue. Dec. 21, 100 Park Ave., with:
Esther Dyson, Editor, Release 1.0, CNET Networks
Howard Morgan, V. Chairman, Idealab
Stephen Brotman, Silicon Alley Venture Partners

Every year, we look for direction and understanding from the industry sages. This year, we ask the people who have launched dozens of new companies about the past year — and their investment outlook at a time when the industry seems to be growing again.

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Esther Dyson, Release 1.0 at CNET, has devoted her life to discovering the inevitable and promoting the possible. As an active investor and commentator, she focuses on emerging technologies and business models (peer-to-peer, artificial intelligence, the Internet, wireless applications), emerging markets and emerging companies.

COMMENTS

+ A lot of tech spending will be useless; its hygiene (E.G., SarBox) not new services.

+ Social networking is going to morph again
Shes now working on attention.xml, a would-be standard for expressing how many people read your blog, how many people looked at your photo.
Social networking is a functionality that will go into other services

+ Physical world has been very separate from the IT world, but that will change. RFID and other technologies will change that. Our big challenge will be filtering, not collecting (just as we have this problem with email).

+ Huge changes in how healthcare works. Were thinking about healthcare in an innumerate way. Currently, incentives misaligned, and risks not adjusted properly.

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Dr. Howard Morgan, Idealab, began working with Idealab in 1997 and began serving as Vice Chairman in early 2000. Howard is also President and Founder of the Arca Group, Inc., a consulting and venture capital investment firm specializing in the areas of computer and communications technologies. He has more than 25 years of experience with more than thirty high-tech entrepreneurial ventures.

COMMENTS

Josh Koppelman (half.com) and Morgan created his new VC
MyPublisher (one of their portfolio companies) lets you convert online content to offline. TurnTide was a recent success for them.

Trends:

Big getting bigger (Oracle/Peoplesoft, etc.)

VOIP is real.
Hes used VOIP for 3 years and only got one complaint about voice quality.
Soon youll be able to call someone on a website just by clicking on it.
Next phase : Video over IP
US is last country in the world to get into thumb messaging. This will become bigger, particularly for gaming/dating.

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Stephen Brotman founded Silicon Alley Venture Partners in 1998. The fund’s institutional investors control over $2 billion in venture capital and include TL Ventures, a Safeguard affiliate, TD Capital and the principles of Draper Fisher Jurvetson and Boston Millennium.

COMMENTS

Good news: wisdom is part pattern recognition and part experience. You have to find opportunities that are patently obvious but yet have a contrarian perspective.
When consolidation happens, its not a great place to innovate.
The new paradigm is about corporate dropouts, its not about university research. Why? Because the tech world has become corporate.
Capital intensity is much lower now.
To start a tech-enabled business, very easy.
Value of R&D is lower (its all in Russia, India); the value is in servicing, design.
The older technologies we described start from zero every quarter. IT services have much more recurring revenues.

For all these reasons, Brotman thinks that the tristate area will generate tremendous opportunities.

20% of Fortune 500 is in tristate area.
590,000 tech workers in tristate area: applied technology people. They write scripts, customize, etc. Many use other peoples products, as opposed to using new products.
170,000 tech workers in silicon valleymore coders, etc.
The people in the tristate area are the new paradigm.
SAVPs portfolio are customer-intimate; they know their industry.
Big customers in CA (Intel, etc.) are very different than big customers in NY (JP Morgan)

In general, 62% of venture capital goes to services businesses
In SF bay area/MA, its only 16-17%

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Q&A
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Rick Bruner, DoubleClick
Where will the growth be? What should a 19-year-old study?

Dyson:
The only place with less growth than the US will be Western Europe
To get rich, go to another country.

Howard Morgan:
History doesnt repeat itself, but it rhymes”
The rhyme for next 20 years will be biotech/bioinformatics.
PartSearch now outsources for Best Buy, Radio Shack, 13 major chains. $50M revenues next year.
Rap is universal because you have to have music that annoys your parents.”

Teten: How will social neworking becoming a functionality?
Dyson: People doing other things will incorporate this functionality. For example, she likes Flickr (in which shes an investor) which allows you to see who else likes the same topics to photograph that you do. She likes Visible Path (in which shes an investor), which uses social networks for a clear purpose, as opposed to simply doing it for its own sake.

Brotman: open source is end-of-lifecycle for core technologies.
Dyson: Its also leading edge of pricing shift.
As an investor, focus on the person not the model.

Brotman: they just invested in Critical Mention, which analyzes TV content

Another trend: make customer serve himself
IBM was losing $200M/year on its PC business; it was a good deal for them to sell.

Dyson: online music is like electricity-based lightingits not a separate category.

Morgan: There are 70M cities in China with >1 million people. Those are natural places for social network software.

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