Friday, March 27, 2009

Virgin King

Gotta love Branson. Now there's a man who knows how to have fun, and actually seems to enjoy his money! Wonder what his bonus was like last year (or maybe he's taking it in kind ....)?

Story from State of The Art, ( and picture from a shoot by Stephane Gautronneau to appear in Paris Match.

Happy weekend!

Thursday, March 26, 2009

Venture Capital Becomes Vulture Capital?

As I suppose might be expected, there are early signs that the venture funding model here in the Valley is starting to morph in order to take into account the new market realities.

Up until now, VCs have focused almost exclusively on identifying and nurturing young companies. Firms would have their own preferred markets - everything from green tech to software - and in many cases would also have a preferred stage from series A investments through to late-stage C or D round companies. However, the old order is in turmoil, roiled up by a fundamental shift in the business landscape.

Quick recap of the golden years. VC firms raise money from limited partners. These funding sources drawn from a range of different directions including pension funds, investment banks, endowments & wealthy individuals, to name but four. In the agreements drawn up between the LPs and the VCs, things denoting the funds investment thesis, such as market and stage preference, are codified, as are other terms like the maximum amount of cash permissible into any single deal. After a life-cycle of about 5 to 7 years, some percentage of those firms get a decent exit with enough money being made to square away the losers and leave a healthy profit for all concerned.

Fast forward to 2009. Oh dear. It seems that now things aren't likely to go quite so well.

Firstly, the available exits are dwindling fast as the big acquirers have all their attention, not to mention cash, committed elsewhere just now. Furthermore, where they do have a need then why not buy a public company? Dollar-for-dollar, with the Dow at record lows, you likely get more bang for the buck by acquiring larger businesses and taking the strategy in a different direction more quickly, than would be possible buying smaller, riskier private companies. Net result is that existing portfolio companies will need more cash in order to wait for the right dance partner to tap on their shoulder and take them off the sidelines.

Secondly, raising additional VC funds is going to be a challenge, too. Even if the usual suspects in the LP class are still making investments, their typical approach of allocating a percentage of assets to the VC class automatically means that they have a fraction of the real dollars now available to pledge to new funds.

Thirdly, existing portfolio companies will now consume more of their attention and, as we saw above, money as new ways have to be found to ride out the current conservatism on the part of the early adopter communities. Suppose you are selling a new technology for enabling better real-time data analysis for firms on Wall Street? Yeah, it can easily be that tough.

Fourthly, private companies that are looking good will not be willing to take the same fire-sale pricing that others will, meaning that the best companies will simply hunker down and stay out of reach until valuations start to climb upwards again.

Lastly, in the midst of all of this, VC firms still have to find a way to make investments and deliver returns to their LPs. Just collecting management fees and pleading force majeure simply won't cut it.

What, then, to do? Here's a leading-edge example of how VCs are starting to change their business mode. In summary:
- requiring far more flexibility about where they invest. Follow the mantra of "trust us to do good things" and allow the partners to invest wherever they think looks good;
- removing the limits on how much can be invested into a single property;
- blending together of the VC, PE and buy-out models, significantly downplaying the role classic VC investing plays in the outcome of any given fund;
- changing the mix of skills necessary in order to excel in these markets and to follow the new maths to find those happier, bigger results.

This of course begs the BIG question: will it work?

My own view is that it will, but only for the very few "alpha-dog" firms. As always, they get to see the good stuff before anyone else, combined with having the necessary access to sufficient funds to move fast and move first. Plus, timing is all. Buying into this thesis now, when the market is so low, dramatically increases the chance of success regardless how how good you are.

To use an analogy, the first vultures who can push their way onto a fresh carcass get all the good bits, and there are a lot of very weak looking animals ranging around the Valley just now so dead meat is going to be in good supply, at least for a while. Expect, therefore, the scavenger population to increase, but far too quickly and far too broadly. The vast majority will get too little, too late, and meanwhile will have abandoned their traditional hunting grounds.

Before you know it, the world will have turned again and it's unhappiness all round, especially as the economy ticks up and now the herd suddenly looks healthier.

VCs have spent a very long time honing their teams, skill-sets and fund-raising activities in order to do one thing but do it very well: find, build and sell great new companies. Doing PIPE deals, buying distressed assets and generally straying from that path isn't a case of wearing the same coat but now of a different color, it's fundamentally a different business. A few will adapt and make it work, but I have to predict that most won't.

Stick to your guns, guys. Do what you are best at and what you have been in business for years to do. The "V" in VC is for "Venture", not "Vulture".

Tuesday, March 24, 2009

Well That Was Dumb ...

Those of you with long memories will remember when our house tried to kill me. The longest lasting effect of this attempted home-icide was to give me a very painful back for a couple of weeks afterwards. I vowed then to always be careful, and to not have a repeat showing of this particular film because I already knew the ending and didn't like it. Alas, these vows sometimes slacken, all by themselves, simply via the continual application of time ....

Nipped out back on Sunday afternoon to spend a few minutes pulling Scotch Broom, a rabid weed that's growing like, well, a weed all across the western United States. Spring is a great time to help get on top of the problem because even quite sizable plants can be pulled out by hand while the ground is still wet, and that's exactly what I was off to do.

As I am sure you have now telegraphed, one particular specimen fought back. I pulled - hard - and twisted a little at the same time, when finally it gave up the struggle and came out; unfortunately, my back exhibited exactly the same behaviour.

Yesterday and today I am therefore paying the price. Actually, today I feel a bit better than I did on Monday but sitting, and its close cousin driving, remain as entries in the category of "things that are painful to do".

My fault, but it will at least serve to remind me not to forget how unpleasant this all is. Hopefully ...

Sunday, March 22, 2009

Time To Go Racing, 2009 Style

What with Sebring this weekend and the first F1 GP in Australia next, the 2009 racing season is well and truly underway.

The upcoming F1 season promises to be one of the most interesting for years with a whole new slew of regulations throwing the old kings out with the old cars ... perhaps! Ferrari look to have done a good job in the closed season, and if the final testing session at Jerez is to be believed then better than McLaren at creating a brand new aero package to go with the new rules. This year the cars have smaller rear wings but are back on slicks again, the idea being to trade mechanical grip for aero down-force and hence to make overtaking easier. At least, that's the theory, but we'll just have to wait and see what will happen in actual races. Also new this year is a Prius-like KERS system, taking advantage of regenerative braking energy, that will allow drivers an extra 80 bhp or so for about two seconds a lap. Not sure every car will start in Australia with this technology but even if not then very soon thereafter.

Despite having Honda pull the plug on them, one of the stronger contenders in the developmental sessions has been Brawn GP. Ross Brawn has now become a team owner and they will be running McLaren engines this year instead of Honda. Somewhat embarrassingly for the Woking outfit, the Honda/Brawn chassis has been around a second a lap quicker running those customer engines, a fact that will surely mean the McLaren boys will be burning the midnight oil prior to Australia in order to close the gap. On the plus side, Button might finally have a car that will allow him to show just what he can do. Again, it will be an interesting year.

Endurance racing has also been thrown a curve ball with Audi not yet committing to a full season of racing, despite their very strong debut showing for the R15 at Sebring where they came in 1st and 3rd. Even in these reduced times, perhaps the idea of just gifting the Group 1 championship to Peugeot might be a bit too much to swallow? Here's hoping.

Friday, March 20, 2009

IE8 Released - "It Crashes Less"

For quite some time now I've been suffering from the IE7 blues. Multiple times a day, it would hang. You'd be trying to reach some web site somewhere - "" being the most likely one of course - and if it seemed to take a long time to load then chances were you had just been hosed by Explorer. Sometimes, however, another behaviour took hold: beware the ghost browser! You'd try and restore a browsing session from the tool bar and instead of getting a nice shiny web page you'd get a grey trapezoid, nicely blurred as though caught by a slow shutter speed as it was trying to restore.

Anyway, based on experiments last night then IE8 appears to fix this issue. Since installing it yesterday afternoon then browsing has once again become a relatively stable occupation.

Apart, then, from actually working, what else does IE8 bring? Microsoft trumpeted something called "Accelerators" when I was installing it. These are not much more than quicker ways of getting to stuff like Hotmail or Blogger, but even then seem to have some very annoying side effects. Trying the Blogger one created a new blog entry, but did so maxmized within the frame and without any obvious way of getting to the allied controls for managing posts, thereby causing me to waste time figuring out how to exit gracefully. Ditto for Hotmail where the dafault assumption is that I want to write a new message and not read existing ones.

Private browsing seems to allow you to poke at the web without Big Brother recording where you've been, so ideal then for the criminal fraternity to look up things like "how to blow the doors off post office vans" and the like. Oh, and porn of course.

Web slices? Haven't tried that yet but looks to be a cross between a real-time web page and a widget. "Get real time updates from this web site on your favorites bar" is the tag-line, but so far I've only found to be supporting this feature and I don't care enough about what it is that minor Hollywood starlets are up to or what diet to follow to try it.

Speed? "Slightly quicker" would be my average take, but you have to factor in here that my IE7 installation was so broken that using it as a baseline probably isn't very meaningful.

UI is a bit cleaner, but nothing has changed as dramatically as has been seen in previous updates.

Bottom line: probably worth upgrading just because it seems to be much more stable, but really nothing dramatically new if you are already at IE7.

Wednesday, March 18, 2009

Sun Setting Over Armonk?

Rumours intensified today that IBM will make public a bid for Sun Microsystems before the week is out. Even a cursory glance at what's being bandied about shows that this is a good move by Big Blue. Sun has around $2.6 B in cash and equivalents, cutting the $6.5 B price, reportedly offered by IBM, to more like $4 B net, a figure just shy of 1Qs worth of Sun's TTM revenues.

Obviously, this would increase IBM's share of the server and data center markets, something that would be particularly valuable just as Cisco announced this week its entry into the fray. However, this also begs the question of whether or not that $6.5 B price will stick if Cisco or HP (Hurd is said to have already passed on the deal when approached by Sun) decide that letting it fall into the clutches of IBM is not in their best interests. There may yet be upside in this offer, putting us back into potential soap-opera land if indeed others start coming back to the table. (We miss talking about Yahoo! and Microsoft so this saga may yet provide a suitable substitute.)

Of all the players, it's hard not to argue that IBM is the best fit. The recent performance of their server division has been extremely strong and IBM has systematically been increasing its competitiveness by bringing newer technology to market faster than the competition has been able to. IBM is also well versed in how to manage long-lived architectural migrations so Sun's customers would be reassured that finally there's a path forwards for them. And along those lines, it's also worth noting that IBM's recent acquisition of Transitive sets them up in an ideal position to be able now to manage such a migration in the optimal way.

That's outside looking in, but what about inside looking out? How might Sun fare if this process were to go through?

1. A ton more layoffs. Sun has never cut back as hard as it should have done, especially given the weak state it's been in since the last bust in 2000. IBM will fix that problem, and then some.

2. Stuff will get sold off. Unclear Sun's foray into storage has delivered much of anything so IBM might just ditch that piece, freeing up capital to apply elsewhere.

3. IBM gets that the world is changing, even in corporate data centers. All the buzz is around cloud computing, but IBM sees broader changes even that that. Platforms like the iPhone, netbooks and others are heralding a world where applications will need to be accessible regardless of where they reside - clouds again - or from whichever platform is being employed by the end user - iPhone and Blackberries, to name but two. No one is better placed to drive this than IBM - Telelogic's embedded strengths anyone? - and Sun's expertise and product line here would fit extremely well into that vision, perhaps even allowing for some retrospective justification of the ridiculous amount they recently paid for MySQL.

4. Engineers good, everyone else bad. Expect huge attrition in the Sun sales force. Either they will leave because of culture clash or they will be pushed out to save costs. Expect to see a lot of Sun's account managers rapidly polishing up their CVs, therefore.

5. And just suppose it doesn't go through, what then? This is a leaf from the Microsoft playbook: even if the bid fails, you have publicly delivered a mortal blow to Sun. What customer will now commit, long term, to their proprietary hardware with this level of uncertainty? It will be very hard to see a future from this point on where Sun remains an independent company. Bye-bye SPARC. It's been real, but it's time you went the way of DEC Alpha.

However this plays out, this is one sunset that isn't going to be paired with a new dawn. No longer the dot in dotcom, Sun is now set to become the period after the word "history."

You Can't Make This Stuff Up #2

No commentary needed! (At least, not in the UK.)

Tuesday, March 17, 2009

Tokyo Sky Tree

One of the perennial stops on Tokyo tours is the omnipresent TV tower. Its bright red superstructure can be seen from many different city locations, despite the increasing proliferation of downtown skyscrapers. However, it - and likely many of it's ilk - are reaching the end of their useful lives. The switch from analogue to digital broadcasting will mean that existing towers like this are no longer able to cover enough subscribers to be that useful any more, especially in this age of satellite and cable content delivery.

However, it appears that Tokyo is still planning to stick with the tower option, only this time bigger. Much bigger. Therefore, please welcome the (still under construction) Tokyo Sky Tree. The design rendered in the Wikipedia article looks like one of those fancy pens that catches your eye in airport departure areas while waiting to escape to somewhere else. You know the sort, the one with the stainless-steel mesh covering and a price tag that looks like it is being quoted in yen even when in reality it's actually dollars.

I like it. Tokyo long since gave up trying to achieve the impossible and stop the march of progress in a city that's largely been completely replaced at least twice in the 20th century, and this just moves the architectural landscape forwards once again.

Here's to the Sky Tree. Long may it bloom.

Sunday, March 15, 2009

Why I Hate Post Offices

Let's start with a point of clarification: it's not the institution of the post office I hate, it's the local instantiation of that august service. Posting - and receiving - things is generally good, tax time excepted, and they perform an important local function. It's simply that I hate going there, and without knowing any of them I hate the other customers in there regardless of who they are.

Here's an example. I had to go and collect a box from the local one because it was too big to fit in our mail box. Fair enough. (And I'll spare you the details of why we buy toilet rolls in bulk from Amazon and have them delivered even though this does explain the size of the box.) OK. Friday afternoon in-between meetings so have a slot to fill. Good news, after hanging around trying to park there were only three people ahead of me. Trouble was, after 20 minutes there were still three people ahead of me and the line hadn't moved, despite two counter clerks being on duty.

From what I could tell, first counter bloke was attempting to figure out how to send a parcel from somewhere out East - he didn't yet know where - that was going to weigh some amount that he also didn't yet know. Could the USPS please tell him how much postage to buy now to stick on it? Unsurprisingly the answer was "of course not you &*%^$% moron" but that message was delivered more politely and over a longer period than anything I could have come up with. It also involved suggestions like, "guess the weight, pick the furthest spot you will be from the destination it is going to and then add 50% to the required postage for that example" which was quite reasonable I thought. Alas, box-man couldn't get his head round the concept, despite the answer being, and I'm not making this up, three dollars and five cents. He left, eventually, with nothing decided and without buying anything at all.

Second counter woman was equally skilled at vacillation. She was trying to mail something of such vital importance that you'd think the US Secret Service would happily courier it in person if they only knew. Alas, there were such a bewildering array of options - exactly two - that met the various constraints that she, too, was unable to decide. For some reason, she wanted more choices than that, a position she was hard to shake loose from despite the answer being that there weren't any. Had it been me behind the counter I would have invented a special "secret" offering just for special customers that was three times the price and involved a special sign being hand written on the envelope. Remember the Monty Python sketch where the bloke goes to buy a fish licence and is incensed to find that the counter clerk won't sell him one, and that when the poor man's finally brow beaten into doing so finds it's a licence with the word "dog" crossed out and "fish" written in biro instead? Just like that.

Why do post offices attract the sort of people who have lost the will to live? Who measure their entire day by how long finishing a transaction that would take an average human being no more than 1 minute can take in order to fill out the meaningless hours between waking and finally being allowed to crawl back into their hole in the ground at dusk?

Just as banning seat belts and instead welding a steel spike to the centre of the steering wheel was once recommended as a way of encouraging safe driving, so too should something similar be found to fix post office queues. I'd vote for tasering. If you are taking more than three minutes (two-and-a-half on Saturday) to finish a simple transaction then the counter clerk is federally required to hit you with 50,000 volts. Not only will this encourage faster decision making it will also have the side benefit of boosting the shares of those who manufacture personal protection devices, as well as requiring more medics to be on stand-by to clear away those who don't survive the experience (thereby also saving the health care industry the expense of keeping the weak alive in the future).

Wonder if I could get this onto a 2009 CA ballot proposition? Trust me, as proposals go it makes way more sense than half the ones that actually do.

Tuesday, March 10, 2009

Kobe Beef

One of the side benefits to travelling in Japan is that, in the interests of entertaining customers you understand, you get to do some things that are a rare treat. And in this case I use the words "rare treat" deliberately, as we shall see. Ladies and gentlemen, I bring you Kobe beef. Actually, I don't of course bring you anything of the sort but I'm pleased to say that someone brought us some, even if we were the ones buying.

Quick recap: Kobe beef is a very expensive way of raising cows and is done with the express purpose of making them fat. Not normally a difficult job I'm sure you will agree. However, this isn't fat in the sense of a big ring of lard round the middle, this is fat as in the meat being deeply marbled with fat spread throughout the choicest cuts. Oh, and by expensive I mean a 100 gram portion at the place we ate was $50 (5,000 yen).

The hotel recommended a place in the Ginza district, home to Tokyo's most expensive real estate (just begin setting the scene for how much of a pounding your credit card is about to get) and was called Mikasa Kaikan. The restaurant itself was on the 7th floor of a small collection of shops and cooks in the teppanyaki style, with a large hot plate set up for each group of guests.

Being protective of the budget, three of us had the smallest 100g cut with some vegetables (extra charge!) so we spent about $75 a head with a beer. Another guest had more of a set meal with a 200g portion, and before drinks that was $130. Oh, and our local chap told us that this was quite cheap relative to what you can pay in Ginza for Kobe beef if the restaurant is at the fancier end of the scale, so be warned!

Is it worth it? For a one-off taste of Japan then I'd say yes. The texture is quite unlike any other beef you can find. The fat, being larded through the thin cut steak, turns the bite-size pieces the chef serves all creamy in the mouth, adding a very unique and enjoyable texture to the dish to go along with the wonderful taste. The seafood someone else had was also extremely good so don't be afraid to go even if someone isn't a meat-eater but does eat fish.

Monday, March 9, 2009

Tsukiji Fish Market

So there we are, two aging business travellers on the streets of Tokyo at 4:45 am, braving the wind and rain in order to watch some foreign chaps sell fish. Fair enough, probably wasn't going to sleep much more anyway, but it still didn't feel quite as good an idea as it had the night before!

The hotel we were using - Royal Park Shiodome Tower - is no more than 10 minutes walk from the fish market so at least it was no big deal getting there. It has two entrances and we picked the first one, going in by way of the fruit and veg market that's housed in the same building.

As you can see, there's a lot of water sloshing about so point 1 is to make sure you wear shoes that are waterproof. Point 2 is to wear shoes you don't mind ending up smelling of fish! Actually, having said that, the floors are remarkably clean considering all the piscene-based hacking that goes on there. Largely, I think this is because the fish is either sold whole or, in the case of tuna, solidly frozen when sliced-up.

So what could you buy? "Pretty much anything you can think of that comes from the sea" is the answer, combined with quite a lot of things that you would have trouble imagining could come from anywhere at all. I think we saw krill at the small end of the size scale right up to massive tuna. In between ranged everything from shell fish, through flat fish, octopus, sea cucumbers, squid, snapper - the list is virtually endless. Some retailers were wholesale, some retail. And no, I didn't feel like buying any of it to bring home thanks very much! Can't imagine what the sniffer dogs at SFO would make of half that stuff; lunch, probably.

The market itself is a warren of individual stalls, many of which are bi-level with an upstairs portion acting as the office. Running up and down the gaps between the stall are small powered trailers, each of which is clearly on some sort of mission that you, the foreigner, are interfering with. Beware these things! To be fair, you are wandering around their offices, cluttering up the place and not buying anything so given all that then actually the rightful occupants were quite understanding.

We went over to look at the tuna auction but it's all sealed off and no visitors were permitted. Glanced through a door that opened and it looked like there were shrouded corpses lining the floor. The frozen exteriors of the tuna, combined with their shape, made them all look like bodies that had been wrapped for burial. Fascinating stuff.

The overall impression left by Tsukiji is that there's no way the seas of this planet can continue to deliver such a bounty. This was one day of the six days a week worth of commerce that's transacted here. Japan apparently accounts for 10% of the worlds consumption of fish, the largest slice of which goes through Tsukiji.

Can we really keep up this level of supply? Tuna are getting harder and harder to find and it's not clear to me whether or not Japan practices much in the way of fisheries management and preservation. Either way, though, Tsukiji is doomed. The Tokyo government is planning to relocate it soon to another part of Tokyo. See it soon, therefore, before either it moves and loses the uniqueness it has today or the fish runs out.

Friday, March 6, 2009

Shanghai Starbuck's

Yes, cultural imperialism is alive and well and still serving the Western capitalist lap dogs well! There are numerous McDonald's and KFC outlets in Shanghai so I suppose it was inevitable that Starbuck's wasn't going to be far away either.

The picture above is taken from just along the waterfront looking back into a section of the financial district. Through the fog you can see a fascinating building that has a handle at the top! All of these skyscrapers look wonderful at night so if the weather and time permits I'll try and get out and grab a shot or two. Last night was cold, damp and windy so hanging around on the way back from dinner - at a "German Bier Kellar" restaurant of all things - wasn't a very appealing idea.

Must dash - breakfast calls. Can't decide between the sticky rice mash or the crispy chicken feet today. (And no, I'm not making that up.)

Wednesday, March 4, 2009

Shanghai Scares

Pudong River, Shanghai

Over the past three decades of travelling I've ended up taking all sorts of cab rides, delivering experiences from the mundane to the all-too-exciting. (For example, when a cab driver in Seoul decided he didn't want to drive me any further using the meter, informing me that unless I paid cash the only option he could possibly see was to leave me standing on the side of the expressway in the pouring rain.) However, and apart from one memorable trip in India, I can safely say that the least-safe of those experiences are typically to be had in China. It feels like the cab-driving equivalent of giving a small child three loaded handguns in order to teach them to juggle. Let me explain.

Heading into the center of town from Pudong airport (allow over an hour to get into central Shanghai and expect a price of anything from 130 to 170 Rmb, depending on how hard your hotel is to find) we were regularly doing 130 kph inches away from the car in front. Lane weaving is, apparently, mandatory in China and the accelerator is the sole way of deciding who has right of way. Chinese cab drivers never seem to have the faintest idea that the magnitude and unpleasantness of any accident is going in some way to be dependant on speed, while the likelihood of same actually happening is inversely proportional to the amount of clear space round their vehicles. At one stage, we were obviously about to have a very large accident. Us, a van and a bus all wanted to occupy the same piece of a two lane road but no one fancied giving way. It all became a huge game of vehicular chicken but without anyone, seemingly, having any remaining will to live; the most important thing was not to brake. Ultimately, the crash was only averted because we and the bus out-dragged the van before all parties collided ... but it was a very close run thing. Oh, and it was right around this time that I discovered that the seat belts in the back didn't work.

Perhaps because they now have access to pretty decent cars (this cab was a VW Passat) and the roads have progressed so quickly from being not much more than rutted tracks to multi-lane freeways, they've not yet had much experience of high-speed car crashes. However, I can safely predict that this unsafe situation will be changing very, very soon, though preferably until after I've taken a cab back to the airport.

Wonder if Volvo would fancy being owned by the Chinese government?

Tuesday, March 3, 2009

Child Safety Seat

Yup, Texas ... or maybe Mississippi.

As one wag wrote, "No son 'mine gonna ride inside no Jap-an-eeze pickup truck."

Sunday, March 1, 2009

Splash of Color

Just to provide a bit more visual appeal for browsers until the next post, here's another shot from inside Antelope Canyon where we went last year. I think this was lower Antelope, if memory serves.

Travelling tomorrow, in Shanghai Tuesday night.