Silicon Valley Watcher - reporting on the business of technology and media

I'm lucky, I find an empty parking spot right outside the Thai restaurant where I'm meeting "EJ" (Evert Jaap Lugt) the CEO of Nimbuzz it's a company I'm starting to hear a buzz about.

I've no idea what EJ looks like but there's a guy waiting outside. He says "Hello Tom, there's a tall blonde guy inside looking for you."

I walk inside and sure enough a tall blonde guy bounds up and introduces himself as EJ. "I asked some guy outside if he was Tom he said he wasn't but he said he knew you." I sit down with EJ slightly embarrassed that I can't quite remember who the other guy is.

We start talking about Nimbuzz. It's a mobile VOIP and IM company founded in early 2006, HQ in Rotterdam, plus a development center in Cordoba, Argentina.

"Argentina is great, we've got about 40 people there, it's a university town, we got a lot of them from Motorola. But it is a different culture, they tend to like being told what to do by a boss but we've retrained them to think for themselves, and we give them interesting work to do rather than the boring stuff Motorola used to give them. In Holland we have a flat hierarchy, nobody likes to have a 'boss' we have a "manager' and we figure things out by ourselves."

EJ is a serial entrepreneur, which is unusual in Europe, especially in Holland. "If I was going to do a startup again I'd do it here in Silicon Valley, or Israel or in Asia - India or China. It's difficult to get motivated people in Holland, they don't want to work for a startup, they want job security and they are too comfortable."

He tells me about one Dutch guy that wanted Thursday afternoons off and to go home at 5 p.m. to spend time with his family. EJ told him he loves his family too (3 daughters) but in a startup you can't do that, you have to work hard for a few years then you can pull back.

We talk about the differences in the mobile VOIP business. "There are nearly 200 other companies in our market. The Americans don't understand the mobile market they think it is like the Internet with its standards etc. But mobile is different, with hundreds of handsets, many operators, and multiple operating systems. It's complex and you have to hash out agreements with many different parties and support many different handsets etc."

Part of the Nimbuzz strategy is to partner with social networking sites because they offer a viral distribution network. Nimbuzz offers a white label solution to the social networking sites for the web component part of their services but a branded Nimbuzz mobile component. "They get to keep the web part, which is theirs, and we have our brand on the mobile part of the service."

Nimbuzz allows mobile phone users to place free VOIP calls over their data plans, they can call call next door or across the world. They can also call users of other VOIP services such as Skype users. "VOIP and regular calls can coexist easily because if I'm calling a business partner I will use the cell phone service but if the quality is not as important I will use VOIP. Quality is dependent on how many people are using the data service at the same time."

I ask about Skype getting into the same market. "I know, you'd think they would be there already but they're not. Same with Google, I wonder why they aren't more aggressive in the mobile space."

It all comes down to focus and Nimbuzz is very focused on what it does, and so far it seems to be working, it has about 1m users worldwide. Are you making money?

"No we're burning money. We need to build up a large enough regional market and then we will do lead generation. I strongly believe lead generation is the future for what we do and eventually all mobile calling plans will be free, supported by advertising or lead generation. You buy the phone but the rest is free. We are already seeing the beginnings of that in some European markets."

What about funding? "We have some great investors, we have a new round we are announcing but Techcrunch already did it, they broke the embargo." I tell EJ that Techcrunch is becoming notorious for breaking embargoes, he shakes his head.

"We're very lucky with our investors. One of them is a large South African media company, MIH Group, which nobody has heard about but they are one of the most successful Internet investors around. About 15 years ago they decided not to invest in print anymore and they now own large shares in major Internet companies in China, Russia, Poland and elsewhere." Another key investor is Mangrove, the European VC firm which funded Skype. "Even though we had offers from other VC firms, our original investors said they wanted to do all the new funding."

EJ is in town to do some deals with some local companies, I can't say who but I did guess a couple of them. More news will follow.

After we finish the iced Thai coffees we walk outside to say goodbye. EJ heads off to find his wife who is shopping in nearby downtown San Francisco. "I like this town," he says.

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Tuesday evening I ran into Talkshoe, a Pittsburgh startup offering free teleconferencing services for up to 250 consumers at a time, over a regular phone.

Talkshoe just launched a widget that can be used within many types of established groups such as those at Yahoo, Google, Facebook, MySpace and more.

Dave Nelsen, the CEO of Talkshoe, said business is great, and that the company has been growing at over 100 per cent per quarter since the service was launched 18 months ago. It reached 3 million users in the most recent quarter.

http://www.youtube.com/watch?v=Nl61b4VL-U8

TalkShoe Company Blog

More info here...

LinkedIn works wonders as a social networking site for business professionals- especially if you are LinkedIn founder Reid Hoffman.

Groupscope is a company that loves to map money relationships between investors and companies.

It applied its lens to answers to a question LinkedIn founder Reid Hoffman posed on LinkedIn:

What are the three hottest companies companies in Silicon Valley currently?

The answers were analyzed by Groupscope. And what did Brad Cohen from Groupscope find? Reid Hoffman is closely connected to many of the hottest companies in Silicon Valley:

It is interesting that Reid posed the question and was linked to the most common answers. I find this somewhat ironic...

...(and the people responding may or may not have known that Reid was involved in the companies they mentioned). The hottest company answers nonetheless underscore the extent of Reid’s connections in SV startups.

capitalBLOG »

This is either a superb testament to the networking prowess of Mr Hoffman, or it's a testament for LinkedIn as a truly useful business networking site. I'm sure it's a bit of both.

....

BTW, please link in to SVW on LinkedIn, I'd like to find out more about my readers (tom at foremski.com).

Link to capitalBLOG » Blog Archive » Searching for the Hottest Silicon Valley Startups - Network Analysis

http://en.wikipedia.org/wiki/Reid_Hoffman

By Tom Foremski for Silicon Valley Watcher

It's Tuesday night and I'm at Bimbo's nightclub in North Beach talking with serial entrepreneur Bill Nguyen about his latest venture Lala.com--a music sharing site with a twist, or rather several twists.

Mr Nguyen is animated, relaxed, and looks like he is having way too much fun. He clearly revels in what he is doing: launching another startup, being a doting father of a two year old, taking time to surf, and being able to indulge his love of music.

"Music is so important, it is how we see ourselves and how we define ourselves to the world," he says. I ask him what music was seminal in his life. He pauses, then laughs and says heavy metal. But these days his musical tastes are omnivorous and his appetite ravenous.

He mentions a band he recently discovered. "You have to listen to them, "Architecture in Helsinki" they are amazing. I've got plenty of other recommendations too."

Finding out about little known Australian bands is one of the perks of his job. Lala is a clever way to monetise the incredibly huge store of music CDs sitting in millions of living rooms.

I, like many people, am bored with my collection of CDs, I'd like to hear music I don't have. Lala lets me swap and sample other people's collections--an astounding 1.8 million titles registered by Lala users.

Through Lala I send my disks to others who find my collection potentially fascinating, and I can do the same--request their CDs. All for just $1, plus 75 cents shipping in prepaid envelopes.

For the price of one new CD I can refresh my collection ten CDs at a time. And 20 per cent of revenues are donated to the Lala created Z Foundation supporting working musicians.

Lala has been branching out into some interesting areas. It recently purchased a radio station, WOXY in Cincinnati, a cult station mentioned in the movie "Rain Man," saving it from closure. This led to the launch of "citizen radio" allowing Lala users to create their own streaming Internet radio shows. This drives CD exchanges because listeners can then send out requests if they hear something they like.

And from there, Lala is moving into streaming live performances, which is why we are talking in Bimbo's. Aimee Mann is about to come on stage and her performance will be captured by Lala.

It's a sweet deal for the venues, says Mr Nguyen because it helps them to attract hot acts. The clubs can tell performers that they have streaming capabilities automatically tied to revenue sharing of music downloads. That's attractive to performers seeking wider distribution and a share of online music revenues.

Lala is also establishing locations where local bands can come in and stream their music through Lala's network.

Soon, Aimee Man comes on, along with several special guests. Special guest John C. Reilly, the prolific movie actor comes on several times and steals the show--and doesn't give it back. Here is another person that is having way too much fun...

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It was also good to connect again with John Kuch, Lala's hard working bus dev and marcoms chief,  and also a doting father of a two year old. John, like everyone else at Lala is a huge music enthusiast and constantly discovering new bands. Here is a link to his Lala radio station.

Additional info:

Some of Bill Nguyen's previous ventures: Seven Networks, Onebox.

Lala.com How lala Works

Lala.com About lala

Phil Harvey, news editor at the always excellent Lightreading has compiled a list of 61 video hosting/sharing sites.

Phil asked me:

Can you lead me to some thoughts as to why there are so many Web video sharing companies being funded now?

I'm keeping a list of them and, frankly, I don't get it. My readers ask me and I haven't got a clue. But my readers are used to that.

Anyway, here's the latest list:

http://www.lightreading.com/document.asp?doc_id=112147

My reply:

Phil, at valuations such as that gained by YouTube, the VCs are willing to roll the dice and maybe win a similar deal. Remember, GOOG has competitors that have to compete along similar markets, and time to market is more important now than ever before. Buy it so that you don't have to build it. Yes, most of those funded will fail so that the VCs can get a small number of winners. Too bad for all the people toiling away in the future failures so that a few can win, but that's the VC way.

Great list! Thanks for putting it together.

-Tom

PS

Also, VCs move in herds, not in packs like wolves. Like herd animals they find safety in numbers :-)

Earlier this year I met with the Maxtor/Seagate data storage folks plus their partner Fabrik, Inc. And got a very early look at a new online service that blurs the line between storing your digital assets out in the cloud, or on local storage.

MyFabrik is a cool application that manages consumer media online or offline. In fact, the data storage costs online are very close to your data storage costs off-line--if you were to buy a Seagate drive.

That's an interesting revenue model. And by offering a nifty media management application, it allows a hard drive maker to add value and pull some revenues from above the (brutal) commodity marketplace of that sector.

This strategy also plays to all types of storage customers: from the hard drive huggers who need the assurance of a physical entity, to the ones that are comfortable with having their stuff in the cloud, and the ones that don't care or even want to know.

Those interested in trying out the new myfabrik online storage and sharing service can register for access to the final public beta release beginning on Monday, August 28. Following the public launch of the final service in September, access to the new myfabrik service is priced beginning at 99 cents/month, which includes 1GB of online storage space. Additional storage space may be purchased incrementally for 49 cents per GB.

Link to Fabrik

The city of London wants Silicon Valley tech companies. It wants their European headquarters as part of a push to create at least 2500 new jobs this year in emerging technology sectors; and further boost the city's multi-cultural tech community.

I spoke with David Riches, Director of North America for Think London, a semi-private organisation representing the Mayor of London and local businesses. It has the resources to enable companies to set up business operations in London in as little as six weeks.

"California companies are by far the largest US investors in London. It's because we already have a large tech community of developers, with strong ties to our universities. It is a much larger tech and research community than Oxford or Cambridge. Plus we have a great market that is young, urban, and tech savvy," says Mr Riches. In other words, lots of hipsters and first adopters.

Mr Riches says that his team will help companies quickly find offices, places to live, set up the basic infrastructure of bank accounts, etc. Introduce lawyers, accountants, help in recruitment, and introductions into the local business community. He laughed when I asked if an old school tie comes with the package.

Paris is London's largest competitor for European HQs, however, French employment laws raise business costs, says Mr Riches. It should be noted that London based companies have to comply with far stricter employment laws than in the US.

London is expensive, he admits, but then again, so is Silicon Valley. What you get for your money in London is a gateway into Europe, a business culture that is more American than in other countries; and access to a talent pool that is attracting tech firms from around the world, including our own giants, Google, Yahoo, and EBay.

Mr Riches also said that there are large Indian tech firms setting up in London, and tech firms from other countries too.

This might seem like a type of cultural technology melting pot being created by the newly arriving companies--but it is more the other way around. London already has a large, culturally diverse pot on the stove and, unlike in the US, the burners are full on.

The arriving companies become part of one of the world's most ethnically and culturally diverse cities in the world. It is estimated that more than 300 languages are spoken by sizable populations in London. This means unique access to a multi-lingual/multi-cultural workforce; some companies are already using that workforce for multi-lingual call centers.

I can see how there could be many other ways to benefit from such a diverse talent pool. That's because businesses exist within a society, which means that their cultural interface is very important otherwise they, and their products/services, won't be successful. They won't hit their mark.

If you don't understand your communities you will not succeed as a business. That's why Silicon Valley Watcher reports on the business and culture of Silicon Valley. And London potentially offers businesses an understanding of many cultures in one place.

London certainly looks appealing as a business center. And its ambitions to replace its hard hit financial services sector with more enduring and rapidly growing industries is a smart move. What will determine its success will be if it can become a development center that spawns great companies. Right now, its most obvious advantage is as a marketing/sales center for tech companies.

For London to attract Silicon Valley tech companies, the Think London organisation needs to do more work with the venture capital community and stress speed to market. The VCs are the ones that are pushing the startups to outsource as much as they can, and to speed to market by globalising operations as quickly as possible.

For London to attract the emerging Silicon Valley companies, however, there also needs to be more of business environment that doesn't punish success.

For example, a year ago I met with Rob Hull, business development manager at BT, the giant British telecom group. BT is investing about $16 bn in a next generation Internet infrastructure, and it dominates the telco market. BT will help web services companies, provide billing services, etc, and split the revenues giving them 80 percent and BT keeps 20 percent.

However, there's a catch... From SVW: Silicon Valley startups told: Come to London ... BT wants your business

...should your wireless service become hugely popular, BT reserves the right to "port" the service to its machines and reverse a 20 percent / 80 percent revenue split in its favor(!)

Mr Hull says that this provision is rarely implemented. But then why have it? Seems a discouragement to me...

I cannot see how such a business arrangement would be attractive to Silicon Valley's Web 2.0 companies, net neutrality issues pale in comparison. Think London might do well to ask BT to think again on that provision.

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Please also see: Why is there no British Google? A top British politician asks...

Also: Think London case studies.

I popped into the Museum of Modern Art Wednesday evening for the launch party for Genius, a startup that is grabbing buzz by the armful. So much buzz that a TV crew from one of the local stations was at the party, wondering if it was an example of dotcom mania making a come back.

No, it was not, but Genius has a savvy team, led by CEO and founder David Thompson, former chief marketing officer at WebEx. Mr Thompson knows his business very well, he's one of the most astute marketing executives (and I hate that term normally...) that I've met in a long long time.

The Genius product is also very clever, the way that it bypasses the the IT department and encourages users not to tell the geeks in the glass room about using the SalesGenius web service--the first in a planned suite of enterprise apps.

Smart use of proxy servers allows SalesGenius to monitor a company's best sales leads. They can view behavioral data on who visits their web sites, and help determine which sales prospects are hot. Hot leads get bumped up to the top of phone list.

I met with Mr Thompson and Heather Mosley from PerkettPR more than a week before the launch, and the more I think about the product and the business strategy I'm more impressed. It looks like a useful product and a very very smart business strategy.

And it was during a discussion with David Thompson that I had an interesting and blindingly obvious realization. I had asked why he had chosen to develop SalesGenius, as the first in a suite of enterprise apps?

He said the focus on sales is the most important part of any company and that's where the most benefit occurs from investment in the automation of the sales process.

A simple answer and it made me realise how often organisations forget this blindingly obvious fact. And I realized why CRM is probably the only enterprise software application that could ever justify its ROI and that's why CRM companies have been very successful.

But new web services threaten the old CRM stack because users can start using them instantly. And users can customize these apps without requiring IT departments and consultants.

Mr Thompson said that his experience at WebEx showed him how salespeople were using online meetings to sell products and services. Using the WebEx technology they could make 10 times as many pitches, and sell much more than before.

Since the interview, I've realized that the SalesGenius product is a crafty way to bring sophisticated web analytics into an organization, through grassroots users. And then once you get viral recognition within the company you get a shot at corporate license revenues, and sales of other online modules for other departments--all tied together for a one-view business console for the CEO.

Internet commerce is going to grow in importance, therefore strong web analytics is going to be the foundation of every company. Because web analytics determines how you sell your products, how you reach your best prospects, and the many other gazillion online interactions that future corporations will have to monitor. Web analytics is a way to get into the core of future businesses, that's the sweet spot because without strong web analytics you will not be able to run your business effectively. I have to hand it to the company, its name might turn out to be accurately descriptive rather than just hopeful ... :-)

I wouldn't be surprised if within a year WebEx or Salesforce acquires Genius. In fact, they should all join together, and they probably will at some point.

By Tom Foremski for SiliconValleyWatcher

LaLa.com launched today--an interesting business that seeks to monetize your CD library. Think of it as monetizing your long tail collection of CDs you rarely play anymore...

For a buck each you can exchange each one for a CD you'd love to hear.

The people behind LaLa are led by Seven co-founder and chairman Bill Nguyen. I popped in to see Mr Nguyen and John Kuch, in business development, a couple of weeks ago to get the prebrief.

LaLa is in downtown Palo Alto in an interesting building and in a spacious office setting that has tons of natural light and high ceilings. When I walked in, Mr Nguyen was escorting out family members who had dropped by to surprise him on his birthday.

We walked into a cooler, darker conference room and sat down on foldable wenge-colored Rex chairs, and switched on the LCD projector. Up comes a user interface that is friendly and intuitive.

"We wanted to be able to give people access to a much larger library of music than ITunes or anybody else. And we have some great search algorithms that can recommend music that you didn't know you might like," said Mr Nguyen.

Basically, the service works this way: you list your CD collection and you mark each one with a "I want" or "I have" and others can browse your CD collection and request your CD(s). You get an email saying that a member wants your CD and you pop it into a pre-paid envelope, as in Netflix, and off it goes.

Similarly, you receive CDs you've requested from others. Each transaction costs just $1. And the artists get a royalty.

You get rid of a CD you weren't listening to, and you get a CD you want, and the artist gets paid about the same as if they had sold a new CD. It is win-win-win.

Clearly, the temptation is to rip the CDs and then move them on. But, should such abuse of the system take place, the artists are getting paid each time. The record companies are missing out on their cut, but hey, they already got their cut...

Check it out and let me know what you think. We have betas available for SVW readers! But sign up quickly because there are a limited number available...

http://www.lala.com/invite/siliconvalleywatcher.com

Here is the official announcement:

By Tom Foremski for SiliconValleyWatcher

About a year ago I was in Palo Alto, trying to get back home but I had promised to stop in early evening to Il Fornio and meet with Become.com--a shopping portal.

I remember that Tim Dyson the CEO of Next Fifteen was going to be there, and I wanted to touch base with him, but I wasn't that interested in meeting with one of many shopping search sites such as Become.com--I was determined to make it a short meeting.

You can tell where this story is headed: I ended up staying for dinner and I was very impressed with the team behind Become.com (and that's when I also met Jason Dowdell(!)) I ended up staying well past my bedtime but it was worthwhile.

Wednesday I got to catch up with Michael Yang, the CEO of Become.com--not that we haven't bumped into each other many times since last year. What continues to impress me about Become.com is the discipline and the focus of the management team.

This is a company that is very single-minded about the ecommerce opportunities that lay in its lap. And this is also, a very experienced management team, having built up My Simon.com, the shopping portal, which was sold to Cnet.

This time, Mr Yang and his partners, know how to avoid the mistakes of their first go around--and that's what makes this company and this team very interesting. They know what to do and they are executing near perfectly on a business plan that they laid out to me more than a year ago.

So stick around, an interview with Michael Yang, CEO of Become.com is on its way.

By Tom Foremski for SiliconValleyWatcher
[There has been a lot written recently that Silicon Valley is back--here is part of a post I wrote in mid-November 2004.]

I've had lots of chats about Silicon Valley lately and I’m of the Bachman Turner opinion that you ain’t seen nothing yet.

When I arrived here November 8, 1984, Silicon Valley was going through the down cycle following the PC boom. A hundred PC companies wanted just 10 per cent of the market, wanting to strike it rich, as rich as the Apple IPO—the Google celebrity IPO of its day.

Hundreds of Apple staff became millionaires, including secretaries and the guy that ran the parking lot. The media coverage was massive. VCs rushed in like a herd and funded a huge number of PC companies and when the bubble popped, the down cycle was harsh. Stories about Silicon Valley’s death were constant and grinding for several years. I’ve seen several business cycles and the same thing happens in each down cycle, endless speculation about Silicon Valley’s future. What future does Silicon Valley have?

I think I can answer that question very easily—and I’ll accept any size bet on this call: when Silicon Valley comes back, it will be bigger than before. (Actually, it’s been back for a while--hence this venture.)

[I was chatting with Ron Piovesan, from Cisco on this topic recently, and he says has also seen signs of improvement. He laughed when I said I own the dotcom name: SiliconValleyIsBack.com. I said I’m serious, I do own it!]

Silicon Valley is very much like a fairground slurpy -- big chunks of ice with most of the juice at the bottom.

And there is a lot of juice accumulating, the laptops are discretely reappearing in bars and restraunts, and there are many signs of bubbly behavior.

Silicon Valley is going to have a larger impact than before. I’ve been through several business cycles and each time Silicon Valley has come back stronger.

In the shadows of Tuesday's Oracle-Sun enterprise system bundling partnership, and news from MacWorld, was some news about Ingres--an open source database company.

The news about Ingres was that Jim Finn joined the company as senior vp and head of communications--leaving a very high profile job as head of IBM Americas communications.

It was just over a year ago that Mr Finn departed from Oracle, where he headed worldwide communications. This was one of the most challenging jobs in Silicon Valley if you consider all the M&A deals Oracle was doing; not to mention working with Larry Ellison, one of Silicon Valley's top business leaders.

Ingres is assembling a stellar executive team and it's ambitions are to challenge the enterprise market leaders with open-source enterprise software. Given the high license and maintenance fees enterprises pay today, Ingres has a nice price umbrella to work under. But enterprise software is a hard sell. Here are some more of my thoughts on the company:
Ingres: Is this the dark horse of the enterprise software pack?

Startup LogLogic is targeting the dark matter of our digital times, a vast ocean of information that we never notice, at least not the users. It is the data generated by firewalls, network equipment and other IT systems.

Andy Lark, the former head of comms at Sun, is LogLogic's CMO. "There are three types of data inside corporations. There is the data in the databases, the unstructured data in emails and documents, and there is log data. And some companies, such as financial institutions, can generate terabytes of log data per week. All that data has to be stored and has to be searchable because of legal requirements."

LogLogic released what it called its third generation technology and offering Google-like searches and advanced AI techniques to locate data within terabytes of storage... sold as an appliance for quicker integration into IT systems.

http://www.loglogic.com/