Category Archives: Investing

The Bitcoin Currency Ecosystem

Business, Investing, Software Development April 2, 2013 Leave a comment

A much more general use of the word currency is anything that is used in any circumstances, as a medium of exchange. In this use, “currency” is a synonym for the concept of money.

This comes from Wikipedia’s definition of a currency and it fits to Bitcoin, which is where this post could end. But that would be a boring post and not help you much, so lets go a bit deeper. For a history lesson search for Crypto-Currency – Bitcoin and its mysterious inventor, a great article.

When Nic Brisbourne wrote about it in March, the total circulation of Bitcoin was $400m and as I write this it is well over a billion USD! More and more people want in and understand the nature of the system or at least trust it more. They are trusting into a currency, a means to exchange value, that is not connected to any state, that nobody controls, that is based on cryptography and code alone.

But VCs are starting to notice as visible in investments in Coinbase, Adam Drapers Bitcoin focus, as well as his father Tim Draper talking about it in a recent appearance on Stanford’s Entrepreneurial Thoughtleader Series.

Some argue that the Cyprus problem builds distrust in state controlled currencies and that is one of the reasons the current interest in Bitcoin is so high. It is inherently uncontrollable unless it is forbidden but you can’t just forbid a billion USD. But if you look at the Coinbase security procedure, it is that they only have a small % of bitcoins on their servers. The rest is backed up on thumb drives. What? Backed up currency? Yep, same as real bills, Bitcoins can actually be printed out on a slip of paper and put in a ring binder. You can even look into other people’s wallets if you know their wallet id. Here is one of mine for example, actually currently hosted on one of the many Bitcoin sites out there. This again means that you will want to have several wallets to not tell everyone who you exchange bitcoins with how much money you have.

But it brings us to an interesting piece with bitcoins. It is both very anonymous in that you can create a wallet and put bitcoins in there. If they come from another anonymous source, e.g. Cash or another anonymous Bitcoin address, then nobody knows whom that money belongs to, but they do know how much money is in the wallet if they know the wallet id. The big exchanges require you to authenticate yourself if you really want to deal in more than a few USD and they need to do that to loose the image of facilitating money laundry. This will be needed to build serious trust and build a stable currency that the nation stations cannot move against.

But can the current run up in value continue? My last transaction from some 14 days ago has gone up in value almost 100%. But even the geek in me couldn’t yet trust serious money towards Bitcoin. On the other side, what good is a worldwide currency that only holds $1b in value? In 2010 there were over 800 billion EUR bills and coins in circulation. Based on this PDF by the ECB I presume 2015 we will hit 1 trillion EURs in circulation. Based on the Statistical Data Warehouse of the ECB, 2010 saw roughly 4.5 trillion EURs in salaries. And Bitcoin is global, making 1 billion USD not enough value for global transactions, actually approaching 2 billion as we speak.

This will seriously be something to watch. Looking forward to your thoughts.

The Real Life Gunter Dueck

Business, Investing, Managing, Managing People, MBA Creativity, Innovation and Change, MBA Knowledge Management March 20, 2013 Leave a comment

On the 18th of March I was fortunate enough to see Gunter Dueck aka wilddueck at an event organised by Startplatz. Thanks a lot for Lorenz and Matthias for inviting me! I actually have to give it to the two, they are making great strides with Startplatz. I am still missing real offices instead of open space, but other than that, what a great place to be. I am already looking forward to spending some time in the coming weeks.

But back to the subject at hand. The KOMED Hall was packed and after a Startplatz Intro by Matthias, Gunter Dueck came to the stage and started well. Lots of anecdotes, the stuff he is good at. I actually put a few things into tweets which I will list here.

He really said that this was his greatest learning after 5 years.

Ok, that one is obvious and often said, but needs repeating. You still need to make a plan by the way as it helps you think, but then you can put it away.

It’s really looking at Crossing the Chasm a little bit differently, but he emphasised that this middle part needs the entrepreneurs that will be willing to go through these hard times. He is not one of them by the way. He repeated that often.

This was actually very valuable as it is so simple. It was told to him by somebody that listed a lot of startups at the NASDAQ and others. It is just that a VC knows that 10% of his investments will have to pay for the entire portfolio more or less. So they need to big bets. Making 100 million EURs on a 10 million EUR investment just makes you break even. To understand this portion from the getgo and build the really big ones, always think that each cost has a 40% interest. It’s really scary, but a good frame of reference. Also Gunter Dueck said that there really only is a hockeystick. All other graphs for company growths are meaningless and not really existent in terms of breakthrough products, and that what innovation is about.

This was agreed upon by many. We actually had an entire team doing those fights for us at Adcloud, and they did a great job. But in the end you need a sponsor at the top. And btw, this is not something that is bad or good or anything, it is just like this. There are budgets, and sales people, and stories, and whatnot inside a company that all naturally is against rocking the boat. This makes it really hard.

Well put.

This again is really important and really true. Same as saying that you need to be orders of a magnitude better. I actually don’t even think consultants CAN get you to a 2+.

Then to end this one slide of what you really have to do for innovation.

A few words on those. Agile is becoming a buzzword but really looking at the core values of agile, and lean for that matter, leads to a change in how you really work. This is especially hard for established players that have clear data on their old business on what to do next, that do not exist in the world we are in today, especially in younger companies. And you need an entrepreneurial spirit and you need risk taking. I wondered recently if a team inside a big company could say that they will forgo 6 months salary for a matching investment of e.g. 5 or 10 times the salary they give up and get a share in the business. This would be a lot more startup like. You have pain on the founder side then, but by making sure that they can have their job back after 6 months you allow them to take risks.

I will leave you at that and let you think for yourselves. It is a really tough subject I am thinking more and more about.

Startupbootcamp Open Pitchday Cologne

Business, Investing March 13, 2013 Comments: 3

The View from Osborne Clarke

Today, which marks my first day no longer at Adcloud, I started off with being a mentor at Startupbootcamp Open Pitch Day Cologne. What a great way to start off and thank you Alex for having me.

Also good to see Christian from Venista Ventures again and meet to meet Norman, innovator at Vodafone, for the first time. Looking forward to some good chats in the future. Now I somehow need to find out how I can get the inside view on the future of mobility from Norman. I am all in for an Idea Generation Workshop like I did with Nokia several years ago.

But back to the important point, the Startups. Diverse crowd to say the least. We started off with Marijan from Fizeau Ads, actually pretty similar to The DECK, with the added benefit to a bit more tech. He came over from Macedonia by car because he does not like to fly. 16 hours. :)

Nothing that will become huge in my mind, but it can become a good business with dedicated customers and partners. And I have to give it to Marijan, he kept up well in light of my grilling. After a bit of back and forth, it seems that they also built different RTB modules. The team can probably be thrown into an accelerator like SBC without idea and end up with something great.

Up next was Jan Hase from Scanny, a backend platform about rewards and points (in the abstractest case) and a first app in Scanny that allows you to get points by scanning products in a supermarket. Actually a really nice idea as a Haribo can send you around to get point by scanning their new product. Once you hold the product in your hand, you are a lot more likely to also buy it.

Then we went on to football with Stefan Lochner presenting his new startup that is trying to bring better game mechanics to the online football games, other sports coming in the future. He has already made inroads with some players who want to support the platform, which is what makes this really interesting.

Last but by far not least was Labbler. Slava, one of the founders came over from Russia to present and with their small team they really built something impressive. Now the question becomes if they will get traction. I will leave it to The Next Web to explain it all. You can also sign up right now. I’d say, to be watched.

All in all a great event taking place at Osborne Clark, thank you for hosting us. I am looking forward to the next event.

Don’t follow trends with your startups

Business, Investing September 23, 2012 Leave a comment

Thomas has just published a good post entitled My take backs from Seedcamp Week 2012 last week. This comes shortly after Tine writing that Revenue is the new black and Paul Graham’s post on Growth of Startups followed by an even better follow up my Marc Suster entitled Is Going for Rapid Groth Always Good?.

Really busy articles all around at the moment and many of them ring true and all of the writers have my deep respect. Tine and Thomas actually were at Seedcamp together, which is where the revenue part comes from. I already had a conversation with Tine and a few others on that topic on twitter yesterday. In short, already there, I raised the point that it is not about shifting strategy in light of investors preferred solution.

And then Thomas comes back with the same point. New York now seems to be an attractive place to start a business and this time I can at least agree. The point that New York seems to be interesting is because it is good for business, not because there are many VCs. This is why we chose Cologne to start Ormigo and Adcloud. For business, it is perfect, and A LOT better than Berlin. We have a great train connection to Brussels or Paris, as well as other cities plus two great airports nearby. Investors can be found if you are doing well anywhere.

Then comes to idea of a move to B2B because, as Thomas puts it, the B2C times are over. But let’s go though his examples: eBay was started in a garage and grew like crazy right from the start. Amazon managed to raise a lot of money, but is not in VC city and actually many believed it would fail. Facebook grew hands over fists to start with and Google actually tried to sell to Yahoo! (read The Search) while foursquare has had its up and downs, as well as Pandora. What they all have in common is founders that were committed and really wanted to do what they do and change something really big. They were all not started because there was a trend to follow. They were all not started to “build a platform”. You don’t do that from the start. You move step by step. You solve problems. You have a vision. You want to do what you do. You really do. And yes, believe it or not, there will be other platforms that will be built.

And then comes the “profits are important” bit. Oh damn. OF COURSE THEY ARE. You have to show that something works and sell a vision and most importantly, you need to be convincing in explaining that what you want to do will work. That will work wonderfully with amazing growth and a clear opportunity to make money from that growth, as well as simple revenue growth that is scalable. There is not one answer to all of this.

The most important thing is to do what you want to do. Because as Mark Suster says in his post:

  1. Some businesses take a bit longer to percolate.
  2. Some entrepreneurs can make a dent in a smaller world.
  3. Are we not subtly convincing too many people to “go big or go home?”

Do what you love, and do not follow a trend of consumer startups, or growth fokus, or b2b or whatever. Build what you want and build it right. Learn from others how to build a good business and what is important.

And if you believe you will need venture capital or  angels, then talk to them to understand what they believe will be important in your specific case for them to invest into your business. Remember to still focus on your business, have different options and try to find the right investor for you that really believes in your vision as well.

Good luck :)

 

The Future of Social Networks

Business, Investing, Ormigo, Web 2.0 March 9, 2008 Comments: 5

I just read two competing views that are actually very similar.

First the wonderful Charlene Li from Forrester blogged that social networks will be like air in the future. She actually has a few slides available from a recent talk. In short, she believes that in 8 to 10 years you will look back to Facebook or LinkedIn and wonder what people where doing there because in the end, everything will be social.

The general idea is that the Open Social Graph is really something that we need and that the big players will be working on together because having one social graph is really to the benefit of everyone. It’s really what Noserub, which one of our devs Dirk has initiated, is all about. This means that in the end the social networks that are just there to be a social network, will die. I am already filling all my social networks with my GMail address book (not inviting people just syncing and seeing how is there) and this really means that my GMail address book is my social network.

At the same time Cringely wrote his latest piece called Antisocial. He argues that it is getting too much and boy do I agree. I can’t join the 50th group or add the 75th application or check who bit whom or what who rated. He really believes that there is just not enough value in all of them. The next big thing will come along faster than you think.

It ties in wonderfully with something I think John Battelle said recently, that these sites have to start competing on features and not on data. Because in the end, Cringely is right, and Charlene is too. Most of them that are just social networks will die, because there is no reason to have them if you have a social graph underlying your life. This is really why we have built Ormigo over a social network. We are no social network as such because that is not where the value comes from, but we are a local market place and local market places of the future will have to be built on social networks, because local is inherently social.

Our value does not directly come from the social network but rather it is one of many features. The value comes from giving you the best local merchants to solve your current problem. Social connections, analysis of the life stream of user and merchant, and so on, in the long run, will be important to do this correctly. Interesting times ahead.

Update: And yes, that means that there will be lots of features, systems, sites out there that will just use social components. This is exactly what Facebook is about. Just read this from Zuckerberg:

Beacon isn’t even a part of our ad team. It’s part of our platform team. We think these large social networking sites are going from large monolithic sites like facebook.com … to social services. A lot of them aren’t even things we’re building. Some of them are going to be inside facebook.com. An increasing amount of that is going to be outside facebook.com. What we were trying to do with Beacon was taking the first step with letting people take actions on other parts of the Web and feed back into what their friends are doing. It also ties into the ad system, because it can be an endorsement — someone you care about is doing something, that’s much more effective.

The Borg Complain about Microhoo

Advertising, Business, Investing February 4, 2008 Leave a comment

The cries are going back and forth and it’s fun to watch. Of course we all know the offer done by Microsoft, being close to $45 billion for Yahoo! Google obviously couldn’t let it rest and now has an official response entitled: Yahoo! and the future of the internet.
Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?
Like Michael I can more or less smile at that because with Google having a 40% market share of internet advertising revenues, something like Microhoo would only be good competition against Google, which they of course don’t like. The bigger question really is how to integrate all of them and there I am with John Battelle with the idea that Microsoft should become more like GE. They are already on their way but they can push it. Let’s see how this one will continue.
Of course now Microsoft already did their counterpounch just if you care :)

The Social Networking Implosion

Advertising, Investing February 1, 2008 1 Comment

Lots of social networking stuff happening in the last few days. First Christos Cotsakos, former CEO of E*Trade, has raised $29.6 million for Moli, a new social network, after having put in something like $20 million himself. The company is already at over 50 people plus more offshore. GigaOm has a good review online, with the biggest special thing of Moli being the option to have several profiles folded into one, meaning you have one for work and one for family, with different information shared within them. At the same time, Techcrunch posts that Lookery is offereing advertising runs on Facebook Apps for $0.125 CPM, which is awfully low. Then chatty Mark Zuckerberg talks about numbers at a company  event, which leak: 2007 saw $150 million in revenue, 2008 will see $300-$350 of revenue with $50 million EBITDA but $200 million of CapEx (read buying servers and the like), so a loss of $50 million. If we take EBITDA like Earnings (just to make it easier because they will never buy stuff again … yeah right … never mind … let’s go on) then the $15 billion valuation would add up to a P/E ratio of 300! Forward P/E that is. Now that’s a valuation to look for!
The problem is that in the Google Earnings Conference Call, it just came out that monetization of social networks is really hard, advertising wise. Xing is in a very good spot here because they are monetizing via their users. Within our own platform, the social network is just a side effect that gets used. Pure play social networks will either have to become really really huge, or will most likely face a problem. At $12 cents cpm, even thinking a site is fully sold out, and gets 2 ads per page, that would result in $240 for a million site impressions, meaning $2.4 million of yearly revenues for a site like StudiVZ+SchuelerVZ. That is really nice, no questions asked, and a lot of nice things can come of it. The problem again might be that there is a social contract between the networks and it’s users so any new push to monetization in a new way might lead to a revolt of the users.
Facebook is surely on a good way, but it will be interesting to see their next investment round, in light of possibly further bad news, or an IPO to see what they are really worth. Microsoft couldn’t care less because the investment was more of an ad buy, but for the other investors, I don’t know.

OpenAds getting $15.5 Million and other Ad Stuff

Advertising, Investing January 17, 2008 Leave a comment

Congratulations to OpenAds! I included OpenAds in two recent posts and now they are getting more money to really develop their vision further. With their announcement of a hosted service I think they might be further along to bringing real change to the advertising market in general, even though that might not be their initial focus. The market is big enough as it is. One thing they really bring to the plate is that they are a real alternative for big publishers as a banner server now. With a $15 million investment, they have the money behind them to explain to a big publisher that they are not going away and especially the big ones don’t want WPP, Microsoft or Google running all of their ads.
As Saul Klein puts it, OpenAds, the server, already serves billions of ad impressions (I’ll add “a day” to that quote) and with the hosted version, access to OpenAds will even get easier. I hope they do have a good idea on how they will handle the infrastructure, especially for statistics delivery. :)
I have been running OpenAds here on the blog from time to time, and have introduced it in different places where something more banner server like was needed, in relation to the stuff I have built in the last few years (being more AdSense like Systems, which add the complexity of ads within ads). OpenAds is really powerful and is getting better with each release, meaning that if you are running ads on your site, I’d look into it.
I started testing the German AdScale some time ago, and sadly they do not filter out non-German traffic. So if I run their system on my blog as default, 90% of the ads served make no sense whatsoever. That is where OpenAds is an easy solution and where a hosted version would be even better, because setting up OpenAds on my Server is actually a bit overkill for my little bit of geotargeting. At the moment AdScale is off again while I set up OpenAds (or get access to the hosted version due to this post ;) ) and then I will probably benchmark it against our system at Ormigo (which we haven’t opened up yet, doing specific deals with specific publishers at the moment). I might try out Proximic, which surely has an interesting system (they are using the Vector Space Model for content match, possibly a learning system ala Support Vector Machines, which would be a lot nicer). The problem I see with Proximic, is that they announced having secured access to eBay’s Shopping.com and Yahoo! Shopping’s product listing, among others. That means that they have access to a lot of potential “ads”. The problem is that they don’t really pay. Google isn’t so good because it does content match, but because it has high prices. Sure, content match is nice, but YPN made more money for publishers when they optimized for revenue without content match as far as I know (this was in the private beta phase). Google does the content match for traffic quality. What CPC might you get for a book buy. A presume a few cents. I just searched for a few books on google and the only one that gives an ad is “The Innovator’s Dilemma” … for Clayton Christensen’s consulting company (he wrote the book ;) ). So I would even presume that if 3 cents minimum bid would be possibly earned in these searches, somebody would bid on them. I do see a lot of power in their matching technology though, but I do know that there are other players out there that do content match (even matching the content to keywords you give them). All the power to a startup from Germany that has somehow gotten international attention though!
I know of a trial by one of the big affiliate system to get us out of a publisher deal and their performance was well below ours (previous company). This stuff is very complicated, with strategy (if it exists), options, brand and performance being just a few of the influencing factors on the publisher side.
Sorry that this turned out to be a bit of a rant … but the Ad market _is_ interesting. And bringing the local ad market really online is even more fun :)
Update: OpenAds running again on blog (via old server, problems with lighttpd here it seems, don’t have invocation codes or banner types selectable and preference settings don’t save for those). Hence AdScale enabled for a second time, now with more ads, and hopefully limited to Germany. If you are in the US and see AdScale Ads … tell me :)

Tripple Stock Play

Investing October 8, 2007 Leave a comment

You need to maximize the value of your portfolio. That is very important. As OnVista was recently sold, with a nice premium, so I made a bit of money on that one. Having worked there, having built up what is now Ligatus, I knew that good things were bound to come out of it. But now they question comes how to maximize the free potential. As I have eBay and Nokia shares and have entrepreneurs and VCs tell me that they read this blog, I opted for the following: I hopped onto eBay and bought a nice Nokia N95. Welcome to portofolio maximization strategies, which also help me possibly do a bit of video blogging ;)

Facebook just a Fad

Advertising, Blogging, Business, Investing, Web 2.0 October 3, 2007 Comments: 2

That’s a question now running around the net. The entire story started with Steve Ballmer saying the following: I think these things [social networks] are going to have some legs, and yet there’s a faddishness, a faddish nature about anything that basically appeals to younger people,â€� Mr Ballmer told Times Online yesterday.

And then there is also this part: “There can’t be any more deep technology in Facebook than what dozens of people could write in a couple of years. That’s for sure,� he said.

One thing is for sure. It polarizes people. One good post on the matter comes from Scoble called Steve Ballmer still doesn’t understand social networking. The other one you should read is Techcrunch’s Fadnation: Why Steve Ballmer could be right.

As you have now read those two posts, I will shoot over a few of my own comments. First of all, I am pretty sure that Steve Ballmer does understand social networking. He probably even understands that my own biggest social network is currently my address book in gmail, which is what I use to sync in my friends in new social networks within minutes. He also understands that Microsoft possibly needs a strategy to allow for swift investment in small startups (which they already have, sadly only pushing their own software at the same time, but that’s ok too) and investments in stuff like flickr, wordpress, skype or youtube, isn’t currently a high priority for Microsoft. Which of those services will in 5-10 years, add a few billions of free cash flow to Microsofts belt? Probably none of them. The same with social networking. That’s a feature, and the networks will be freed up eventually. Microsoft is looking for the next billion dollar thing, or for something that allows them to get closer to the billion dollar thing, and at the moment that is advertising, which includes networks, better management of advertisements, apis and so forth, because they will never have all the sites they need to run ads on anyway.

Next up, is Facebook a fad? Nope, I don’t think so. I really do like it and it’s a nice service. If the money idea behind social networks is all about using social networks as a basis to better target ads, then all the big players will be desperate to create an open social network protocol they can tab into, because better targeting all the time is the only way this will really work.

What the fad part is really about is that have my contacts in Xing exported, I have them imported into my GMail address book and whenever something opens up that I like, I can just sync that in and have many of my friends back. Especially the younger generation is a group of people that will very swiftly move to a new service, importing in their old friends. Facebook obviously will not die, but it is not certain that it will not be replaced by another “fad”, another hyped system that is the one to end them all.

So with the right set of features, with the right people to start with, you will probably be able to build the community that Facebook has, or rather a similar one that you might be able to monetize. That is something that MS might invest in, somebody that has the key drivers right and Ning might be more interesting down the line, at least from a business perspective, and from a Microsoft Platform view.

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