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VC’s fresh perspective on Consumer landscape – Dos and Don’ts

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VCs are currently looking at the consumer landscape and the segment is hot again!  Many in the industry are wondering what the driver is this for the renewed VC interest.   “Right now consumer companies are getting the biggest exits” offered Howard Hartenbaum, from August Capital.  He further speculated “The value of Facebook is behind the trend. Every VC wants to have a stake in the game.   If they don’t, they afraid they will miss the big payoff.”  A different view was offered by Rebecca Lynn, from Morgenthaler.  “There were many good ideas in the early 2000s that were great; it was just that the market was not ready for them. Those same ideas are working now.”  But what should entrepreneur do?  Should they look for angel funding or chase a VC for a more substantial investment?

If you are, or are considering becoming, involved in a start-up consumer company, you may have missed a lively discussion at the SDForum quarterly investment forum on Tuesday, July 13th.  Sylvia Burks, (Pillsbury Winthrop), moderated Tuesday’s (July 13, 2010) SDForum Quarterly Venture Breakfast on the Consumer Internet. The panel included Howard Hartenbaum (August Capital), Rebecca Lynn (Morgenthaler), and Danny Wallace (PricewaterhouseCoopers).   Here is some advice from the panel.

Things to do:

  • Determine whether you want a 2 - 3  or a 7 to 8 year exit.
       o For a 2-3 year exit, take no more than $1.5M from angels.  
         A realistic goal is acquisition for no more than $30M.
       o If you plan to stay the course for 7 to 8 years,
         take VC money 
         Have a plan that supporst a 10X return on the on VC money.

  • Articulate value proposition in an easy to understand sentence. 
       o Good Examples
          Share your thoughts with everyone who is interested. 
          Easily connect with your friends. 
          Share your photos. 
       o Bad Examples
          If you had this problem, then you need our solution.
          If you “are in a complicated situation and need to”
          then you would  “use our product.” 
          Simply have a solution.

  • Be interesting to a VC (or to a potential acquisition)
       o Creation of a network effect? 
          (The more customers Twitter acquired – the faster they grew.)
       o Likelihood other people will use it for a platform
          (Creation of new companies using Twitter APIs spurred growth.)
       o Clearly articulate customer acquisition and retention
       o Simple, simple, simple explanation of the value proposition
       o Easy, easy, easy to use
       o Delights the customer
       o Be close to something consumers already do
       o Review the ease of use carefully –
         No one cares about better technology with steep learning curve. 
       o Measure if the market is ready
         Be sure the prerequisites are prevalent in the market place

What makes a VC run for their lives?

  • "I don’t need the customer input – I just know what they want.”
    Instead:
       o Go to market quickly.
       o Be willing to iterate quickly. 
       o Enable customers to tell you what they like and dislike.  
       o Measure the effectiveness of changes.

  • Promoting your product on “better technology”
    Instead:
       o Describe the benefit of the new technology
       o Test the reception of the benefit, not the technology
       o Measure whether consumers care about the benefit

 

 

Last Updated on Thursday, 15 July 2010 19:19
 

RightScale Customers Gain Agility

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Betsy Zikakis is vice president of Marketing at RightScale. Her “cloud stripes” aren’t just from RightScale, but from 5 years of cloud experience including Avaki, a grid technology vendor, Engage, an internet advertising network and Workscape, a human resource SaaS provider.


As part of the Core Cloud Corps series, I had a chance to talk with Betsy and get her advice to companies thinking about using the clouds, thoughts on private clouds, industry trends, and the likelihood of standards in the near future. The Core Cloud Corps encompasses not only cloud providers, but the companies that provide security, management, tracking, and provisioning. See Core Cloud Corps blog.


Betsy’s Advice to people thinking about using the cloud


“Just do it. Pick a project and get started.   Don’t let security get in the way, don’t let the concerns about how to budget it get in the way, and don’t let concerns of how to manage it get in the way!  The cloud is the wave of the future. If you don’t learn how to use it, you will fall behind your competitors.”


About RightScale


RightScale
  was founded in 2006. They are a SaaS that manages IaaS for both public, private and hybrid clouds. Their Cloud Management Platform provides system administrator’s control and transparency of the data and applications that are moved to the cloud, across the entire lifecycle of the project.  The platform sits between the infrastructure providers and the customers’ application.   Infrastructure providers include public clouds like Amazon, RackSpace, GoGrid, (and soon to be IBM), as well as private cloud providers Eucalyptus and VMware’s VMExpress.  


Public and Private Clouds


Private clouds are important for two reasons.  First, they are often a stepping stone to future public cloud services, so support of hybrid cloud is important. Second, many applications will likely span both private and public cloud in a hybrid manner.  Here is an interesting article from Gartner:  Companies eyeing the private cloud 

I asked Betsy for some examples of applications that might run in a hybrid configuration.  She described e-commerce application, disaster recovery projects, and development and test examples.


E-commerce Application that wants to run the credit card application on a private cloud and the product application on a public cloud


Disaster Recovery Application that manages applications that are normally run on a private cloud but wants the flexibility to move to a public cloud in the case of a disaster.


Development and Testing may use private clouds for their development but perform scalability testing on public clouds. 


Trends


I inquired about trends that RightScale is seeing from their customers.  “While a few years ago, the most prevalent customer was web 2.0 company that was most worried about cost containment and scalability,” commented Betsy.    “In the most recent survey, when asked what they were doing in the cloud. Customers had a different response.  Today they are performing different tasks (BI gaming, grid computing) and they most often cite the need for agility as the reason.” 
 

In the last 6 months we have seen the use of clouds emerging as a vital part of BI projects.

The growth of on-line gaming participation and its flash crowds which cause huge peaks in traffic, has increased gaming companies cloud usage in the past year. 


Test and development has become more common, especially for testing scalability of products.
 

Use of grid computing continues to grow.  Periodic demand for quickly completing a one off project, paying for only what you need, when you need it is attractive! It is interesting that many of these projects come from the line of business.  ,


“When our customers discuss agility, they are often referring to projects they would never have attempted prior to the cloud.  A pharmaceutical  company that analyzed  5 years of data, simply to see if there was anything they could learn from it;  A media companies that quickly transcoded (converted  a media file or object from one format to another) all their existing files;  A finance department that wanted to  do massive number crunching to test different models, “ commented  Betsy.


RightScale frequently find it is a business problem driving an enterprise’s first use of the cloud.   The problems often represent a one off project, require faster turnaround than would have been feasible without a large capital investment, and include BI.  “The cost is the same whether you use one machine for 1000 hours or 1000 machines for 1 hour,” Betsy said.  “And when the solution is needed quickly, often 1000 machines for one hour is the answer.”


Standards


While every presentation I attend seems to agree that more standards are needed for wide spread adoption of the cloud, Betsy had an interesting perspective.  She believes that even at the IaaS level, the different vendors are going to want to differentiate themselves.  One may emphasize higher security, one the data stores they offer, and another pricing options.  These may require different interfaces.  So, while companies need the ability to move from one cloud infrastructure to another, they won’t want to know all the different APIs.  They will depend on some vendor to provide a platform between them and the infrastructure provider.


Cloud Security

There are some industries that must contractually keep their data in-house.  But most of the time when anyone else says the cloud is not secure; they often mean I don’t want to use the cloud. 

We see companies such as Amazon continuing to add more and more security into their clouds. Procedures are in place that often make them even more secure and backed up than many companies’ in-house systems.

 
Next Article in the Series


Hopefully you found this article informative and will tune back in for the next blog – featuring  an interview with Arvid Fossen, Director Product Management & Marketing, at AServer, about their Datacenter as a Service (DaaS) offering.

Last Updated on Tuesday, 18 May 2010 23:06
 

Three Critical Elements of Your Career Strategy

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I had the opportunity to be guest blogger for the SDForum Tech Women’s blog. ….Kathy Ulrich author of Getting to the Top: Strategies for Career Success advises everyone to “Remember that a successful career strategy encompasses more than your next job search, you need to identify some long term goals, be proactive in your choices, and develop skills along the way that help you reach the top.” Read more

 

 

 

Core Cloud Corps - Who Are They & What Do They Have To Say?

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Everywhere you turn today, someone is blogging about cloud computing. A recurring theme is “All clouds are not created equal”.  Even a map of the cloud computing ecosystem doesn’t tell the whole story.  I like to group the companies required for a complete solution together.


Since so many companies want to execute arbitrary applications in the cloud, let’s explore them first.  I refer to this set of companies as “Core Cloud Corps”.  The group includes not only cloud providers, but the companies that provide security, management, tracking, and provisioning. Over the next few months, I plan to describe several companies, and when possible, interview a representative from the company, for a weekly blog.
 
The use of IaaS is the fastest growing cloud computing segment. But none of the IaaS companies provide the complete solution by themselves.  Best of breed supporting cast is needed for a complete solution.
 
While many of the Core Cloud Corps are in co-opetition with Amazon (Microsoft or IBM) for some services, their growth rate is dependent upon or parallels that of Amazon’s in this space.


Stay tuned for my next blog in the Core Cloud Corps series.  It is an interview with Betsy Zikakis, VP of Marketing at RightScale.

Last Updated on Tuesday, 18 May 2010 23:34
 

All Roads Lead to the Clouds

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My previous blog discussed the “Securing the cloud ecosystem” panel from Cloud Computing 2010.   The panel had representation from a security vendor, (Scott Chasin from McAfee), two large professional consulting organizations, (Ronald Knode from CSC, and Shahed Latif from KPMG) and a services company (Niall Browne from LiveOps).  The topic of where are we now with cloud computing and where will we go from here was so interesting, I decided it was worth its own blog.

Cloud computing security is currently in the classic list phase.  There are tens, if not hundreds, of lists available online spelling out the seven most important things a large (medium, or small) company should do to ensure cloud security.   Add whether or not the enterprise’ IT is mature.  Move to whether we are talking about SaaS, Paas, or Iaas.  The lists go on and on.  Lesson of the lists – Don’t forget why you created the list in the first place.  Don’t lose track of why you want your cloud to be secure.  Security is not just about preventing threats; it is about adding business value to the enterprise.  Examine what you are doing and be sure it IS adding value to the enterprise. 

So here is my addition to the lists: Three things Cloud Computing Security needs to move into Cloud 2.0.

1.)    Agree on standards and how to measure them. Customers are asking about standards and transparency.  We don’t have any useful standards today.  The existing standards are based on old models. For instance,  SaS70 is a10 year old standard which addresses a one time (or maybe annual) snap shot. Cloud consumers must figure out the standards they require from cloud providers.  Even after we agree on standard, we need to determine who should verify the compliance.  Should that be the cloud vendor? Should that be a trusted third party?  Can the enterprise do it themselves?

2.)    Figure out how to handle identity and access management.  Today, no one has really cracked the Identity access and authentication mode for the clouds.  The best we have today is to extend Single Sign On (SSO).  But does that model continue to scale for a global, cross enterprise, mixed reference, multi level cloud strategy? (Probably, not.) In the next year, products will hopefully surface to address these issues.

3.)    Determine how we to obtain the necessary transparency.  Today, many committees are busy working on standards. One caveat is that most successful standards come from successful reference models. Within the next year or two, we will most likely agree on some standards.   Next we will have to address how to convince the cloud providers to implement the required infrastructure so we have access, in a real time, to the information specified in the standards.

If you don’t know where you are going, any road will take you there.  We know we are headed to the clouds.

 
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