Yet Another (ex-)VC Blog

Cloud computing, startups, and venture capital

Archive for October 2008

Opening the cloud computing kimono

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One of the central tenets of cloud hosting (e.g. Amazon EC2) is that application owners no longer need to be concerned with the lower level underpinnings of the infrastructure.  Theoretically, the app owners can focus on their application code and then let the cloud provider handle the configuration and scaling of everything underneath (VM, server, network, storage).  This sounds great, but in practice, its just not the case, particularly in the enterprise world.

When I was running infrastructure operations at FOXSports.com, we used a managed services provider for a variety of our hosting needs.  They provided us certain services on a “cloud” basis, which meant that our servers could access these resources freely, but that we had very limited visibility into the infrastructure providing those services.  This made it very hard to debug issues related to this service since the MSP provided limited monitoring information for the systems providing the service.  I remember fighting very hard to get additional visibility into the service, and ultimately the MSP built some tools to support that need.

Fast forward to 2008…if I am an enterprise thinking about deploying anything remotely business critical to a cloud hosting provider, I will want to know (in gory detail) how the systems and networking supporting the infrastructure are configured and architected.  Why?  Because if something in the infrastructure breaks (and as we know, something always breaks), I am going to need to fix the issue as soon as possible.  With little visibility into the underlying infrastructure, I’m going to have a very hard time isolating and ultimately solving or working around the problem.

Where am I going with this?  For the larger clouds (like Amazon) there is a somewhat limited amount of information publicly available about how the underpinnings of their system works.  If I’m Amazon, for example, I probably have a great deal of know-how and trade secrets related to my cloud infrastructure that I’d like to protect.

The conundrum (I think) is that to see true success in the enterprise, the cloud providers will need to reveal a good deal of this information to potential customers in order to get them comfortable enough to move significant workloads and applications to their cloud.  Is it worth it for the cloud provider to give up some of that competitive advantage in exchange for more enterprise traction?

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Written by John Gannon

October 31, 2008 at 6:30 pm

Need a team to help your NYC-based startup (for no cost)?

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I wanted to make all of the NYC-based entrepreneurs aware of a great program called InSITE. 

From their website:

InSITE is an entrepreneurial mentorship program that brings together
the best and brightest students from Columbia and NYU Business and Law
schools to support New York entrepreneurs in the development of their
businesses and their pursuit of venture capital and angel investments. 
InSITE’s mission is to accelerate technology start-ups through their
early-stage development, transitioning them from their seed stage into
being venture-funded companies.

A bunch of business school classmates of mine are involved in the program and I from what I have heard and seen it provides a great value for startups who need help on the business/fundraising side of things but don’t have the dollars to hire help.

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Written by John Gannon

October 31, 2008 at 12:11 am

Understanding cloud computing costs in the enterprise

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Amazon has gone live with Windows support in the EC2 cloud while at the same time announcing a private beta for some new scaling and load balancing features.  These features will certainly be useful for the smaller customers of EC2, but my guess is that those features were driven by a desire to make the Amazon cloud more “enterprise friendly”.  And speaking of enterprise friendly…

In an earlier post I discussed some areas that Amazon and the other cloud providers will need to address before they’ll see mass enterprise adoption.  One area I did not discuss, but that is also important, is cloud financial management (cloud “chargeback”).

Chargeback methodologies and technologies are used to help medium-to-large enterprise IT departments meter usage of key IT resources (storage, network, compute) and then allocate usage back to individual business units, applications, etc.

Although cloud computing provides financial benefits like reduction of CAPEX and the ability to pay-as-you-go, organizations will still need a reasonable amount of granularity in the reporting of cloud usage and the ability to map that usage into a financial chargeback model that makes sense.  Knowing which applications and departments are driving IT expenses is critical now, and will continue to be critical as cloud computing goes mainstream in the enterprise.  Therefore, any cloud chargeback solution should integrate with the chargeback framework that the company uses to manage their physical assets.

I can also see forecasting of cloud computing demand within enterprises becoming more important as greater usage variability  drives expense variability.  Avoiding CAPEX is a great thing, but if you’re unable to predict OPEX, you’re going to have other problems.  Traditionally, capacity planning and demand forecasting has been a dark art (at least in the distributed systems world), but I think the industry as a whole needs to think about new ways to address the problem in a hybrid cloud/non-clouded world.

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Written by John Gannon

October 24, 2008 at 7:19 pm

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The importance of momentum

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Momentum is a key factor in the success of a startup company. I look at the momentum of a company in a couple of ways depending on if we’ve invested or not.

Momentum during due diligence:  During the due diligence process (prior to making the decision to invest), a VC firm will typically meet with the company multiple times over the span of 1-2 months and make all manner of calls on customers, partners, and the like.  Jeff Bussgang of Flybridge just wrote a great post on how due diligence works at an early stage VC, and the Startable guys also provide an interesting view of the process (including obligatory boulder picture).

Because there are numerous interactions over a period of time during the due diligence process, it gives me a good opportunity to hear about how the team is moving their business forward without any additional investment.  It’s encouraging if a startup hits milestones, does deals, makes sales, or releases product over the course of the due diligence process because it shows that the founding team is laser-focused on moving the ball forward regardless of the outcome of fundraising.

Momentum after investment: Closing that big deal, hiring that key employee, or making a major release of your product are all powerful momentum-generating events at an early stage startup.  It is amazing to see how these events tend to act as forcing functions, causing other good things to happen to a company in a short period of time.  It seems that successful startups capitalize on these events and leverage them to hit other company goals.

My friend and fellow VC Mark Davis also wrote a post about momentum which focuses on how you should communicate progress to your potential investors.  Well worth a read.

Update:  ReadWriteWeb just posted about taking advantage of momentum after making a big announcement.  Check it out.

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Written by John Gannon

October 22, 2008 at 6:17 pm

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Benchmark getting into PIPEs

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Benchmark Capital is thinking about doing some public market investing (PIPEs) according to a recent article in PEHub.  I wouldn’t be surprised to see other VC firms look at this as a way to augment their investment strategy.  After all, there are plenty of public companies that could use a cash infusion and have little ability to generate it through traditional means.  I’m wondering in what other ways VC firms will get creative in how they invest their capital during these very interesting times.

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Written by John Gannon

October 19, 2008 at 1:41 pm

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A Zemanta-like LinkedIn plugin would be really cool

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Image representing LinkedIn as depicted in Cru...

Image via CrunchBase

Since I launched this blog I have been using Zemanta to help make my blog posts richer in content, either via adding inline links or related links added to the end of a post.  I like how the Zemanta plugin creates an overlay on the WordPress posting interface so that it seems like a part of WordPress itself.  It would be great if LinkedIn created a plugin like this, or if someone else created a plugin, that would enable the following features on top of LinkedIn:

  • Enable external email (GMail, Outlook, etc) to LinkedIn user being browsed (either in search or profile page).  Not sure LinkedIn would really like this but it would make my life easier :)  Rather than search on my connections for someone’s email address, the plugin could dig this out for me.  Maybe it could change the InMail link into an Email link that would give the option of InMail or regular email?
  • A mouse-over or clickable dropdown next to each job position on a profile that would list my connections who worked with that person during the same time period.  Right now I can only see a list (sometimes a huge list) of people on the right that are generically 2nd degree.
  • Ability to insert a signature or commonly used text into InMails, requests for contact, LinkedIn Answers posts, or connection requests.  I spoke about this in an earlier blog post. For example, I help with biz dev for one of our portfolio companies and for the most part use a generic description of their product.  It would be great if I could pop in that generic text (with a similar interface to how Zemanta handles related links) with a click rather than a whole bunch of typing.

I wonder if LinkedIn would allow such a plugin to interoperate with their service given that they are sensitive to automated scripts, etc running against the site?  This isn’t spammy and would seem to enhance the user experience.  Thoughts?

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Written by John Gannon

October 17, 2008 at 5:56 pm

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Do the work

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Today I was called by someone who I had met for 5 minutes at a conference a couple of weeks ago.

They wanted me to consider using their services (this was someone who wanted to provide me a personal service, not an entrepreneur) and asked me if I’d consider taking a meeting with them to discuss their offerings.

I declined the request, but made the following two requests.

1) Can you send me some more information?

2) Do you work with anyone that I know and trust?

Regarding #1, the person emailed me after the call with a link to a corporate homepage.  There was no attempt to leverage any of the information I provided in our discussion to direct me at a more specific, relevant section of the website.  I wanted the person to do the work and point me at the subsection of the website that applied to my situation.

Regarding #2, I stated that I would only work with someone who came referred to me through my personal network, or someone who the service provider and I both know and trust.  The objection handling that this person used was “I work with some heavy hitters on Wall Street, and they would recommend me.”  Great, but I don’t know these people from Adam, and although a big name is impressive in some cases, you’re not trying to sell me basketball sneakers or a pair of $200 jeans, so some more directed, personalized sales tactics would make more sense.

What will impress me is if this person calls me back in a couple weeks and says: “John, I took what you said to heart and did some homework.  I found out that you know Mr. X. at firm Y, and his cousin is using my service and is very happy with it” In that case you can bet I will take a meeting with the service provider.  And not just because they were able to track down that connection, but that they are willing to do the work to show me that my business was worth pursuing.

I firmly believe that if you do the work you’ll start to see the results you want in business, and in life.

So do the work.

Written by John Gannon

October 13, 2008 at 5:39 pm

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