Disruption
David Pakman's Blog www.pakman.com

Some Thoughts Coming Out of TED
(We need more entrepreneurs!)

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Mar 01
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With my mind fully stretched in various different directions, a bunch of thoughts are coalescing, coming out of another fantastic TED. Three main points are loosely stitched together in my mind and they point to a bunch of future opportunity.

First, we heard convincingly from economists like Robert Gordon, Erik Brynjolfsson and Andrew McAfee that America’s manufacturing jobs which, for so long, powered our healthy middle class, are not coming back in any big numbers. Many of us scratch our heads to understand how to fill this enormous hole. At Venrock, largely informed by a similar Hunter Walk observation, we believe this dirth of fruitful middle class employment is leading to so much of the activity in the shared resources sector (AirBNB, etc.), in the peer to peer marketplace sector (PoshMark, etc.) and in the digital labor market sector (Uber, TaskRabbit, etc.) as income supplementation. This will help and is a highly investible opportunity. But still, is this enough?

Second, we marveled at Elon Musk and his unrivaled appetite to tackle the planet’s largest problems through commercial endeavors filled with enormous risk (SpaceX, Solar City, Tesla). He is an international treasure and it simply begs the question…why aren’t there more of him? Of course, there are many fantastically successful entrepreneurs and we celebrate them all. But how many Elon Musks are there on the planet? One hundred? One thousand? Ten thousand? Why aren’t there ten million? What are the specific experiences, personality traits, education paths, parenting, and DNA necessary to produce the planet’s super humans driven to defy the odds on such interplanetary scale? It is clear the planet needs more of them, and so why aren’t we unlocking the answer to the question of how to make more? A speaker reminded us of the Chinese proverb…

If you want one year of prosperity, grow wheat. If you want ten years of prosperity, grow trees. If you want one hundred years of prosperity, grow people.

We need to grow more Elons (and Steves and Bills, etc.)

Finally, Sugata Mitra delivered a compelling argument that our schools are simply obsolete for the task of turning out the kind of people we now need in our modern society. He argues for far more self-organized small learning groups of kids with cloud-based tools and light direction from a teacher. That may be part of the solution, but it is likely only a part of it. If our future doesn’t need line workers but needs more inventors, creators, risk-takers, builders, and makers, where will they all come from? Surely there is no natural limit on the number of people with these strengths in our species, right? Surely we can teach and encourage more people to excel in these areas, right? In order to do that, just how much of our society needs to change? Isn’t it more than just our schools? Isn’t it the goals we set for our kids as parents? Is the over-whelming emphasis on organized team sports in our suburban communities part of the problem? When we reward kids at spelling bees, perhaps the ultimate test of rote memorization, are we not helping? Shouldn’t every kid on the planet be playing Minecraft? How deep must we dig to get at the real root here?

I suspect this is perhaps the greatest issue we face as a society. How do we produce more entrepreneurs?

(Special thanks to fellow TEDster Juliette LaMontagne for the helpful brainstorming.)

Author David Pakman
Category Big Media, Startups, Venture Capital
Comments No Comments

Dollar Shave Club − The Power of Asymmetric Marketing

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Nov 01
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Today we announced our investment in Dollar Shave Club, a consumer subscription service focused on men’s grooming. I am honored to be joining the board of the company Michael Dubin has so successfully introduced to the world.

eCommerce companies can be challenging for venture investors. They tend to require lots of capital and usually have low multiples. There are a few cases where outliers can emerge. In subscription commerce, a few rules have to be met for large companies to be created. First, the market must be enormously large. Subscription, by its very nature, usually appeals to a subset of any market it aims to serve. Consumers must intend to make a long-term commitment to a brand in order to subscribe and must not tire of of the service. My experience running eMusic taught me the key metrics to look for in subscription models in order for large companies to be built. Churn rates must be very low. If your average customer leaves after, say, nine months, a large company cannot be built. Your average customer must stay in the service for many years. Think cable, satellite radio, and Netflix. These companies have average monthly churn rates of less than 3%. In the razor market, brand loyalty is measured on the order of twenty-five years. You generally can acquire a customer for a lifetime. And that is exactly what Dollar Shave Club aims to do.

Even more exciting, however, is how Michael sets out to build the brand. He believes that brands are now publishers and must market themselves largely through content. His overwhelmingly successful launch video, viewed more than seven million times, instantly went viral and jointly conveyed the brand personality and the benefits of the service deftly. In this age where social media dominates our collective conversations, we believe very large brands can be built without the widespread use of paid traditional media. It will take several years for the incumbent CPG companies to master these new marketing arts. In the meantime, companies like DSC emerge and get very large despite the massive spend of the traditional guys. We refer to this as asymmetric marketing — no matter how much money spent by the incumbent, the new brand can still become very large for tiny fractions of that spend.

Michael and his fine team have exciting plans. They look to build an enormously successful men’s lifestyle brand. I hope you’ll give Dollar Shave Club a try. I loved the product so much, I invested in the company. ;-)

Author David Pakman
Category eCommerce, Startups
Comments 3 Comments

Not All Traffic Is Created Equal

Sep 26

To build the online media giants of tomorrow, companies need models where the costs of both content and distribution are near zero. Google, Facebook, Twitter, Instagram, Pinterest and countless others employ this model. These models allow scale to emerge at very low-cost.
And in these particular examples, the scale achieved is astronomical — on the order of hundreds of millions or billions of users. In thinking through how to build businesses around this scale, a lens emerges: what kind of traffic produces that scale?
In the case of social media companies like Facebook, Twitter, Instagram, Pinterest and Tumblr, the root activity on the site is the sharing of content. But the content shared on those sites differs widely, particularly around which content attracts the most engagement. Broadly, Facebook attracts photo sharing and light-hearted personal content. Twitter responds far better to true news and topical information sharing. Tumblr seems to resonate around entertainment and creative media. And Pinterest lights up around home design, apparel, food and other commercial items. (I am taking some liberties by generalizing, but you get the point.)

At the scale of Facebook, you could have your users share almost anything and still be able to build a large business, purely by loading the site up with lots of advertising that is (at very least) rudimentary targeted. At that scale, you can reach billions of dollars in revenue. And I believe, even at their scale, their ad load will need to further increase (along with their targeting abilities) in order to signficantly grow the business. (They also must move advertising off-site, as they are now doing, which I detail in this post.)

But if your service attracts particular verticals of content engagement, not all content is created equal, and some is much more valuable than others.

I divide traffic/content engagement into three buckets: topical, informational and transactional.

  • Topical content engagement is what is mostly taking place on Facebook, Tumblr and Twitter. It is comprised of posts generally linking to news, information, family, entertainment, photos, etc. The signal in this stream is the lowest of the three in terms of monetizeable traffic.
  • Informational content, often found on sites like SlideShare, Zillow and automotive blogs is the sharing of information that is near the top of the funnel for demand creation. Things like business white-papers or product reviews are perfect examples of informational traffic. This traffic has significantly more value than topical traffic, and excels at attracting endemic advertisers in the key verticals of travel, auto, tech, financial services, real estate and pharma, to name a few. Intent is well understood in this traffic and the signal is strong.
  • Transactional content is traffic that is essentially one click away from a purchase. Obviously, traffic found on ecommerce sites is the prime example of this and search traffic is a close second, but increasingly Pinterest is proving itself to be a massive source of high-converting traffic. Here, intent is clear and the signal is strongest.

I believe, with the Facebook share price correction, we are entering a period where sites based on topical content traffic are going to struggle in generating value for themselves. Much of the valuations around the consumer web are rationalizing, and because of that, investors are once again focused on understanding business models. Social media properties building traffic around informational or transactional content will be significantly more valuable than topical ones in this forthcoming period. This general notion that every social property with scale will be able to create their own custom “social ad” units and monetize themselves consistent with their earlier valuations, I think, is flawed, unless those properties are in the two higher tiers of content.

Author David Pakman
Category Social Media, Startups, Technology, Venture Capital
Comments 38 Comments
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As Big Media Goes Digital, Markets Shrink

Jan 16

Lots of debate, lately, about Big Media and their bumpy transitions from analog incumbents to digital providers. Over the past few weeks we have had debates around the proposed PIPA and SOPA legislation, Rupert Murdoch (that bastion of new media savvy) railing against Google as a “pirate” and @fredwilson chiming in on the predictable monopoly actions of his cable company, Time Warner Cable in their dispute with MSG Networks. Yesterday Fred posted his views on the weaknesses of Big Media extending their scarcity business models to the internet.

My long-time opposition to scarcity models for digital media content online is well established on this blog and before that at Apple, N2K and eMusic. One thing Fred mentioned inspired me to revisit this subject, and that is market size. Fred says,

[quote]But the studios themselves are likely to do better in a direct distribution model where they reach a broader market at lower effective prices to the end customer. This is what happens in digital distribution. Prices come down, markets expand, customers see lower prices and broader availability. Producers do better. Everyone else does worse.[/quote]

A bunch of things happen when analog media markets go digital. First, prices come down. The cost of distributing digital content is far less than physical goods that used to carry that content (printed books, plastic CDs and DVDs, etc.). Consumers understand that and expect prices to fall. The music industry hated selling songs for $0.99 when CDs used to sell for $18. But almost no one bought tracks for $3.49 when digital music was first sold online. At $0.99, consumers bought a lot. Next, bundles break. Consumers expect to pay to hear or watch only the songs or episodes they want. TV shows sold as 22 episodes on a DVD for $49 will fail when you can watch any episode for $0.99. Consumers don’t like bundles when they have a cheaper alternative. And then competition increases. Because the old guard doesn’t have monopoly distribution anymore, lots of alternatives enter the market. Consumers get more choice. These are all good things.

But finally, and this is where my view diverges with Fred’s, markets shrink. I used to posit that when content is offered widely online with few restrictions, more of it will be sold. But because prices fall, bundles break, and competition increases, I think the legacy content owners end up with smaller markets. They may reach more people, but in many cases they will ultimately make less money per title.

This is not necessarily a bad thing. Since it costs almost nothing to distribute it digitally and the cost of online marketing is far less than on traditional media, content creators can still have great businesses and make lots of money. But the main reason, I think, so many legacy content companies resist the new digital markets and their new business models, is because their businesses will shrink. And that means significantly changing your cost structure. Fewer private jets and executive dining rooms with 4-star chefs (remind me to tell you about my lunch at News Corp a few months back…)

Because the new economics are scary, the incumbents resist it. But the startups embrace it. And this is why we do what we do. As digital media entrepreneurs, we are not working to preserve a legacy business model, we are hoping to create new ones.

Author David Pakman
Category Big media silliness, Startups, Venture Capital
Comments 5 Comments

Got Klout?

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Jan 04
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Marissa and I are pleased to discuss our latest investment (and our first one as a team). We are excited to join with fellow firms Kleiner Perkins and IVP in investing in the internet’s standard for measuring influence, Klout. As the internet moves from pages to people, Joe Fernandez‘s vision of the need for “Pagerank for People” is spot on. Klout’s algorithms score the actual influence of people as they share on the social web. They attempt to measure your influence by observing interactions on the social web. As we all work to build and manage our online identity and profile, Klout helps measure our reach and topics of influence.

In every other mass media, measurement provides a benefit to the advertisers who subsidize that media. Large companies have emerged based on, frankly, less than perfect measurements systems. In TV and radio, panel-based inference measurement somehow have passed as a legitimate way for advertisers to make decisions on where to spend billions in advertising. These incumbent measurement firms became standards for measurement within their domains. Klout has the benefit of being able to measure actual data, not inferred data. They aim to score the entire social web. They currently have scored more than 300 million users and are scoring and re-scoring a mind-boggling amount every day. With more than one billion people on the social web today, they are by no means complete. Nor are their algorithms perfected. Just as Google changes their PageRank algorithms hundreds of times a year, Klout will evolve their data science as the social web changes to provide the most accurate influence scoring on the web.

Klout has the distinction of being one of the few companies whose monetization plans actually benefit its users. Using Klout to identify influencers in particular topics, brands offer new products or special “Klout Perks” to you in the hope that you will like them and share your point of view with friends and followers. This relationship, unlike interrupt-driven advertising, benefits both parties. Klout has worked with more than 100 brands like Starbucks, Audi, Spotify and Microsoft and has hundreds more lined up to do the same. Joe speaks infectuously about his plans for taking Klout to “the real world”. He imagines restaurants knowing your Klout score when you call to reserve a table, airlines printing your Klout score on your boarding pass, and of course call centers knowing your Klout score when you call to complain. Already hotels are using your Klout score when you check in to decide upgrade policies.

Aside from this exciting vision and stellar progress, two other themes draw us to Klout. One, we hold a passion around seeing the relationship between a brand and a customers changed. We believe that the social web requires brands to respect us more. To take our point of view more seriously. To adopt policies consistent with good service and fair treatment. No human should have to sit on a plane for seven hours on the tarmac, of course. But also, utility companies should be held accountable for poor service, cable companies should be held accountable when we stay home from work for a day and the repair crew never shows up. Banks should be called out for imposing hidden fees in the dark of the night. And finally, our governments and elected officials should hear from more of us more often. In this age of declining influence of traditional media, Klout enables our individual voices to be more influencial with instutions who hold power. That is exciting to us.

And finally, Klout supports our view that we are shifting from an attention economy to a data economy. The last ten years of digital media on the web have been built on attention. Those web properties that amassed our attention (generally by stealing our eyeballs away from traditional media) and reached scale have been rewarded with great businesses. Yahoo! got our attention with email. Google got our attention with great search. Facebook gets our attention with photo sharing. We believe the next ten years will be built around data, and in particular, social data. We have invested in M6D for its leadership in social ad targeting. We invested in Singly for its leadership in building a social data locker and app platform. And now we are investors in Klout for its leadership in social influence measurement. We salute Joe and his team for amazing progress so far, and are pleased to be along for the ride.

Author David Pakman
Category Social Data, Social Media, Startups, Venture Capital
Comments 5 Comments

“Great” is Tough to Pick out of the “Good” Crowd

Dec 02

The following is a guest post by my partner, Bryan Roberts. (@brobertsvc) He is one of those legendary VCs who, at about my same age, has invested in many of the most spectacular healthcare companies created over the past decade. He has been the highest-ranking healthcare investor on the Forbes Midas List since 2008. He is wise beyond his years and a great mentor to me. I found this post quite inspiring and wanted to share it widely.

The oldest adage in start-up’s, for entrepreneurs and VC’s alike, is “the key to success is the quality of the people.”  Markets and innovative approaches are important, but my experience supports this notion unequivocally. I have had the good fortune to be involved from an early stage with several billion dollar companies, and most found success after a material pivot from their original approach – Athenahealth, Ironwood Pharmaceuticals and Sirna Therapeutics to name a few.  “I invest in people” is the start-up ecosystem’s version of motherhood and apple pie, but how do you identify “Great” prospectively?

Whether explicitly or not, everyone has their own answer to this question, and based on the success rates, those answers by and large stink. I don’t have a Magic 8 Ball on the topic, but two things make this the issue I wrestle with most: (1) the often-unpredicted success or failure of “nobodies” or “sure things” respectively, and (2) the outsized rewards for locating great, juxtaposed with the probability of abject failure when settling for good. The A+ entrepreneurs with whom I have partnered have come in unusual packages – simply put, there has been no central casting: a biology post-doc who thought about opening a microbrewery B&B; a large animal veterinarian who went to business school in his late 30’s; an x EMT who was also nephew to the President among others.  The best VC’s seem to show the same diversity of background.

I now focus on these attributes:

  1. Great talent finds a way to win… and is relentlessly driven to do so with a real sense of urgency.  They follow through and complete the task – starting is easy, finishing takes real will.  It is not that they think out of the box, there simply is no box.  They view ambiguity as opportunity, not risk. When things get uncertain is when they really perk up and start to pay attention because that is when real change is possible.  Most of all, they exceed expectations. They bend the space-time continuum in some fashion and their accomplishments are extra ordinary.
  2. Experience is overrated. By and large, the world is changed by the young and the hungry. Experience can be enabling or constraining, but it is not even close to the silver bullet many believe it to be.  If you are seeking a VP marketing or head of sales at a 100+ person company, absolutely look at a resume.  But to find someone with the passion and uniqueness to actually create an early stage venture, you have to spend the time: watch them and see what they do, talk to them and see what they think, ask around and see how respected they are.
  3. Balance exploring/driving with learning/listening. Great people have a very clear grasp of the their vision, while understanding that the world has a lot to teach them. They are humble students of the game, but very confident in their abilities, and never “do what they are told.” They don’t avoid conflict and will always bet on themselves rather than shy away from risk.  They ask questions and argue on facts, balancing their gut with innumerable data streams to get to what they believe is the right answer.
  4. Great people are magnetic. They are not only smart and driven, they attract resources when all the data suggests they should not – whether capital, people or partners – and thereby become larger than just their singular efforts.

While potentially controversial today, I have come to believe that great entrepreneurs and great VC’s are two sides of the same coin.  Both embody these characteristics.  They are maniacally focused on changing the way we live with innovations others thought were not possible. They are passionate about building a great company and put the company before themselves.  No great VC takes solace in having a portfolio when an individual company struggles – like entrepreneurs, this is deeply personal and about so much more than just money.  Their roles are complementary, like looking down opposite ends a telescope, but those different perspectives to a problem can be extraordinarily synergistic.  Great future entrepreneurs can look like great young VC’s, and vice versa – three of my recent investments are stellar companies started by these “crossover” folks.

All venture firms are simultaneously never, and always, looking for team additions.  I believe this is a direct result of how elusive it is to identify those who will be not only smart, passionate, personable and high integrity, but also successful in this ever-changing, ambiguous entrepreneurial world where what worked last time is no recipe for future wins – and more likely charts a path to mediocrity.   In fact, my own difficulties in finding conviction around potential team additions for our firm is what spurred putting these thoughts on paper.

Author David Pakman
Category Startups, Venture Capital
Comments No Comments

Is Social Data The Next Investing Frontier?

Oct 19

Much of the excitement around internet startups over the last five years has been around social services. From Facebook to Foursquare, from Twitter to Instagram, from Yammer to Zynga, significant investment dollars and entrepreneurial effort has gone towards capitalizing on the fact that we are all linked together by connected devices. These connections present great opportunity to disrupt the traditional ways of attacking markets like shopping, travel, communications, media consumption, gaming, etc. There are plenty of other big investment themes, of course, like local commerce (Groupon) and cloud services (Cloudflare and Dropbox), but social has been the dominant theme. The first wave of social companies were social utilities and social media (including gaming).

I believe that is shifting and has been for some time. Other agree. We have been pursing alternate investment themes these past few years and the largest recurring theme for us has been data. This is also not a new theme, but it is growing in prominence and awareness, punctuated by this week’s Web 2.0 Summit whose theme is “The Data Frame”. We have invested deeply in data-based businesses whose efficiencies disrupt their less-efficient or less powerful legacy brethern. AdTech is one such area. Healthcare is another. Payments is a third. Security is a fourth. And soon, the consumer web is likely to be further transformed by businesses based not on social utility, but on social data.

Plenty of consumer startups use data to make product decisions. That is not what this post is about. It is about consumer businesses actually based on the value of our individual social data. Through the use of so many exciting social utilities, we are creating more data about ourselves at an increasing rate. This data becomes more valuable to us when developers can access it in an aggregated and trustworthy way.

Today, an investment we seeded back in March called Singly is making its intentions known at Web 2. Their vision is audacious; individuals must be in control of their social data. I blogged a little bit about this opportunity here. Today Singly emerges as a developer platform to bring that vision to reality. John Battelle blogs about it here. I think their emergence shines a light on the investment opportunities around social data as well as the opportunities to launch open personal data platforms.

Jeremie Miller, Singly’s Co-Founder will present today, Wednesday October 19 at 2:20pm PT/5:30pm ET. You can catch the livestream here.

Author David Pakman
Category Big Data, Social Data, Social Media, Startups, Venture Capital
Comments 1 Comment

The Magic of Minecraft

Sep 01

On the Saturday night before Father’s Day, I called my three kids together and asked them if they’d like to earn an extra five dollars. My wife and I were having a dinner party at our home that evening, and if they agreed to take baths/showers themselves, put on their jammies, brush teeth and settle into bed themselves, they could earn the extra money. Highly motivated, they took the challenge and went to bed without parental involvement. The next morning, after awarding them their well-earned compensation, the older two (ten and eight years old) immediately asked if they could buy the paid version of Minecraft with their money. And from that moment, my eyes have been opened to a magical creation.

A view of a Minecraft world

What is Minecraft? It is a java-based web computer game the kids had been playing for a few weeks. The free version allows them to play a primitive version of the game in single-player mode. I checked out the paid version and upgraded them each for €15. The game was created by a mysterious and revered Swedish indie game developer named Markus Persson, known as Notch (@notch) and his team of 8 others called Mojang. As my kids showed me the somewhat crudely drawn lego-inspired world of trees, grass, oceans, islands, zombies, spiders, skeletons and the dreaded creepers, I was intrigued. They were mining for ore, collecting supplies, crafting new items with pre-determined recipes and sharing their learnings. There were no spaceships, no lasers, no bullets, no armies, and no blood. In place of the fast-twitch first-person-shooter games dominating console and PC gaming was a construction oriented world set in primitive times that has captured the imagination of about 10 million free users and 3 million paid users worldwide. (Yep, that’s more than $66M in revenue in less than two years.)

The dreaded Creepers!

Watching them play in parallel on two different computers, I assumed there was a multi-player version. After some googling, I found literally thousands of multiplayer serversrun entirely independently from Mojang. We tried one and found very rich worlds with scores of simultaneous players and lots of rules. Not feeling advanced enough to join these evolved worlds, some googling brought me to a free java version of the server. It was Father’s Day after all and I’d rather be playing with my kids than not, so I launched a local server in our house. It worked like a charm. We all logged in and then the magic really started. We were now playing in the same world, chatting with each other, banding together to mine, build and defend our creations. After a few hours glued to our computers and to each other, it was clear we were going to be playing this for a long time. I was flying to California that night and thought this would be a great way to keep in touch with the kids, so from the car on the way to the airport I spun up a Rackspace linux box (Ubuntu, of course), installed java, and brought the server up. I made some DNS changes to the pakman.com domain name and launched our server more publicly. It would now be possible for us to play together no matter where we all were. Quickly addicted to the tasks of mining and building, I awoke at 4am California time each morning to play with my kids online for an hour before they left for school and I left for meetings. At night I’d check out what they made. They wanted to play Minecraft every waking hour of the day. And so did I.

Creative City on the Pakman Minecraft Server

Fast forward to today. The three of us have played probably more than 200 hours of this game, mostly together. We pray for bad weather on a Saturday to cancel tennis or other outdoor commitments so we can build and explore more of our Minecraft world. My kids have invited many of their friends, almost all of whom were already playing Minecraft, to join our server. We have more than 30 kids who have tried our world and at least 4 kids on at any waking moment of the day. I have consulted other Minecraft server Operators (“Op”, for short) and become a sophisticated Op myself. I upgraded the server to an 8GB quad core box to allow more simultaneous players. I moved the world onto a RAM disk to accelerate the delivery of graphic chunks to the clients. I now wrap our server in the community-created Craft-Bukkit framework to allow me to add and modify server mods without bringing the server down (the kids hate downtime). I added an economy to our world so the kids can buy, sell and trade items in exchange for money. I added a bunch of NPCs (non-player characters) to richen the world experience. I added a Group structure. New players come in as guests with limited abilities so they cannot trash the world (“griefing” in Minecraft parlance) until we trust them and know them. We even added an alternate world called The Creative where kids are encouraged to build elaborate structures. These kids created an entire town complete with a church, fire station, castles, restaurant, airport, farm, houses and a library (okay, I made the library).

The mercurial and revered Notch

A few weeks into the experience, I got a frantic call at work. Some kids had come into the server and were destroying homes and killing players. “Dad, quick, you have to do something. You have to ban these kids from our server!” So, I banned a few of the wrong-doers. It may not surprise you to find out that the few who were banned were already somewhat known as the trouble-makers at school. Now we have griefing-protection tools and anti-cheat technology on the server to help bring a little order to the world. Not too much, but just enough to keep the community healthy. What is happening here? First, it is important to understand that Minecraft is not just a game. Although known as a “sandbox” 3D construction game where users create in a virtual world with basic rules and logic that determine the way the world operates, Minecraft is a true phenomenon. Head over to YouTube to see this first hand. There are more than one million videos uploaded by gamers showing off their creations, tips and ways to mod the game. In this video that made its way around twitter a few weeks ago, a group in the UK created one of the most elaborate looking dams I have ever seen. In another one, a group on a server created a Happy Birthday message to Notch. Most extreme? This block for block replica of the Starship Enterprise or the Arc de Triomphe. The game is actually still in beta, the server is buggy and there is very limited developer support from Mojang. Despite this, there are tens of thousands of developers who have written mods and plugins, hundreds of thousands of skins and texture packs to alter the look of the game, and many community wikis and forums with hundreds of thousands of posts and articles. (It’s not particularly easy to mod the game without a nice API…these devs are disassembling java code and hacking it to make the game work differently.) Unconvinced? Watch this Best of Minecraft 2010creations video.

Arc de Triomphe, Pyramid and the Parthenon

Notch and his unbelievably gifted team at Mojang have unlocked an enormous reservoir of creativity largely among kids. I was not too surprised to find my ten year old’s teacher allows the kids to play Minecraft in the classroom to teach construction and encourage creativity. But more than that, I am observing first hand how the players develop ad hoc rules for social interaction in these worlds. This is so much more than a game. This is the inevitable progression from one-dimensional social networks like Facebook to virtual world social networks. If the Mojang folks supported a more robust server architecture and possibly larger game maps, we could see worlds with hundreds of thousands of simultaneous players. I believe Minecraft fulfills the promise Second Life and IMVU have not; these players are not waking up and deciding to go into a virtual world. They are deciding to play and build in Minecraft and the world and social rules follow from that. Minecraft gives its players a reason to come together to interact, much like an outdoor BBQ brings us together to eat and socialize or a dance club brings us together to dance and socialize. Minecraft also presents a number of challenges to traditional video gaming in general. One of the reasons I believe kids love it is because every single block in the game is moveable and alterable. The entire game landscape can be redrawn by the players, one block at a time. This is enormously empowering to a child who lives within a strict set rules about what may and may not be touched in the real world. In Minecraft, you can touch everything. (The blocks do adhere to primitive logical rules like gravity and the effects of states of matter, so it is not a complete free for all.) In addition, the marvel of the game’s success cannot be understated. It has not even been formally released and it has 10M players? And it was developed by a tiny team (relative to big game development) who built and then leveraged a rabid community of their users, many of whom are technical enough to hack and improve the game in all sorts of unimaginable ways. So where can this all go? If the team at Mojang wanted to and thought this way, I think this game could be a platform for global social interactions and easily become the largest virtual world social network. I can see this reaching 100M players. They could more formally support the developer and multi-player server interfaces to really let the game be extended in more reliable ways. They could allow for different world generation algorithms to be used to create more variety in the basics of the map structure (which could unlock a different set of creativity). My friend (XMPP, Telehash and Singly co-founder) Jeremie Miller excitedly hopes for an ability to teleport among various servers without re-starting the game. This would require intra-world permanence of your items and state but would allow people to move from community to community very quickly. As constructed today, each client actually can create and run its own single-player game. Why not allow every client to be a server and host additional players? If they used Telehash, Jeremie points out that “anyone can portal to any other running world on any computer anywhere in the world.  Any server you’re on you can always build a “home” teleport to a world on your computer, as well as build portals from yours to all your favorite multi-player servers.” This is an exciting vision. Jeremie also suggests allowing media assets to be delivered from the server to client, currently not permitted. The only way for new characters and scenery to be introduced is to simultaneously mod both client and server. Allowing the server to add new elements to the client would obviate the need for all users to upgrade their clients just to receive new game items. This all being said, I wouldn’t change much. Ecosystems like this are fragile and are very hard to get right. Notch and his crew have gotten it pretty much perfect as it grows organically every day. I truly believe this team is quite genius. The amount of thought that went into getting this balance just right to encourage us to explore and learn on our own and then want to share our learnings is staggering. This week I purchased three tickets for me and my two kids to attend MineCon in Vegas in Novemeber, a community-created convention when the game will be officially released. Wanna come? If you’d like to try out the Pakman Minecraft Server, please send me an email and I will happily send you the address.

Author David Pakman
Category Gaming, Social Media, Startups, Technology
Comments 12 Comments
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The Power of a Transformative Idea: Presenting Singly

May 31

In the job of venture capital, one of the greatest moments I have found is hearing an entrepreneur present a truly transformative idea. We hear exciting ideas all day long, expressed with passion and unwavering belief. But a few times a year, perhaps, I have been lucky enough to hear an idea that is unquestionably an enormously important vision of the way the world should evolve. Over the course of last summer, two entrepreneurs separately presented to us their big vision of personal data and it, well, rocked my world. We invited one of them, Jason Cavnar, to take a seat in our Palo Alto office (in what we call “The Quarry”) to start fleshing it out. He introduced us to Jeremie Miller, the revered founder of open source XMPP/Jabber, who saw the world the same way. The two combined visions and forces, and Singly was born.

After about nine months of team-building, coding and developer community work, Singly is starting to emerge and present their vision for the future of personal data. I am happy I can share it publicly and get your feedback.

It is clear that all online experiences are becoming social. To me, this means sites and apps become more participatory. That is, we interact with them in personal ways and leave some data about ourselves there: we comment, rate, share, add friends, search, personalize, filter, select, check-in, post, etc. Right now, our personal data is spread across, probably, 20 – 30 sites and apps like Facebook, Google, Twitter, Yelp, Foursquare, Netflix, Flickr, etc. Soon, as everything becomes social, our data will be spread across literally thousands of sites. That data is very powerful and useful. However, it is vey hard to pull back together. Over the past year or so, I have seen literally hundreds of entrepreneurs developing apps which utilize subsets of this data to provide value to users. The problem for them is they spend 4-6 months writing code to aggregate, normalize and clean up the data they need from a few services before writing the code that is valuable and differentiated. They would benefit from a centralized place where our data lives.

The other side of this coin is that we are spreading lots of data about ourselves all over the place. Some of us might care to know what we have spread out there, where it lives, and what developers are doing with that data. Enter Singly.

Singly began life as the open source Locker Project. TLP, available here for developers, is a container for personal data. It contains the core locker as well as a slew of open source connectors and collectors. Those connecters attach to (soon) hundreds of services to copy our personal data, in real-time, back into the locker. Collectors clean and normalize that data. Singly puts a nice API on top of all this data along with a permissioning and authentication interface. Singly also will offer hosted lockers in the way WordPress.com offers a hosted version of the open source WordPress platform. You can see a world where developers can start writing an app knowing, provided the consumer lets them, they have access to normalized and complete personal data for their users.

This vision offers a future where people *do* control their own data, where innovation can be fully unlocked for thousands of developers, allowing great new apps to appear for consumers, and creates an interface point for brands to interact with people and their information under a trust framework humans can understand.

The team has been making some exciting announcements this last week. Here are a few things to check out if you are so inclined:

[unordered_list style="bullet"]

  • A vision document from Jeremie Miller
  • A blog post from the team announcing the effort
  • Matt Zimmerman’s announcement that he is leaving Ubuntu to join the team
  • The Locker Project: website, GitHub, Twitter, blog, IRC (#lockerproject on FreeNode)[/unordered_list]

Incidentally, others have discussed a slightly different version of this future. Some believe aggregating personal data will lead to a world where marketers will offer to pay you for your data. I don’t see this happening. I cannot see consumers getting into the business of selling their data to marketers so they can see personalized advertising. Instead, I believe marketers will be encouraged to offer value to us in exchange for access to our data. The best example of this today might be the Nike Plus app. Nike gets access to highly personal health and wellness data in exchange for providing great utility around my exercise schedule. In any case, we know advertising is becoming more personal and is more effective when based on our social data. The Singly permissioning interface will encourage marketers to think a bit more like developers.

Author David Pakman
Category Big Data, Startups, Venture Capital
Comments 5 Comments

IPO Market Failure: More People Must Benefit from Tech’s Wealth Creation

Apr 26

This post will sound terribly self-serving: a VC calling for more IPOs. But hear me out.

The massive contraction of IPOs in the tech markets has not just hurt VCs, it has deprived citizens from participating in the largest wealth creation opportunities currently available to us. We know wealth creation in this country is largely driven by entrepreneurs. It’s entrepreneurs who create new companies. Very successful companies are wealth creation machines. Sometimes millions of people get to participate in this wealth creation. Lately, only a few thousand people have. How so?

Consider Facebook. This company has largely helped inspire and create the entire social media industry, a revolution so profound every company will eventually be subjected to its new rules of customer engagement. It continues to turn traditional media on its head and offers fresh challenges to web incumbents as well. In seven years or so, it has convinced a cool 600 million of us to join its community and power its business. It has revenues well north of a few billion dollars a year, on its way to $20B. And it grew from nothing to $70B of value in that time. How many people have participated in this massive wealth creation? Likely fewer than 5000 people. That’s the 2500 employees or so I estimate have ever worked there and received stock or options, and the 2500 or so individual investors (GPs and LPs) who have either invested directly or bought shares second hand. If I am off here, it is likely by a few thousand and not by an order of magnitude. The demand for this stock is so high that entire semi-liquid markets have been created to help manage it. Yet this stock does not trade on any public market and its ownership is restricted to just a few thousands elite investors. But this company is the single largest creator of wealth in the tech sector over the last five years or so! This is what our incredible entrepreneurial ecosystem is capable of producing, but so many are deprived of its benefit. This is broken. And the same concern applies to Zynga, Groupon, Living Social, LinkedIn, Twitter and other emerging tech leaders.

Now consider Apple, Google, Amazon, Netflix, SalesForce and other tech giants. Tens or hundreds of millions of people have participated in their incredible wealth creation. All because their stocks are traded on open, democratized public markets.

So, if I were “President of the U.S. Economy”, or even the Global Economy, one of the many things I would want to correct is this phenominon. If I were seated between Obama and Zuckerberg in the Bay Area a few weeks ago at that dinner, I would have taken careful notes of Zuck’s response when Obama hopefully posed this conundrum to him. “Tell me why you won’t be a public company?” I imagine the issues are numerous (Sarb-Ox, cost of being public and dealing with complex reporting/regulations, liability, it’s sucks being a public company CEO, etc.) but that is not a reason not to try and solve this conundrum. There are broad benefits to re-starting the tech IPO market. The NVCA and Dixon Doll have done a better job than I have in articulating this. And there are signs that things are improving with maybe 70 – 90 new venture-backed IPOs reaching market this year. But the current situation strikes me as inefficient and in many ways, unfair.

The best summary of this situation and proposed solution I have seen is the Dixon Doll/NVCA presentation here.

Author David Pakman
Category Startups, Technology, Venture Capital
Comments 2 Comments
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