The NVA Blog

The stats are from the reporting package used on newmanva.com, Mint. Even though IE owns much more market share than Firefox, this clearly isn’t the case here. What does this say about our site visitors? Are they more technically evolved than the “average”? Or does it mean nothing at all?

I just upgraded this blog’s WordPress installation from version 2.0.2 to 2.1. The upgrade went smoothly and took about an hour really. Some minor plugin wrangling was necessary to get everything humming again, but so far so good. HTML-edit mode wasn’t working in 2.0.2, and the new implementation in 2.1 fixes that. Aaah.

I use Mint for stats and just upgraded from version 1.x to 2.0 as well. That was equally easy to upgrade, and there are some cool new peppers (er, plugins in Mint-land) for 2.0. It’s a paid upgrade but is worth it. The author, Shaun Inman, has done a fantastic job with the software and there is quite the user & developer community growing around this product. I’m happy to support their efforts! BTW, there is a WordPress plugin for Mint that automatically adds the Mint code to every blog page.

Newman Venture Advisors wishes you and your families all the best this holiday season. Here’s to a happy, healthy and prosperous 2007.
The NVA blog has been quiet the last few weeks as I’ve been heads down on a few very exciting projects. Watch for posts in early 2007 for details and news!

Happy Holidays!

Firefox 2.0 came out recently. It’s got some nice new features, and seems pretty good so far. The thing that I’m most excited about is the integrated spell-checker. This blog is powered by WordPress, which is is great software but has lacked a built-in spell checker. (at least version 2.0.x). There are a number of available plug-in spell checkers for WP, and I’ve tried a few of them. I haven’t really been happy with any of them. They either don’t work at all, are clunky, or simply don’t catch the errors. Cutting and pasting into and out of Word to do the spell check stinks because you lose the links and the formatting of the online editor.

Firefox 2.0 has a spell checker built-in, and it seems to work quite well so far. So now when I write blog articles in FF (as I am right now), the browser handles the spell checking rather than the blog itself. The benefit here, aside from the obvious ones, is that the checker allows you to add words to it’s dictionary. So you get a universal dictionary you can take with you to any web page or blog you may be writing or commenting on. Handy, especially if your work is littered with industry-specific jargon that most spell checkers don’t know off the bat.

Firefox 2.0 is not without it’s issues. Some due to newness (many plugins have not been updated yet), and some bugs. Read up before you install, or run it side-by-side with your existing browser at first. I’ve been waiting for a year WP to add an elegant built-in spell checker to the WYSIWYG writer, but FF 2.0 solves the problem!

In a wonderful instance of irony or serendipity, the YouTube acquisition by Google was announced the same week The New York Times ran a story about the VC model being broken “A Kink in Venture Capital’s Gold Chain“. Daniel Primack’s P.E. Week Wire covered this also (here).

The article talk about the VC model itself being “broken”, and then P.E. Week Wire argues the firms themselves have to change too. For example, Sevin Rosen Funds argues that the available exits for VC backed companies has changed for the worse. They believe tha that this change is fundamental enough to NOT raise another fund until a new model is found. There are the commonly cited reasons; The IPO market has been all but shut-down for VC backed companies due to SOX and impatient hedge funds jumping the gun. Further the high-profile, megadeals such as YouTube are exciting, but insufficient to sustain the industry. Another issue is that there is arguably too much money being deployed in some of the trendy sectors, which makes the likelihood of enough juicy buyouts weak due to volume. (It’s all a numbers game, after all)

The good news is that the industry IS evolving. There has been a growing trend in the last 2 years or so where partners from larger firms have decided to not raise another large fund, left the big firm, and gone on to start another firm focused on early-stage deals with a smaller fund. Some of the Tier 1 VC firms out there today started as early stage firms and got bigger and bigger as they knocked down successful funds in the 90s. Firms like YCombinator, True, and Labrador are a few examples of seed/early-stage firms that roll up the sleeves and are pushing the envelope on ways to fund innovative companies without placing excessive exit demands on them from the get-go in order to satisfy the requirements of big funds.

There is no question that the exit environment is tough, and the “hot” markets get quickly over-populated due to ambitious entrepreneurs, an excess of private equity, and of course greed. The MBA-camp is reworking their formulas, algorithms, and spreadsheets and the operational guys are thinking deeply about how to drive cost out of the model top to bottom. At the end of the day, VCs are for-profit companies that will have to evolve and adapt to market changes and new competitors just like the companies they fund do every day. It is beginning to happen in some circles. As with everything in business the Rogers curve will be followed. There will be firms that are Innovators and Early Adopters, there will be a Majority, and then the Laggards.

The only thing that is for certain, is that the VC model needs to evolve and adapt. Broken or not, this industry fuels massive amounts of innovation and growth in every industry sector (even cars as we previously blogged about here), and we need to see the VC model evolve and survive.

Something tells me that Sequoia Capital doesn’t think the model is broken. They have invested in many of the stars - Apple, Cisco, Oracle, Yahoo, Google, etc. They just made a 43x return on YouTube. We are talking about over $400M in less than 2 years.

Even smaller exits, like Grouper’s sale at $65M to Sony, were profitable to the investors. Grouper had raised 5.25M, so that’s a 12x exit, which is very respectable.

New models will emerge in the next few years, many will be tried. In the meantime, we believe building solid companies that are operationally efficient and provide meaningful value to their target market will be successful. What do you think?