Its about that time again in the cyclical world of technology . . . when founders divorce their first love and move on to prettier, younger, more interesting other founders. . . if only because grass always seem greener. There are so many backstories that I have yet see any other blog cover. . . perhaps its not the right time to piss on the parade or perhaps its just too close to heart. Skobee is headed down that path . . . but perhaps an even more text book and high profile example. . . it’s whats going on at Edgeio. I have no inside information, and everything is just gleamed from reading and observing. Even more so, this is not an indictment on business models, the company, or the people involved . . .it is a fact of life .. . and I’ve been through it myself on both sides. . .

So what the hell is going on with Edgeio and Crunchboard (or Mike Arrington & Keith Teare)? It is kinda of obvious that Mike no longer spend much of his effort at Edgeio . . . trying to turn CrunchXXX into a media empire. Has he given up? Does he not believe in it anymore? Or at the very least, he thinks CrunchX is more interesting and have higher upside . . . Even more telling to me is that

EDIT: Apparently Mike is not a founder of Edgeio, he is a board member. As a result, his involvement is not meant to be on a daily basis in the first place.

1) ChrunchBoard is not being aggregated by Edgeio (there are no CrunchBoard listings in Edgeio)

EDIT: This is not correct, I could not find crunchboard listings at crunchboard launch but that is no longer correct.

2) ChrunchBoard’s new aggregator vision is decidedly Edgeio-esq (As Alex Bosworth points out)

The same story played out during the whole social networking crazy between Six Degrees, Friendster, LinkeIn, and host of other G1 social networking companies. . . all the founders were friends, sat on eachother’s boards, invested in their companies, and eventually took spins from an original idea and launched their own potentially competitive ventures . . .

This post is not about Techcrunch etc . . . its about using it as a case study to see what entrepreneurs can do . . . So what to do? What to do when your co-founder has ADD and moves on to the next new new thing before finishing the current committment? How to you communicate to your investors when your co-founder move on (remember VC’s like to say they invest in teams, so if 50% of the team moves on, 50% of the investment thesis also disappears) . . . Even worse, how do you raise the next round? What kind of message does this send to VC’s who are comtemplating investing in the next round. Saying that your co-founder just like to “start companies” and not execute is just an excuse . . . its the same damn excuse VC’s feed the press when they force out a founder (remember the official spin Tribe gave for Pincus leaving) . . . besides what is starting companies . . .its executing really fast . . . VC’s can smell their own bullshit a mile away. This is what VC’s calls a “hairy” deal . . . they have twenty other companies to look at, they dont want to deal with a cap structure with baggage. . .

Ofcourse this shows that its extremely important to have vesting schedules for ALL co-founders so that no one can walk away and still own as much as the next guy. (I touched on this before) . But beyond that, what else can you do? Play nice, spin it as well as you can, and hope the business fundamentals/metrics will make it attractive enough to sustain the cashflow (through operations or financing). Ofcourse, pick your co-founders carefully, and know their value add (short term/long term) before jumping in bed . . . founding companies is by definition a risky venture . . .you have to truly believe . . . having one leg of the table being taken out can wreck havoc on the culture and morale of the company. . . (there is probably less than 10 employees) if your co-founder has a “put option” he or she might not be the best candidate . . . unless you are planning for it . . . still its hard to pitch to a VC and tell them that one of they guy they are talking to is leaving . . . LP’s dont like having partners leaving midstream either . . . they have clauses that let them take money one in case it happens. . . so VC’s understand . . . No founder leaves $100M in equity on the table just because he/she likes to “start companies” (if ~20% /= $100M VC’s aint interested in the first place).

I’ve been the ADD guy before, and I’m probably still am. . . but I’m extremely self-aware . . . I tell myself to focus, execute, build everyday much more than telling myselg to think bigger and have a new vision . . .

I dont like it (the people (sometime me), the thinking, and the culture that promotes this) . . . there is a HUGE difference between serial entrepreneurs and ADD entrepreneurs . . . starting companies is not a scarce resource/skill . . . BUILDING companies are . . .

Was trolling around Sitepoint and came across this hilarious exchange between an entrepreneur and his logo designers. . . (see screen capture) . . . apparent the guy (who shall rename nameless) believes that his logo need to capture the “je ne sais quoi” of web 2.0 in order to be popular (who knows, maybe Arrington added logo’s to his criteria of web 2.0 coverage filters) and kept on telling his designers that the logos werent “web 2.0 enough” to the bewildered expression (I imagined) of the logo designers. In the end he tried to boil it down to a science . . .

Thanks for the comment. Look through those logos again, they all have one thing in common if they use blue in the text, then it’s a brighter blue, and if they use black, then it sits on a black background, not a black shading…the logo you have looks too dark for us..does that help? feel free to question me if you feel i’m not being descriptive enough.

He was refering to this list of web 2.0 logos at fontshop

my response? … the sky is indeed already falling . . . if not, may God please help us when it does. . .

Frank Quattrone, the former Credit Suisse Group investment banker whose criminal obstruction charges may be set aside by U.S. prosecutors, retains the support of technology industry leaders who could help revive his career.

Quattrone, the son of a garment presser, was raised in a poor neighborhood of south Philadelphia. He joined Morgan Stanley in 1979 and became head of technology investment banking in 1990. In 1996, he moved to Deutsche Bank AG and in July 1998 to Credit Suisse.

Two weeks later, more than 130 investment bankers, analysts and other staff followed him from Deutsche Bank to Credit Suisse.

The group was based in Palo Alto, California, near the Sand Hill Road addresses in neighboring Menlo Park where many of the largest venture-capital firms are based. Over the years, Quattrone’s group handled IPOs for dozens of companies, including Amazon.com Inc., Cisco and Adobe Systems Inc.

More here from bloomberg

(I was part of that 130 bankers that moved with him to CSFB so I’m biased). . . Frank’s prosecution was a vestige of the web 1.0 (aka dot-com) era and the bust in 2002-2004 that followed. However, now that the web is back (as in 2.0), investors are going gaga once again over technology companies, and twenty somethings are once more on the covers of national magazines . . . looking for a scapegoat for the bust that followed sounds quite anti-climatic and counter productive. (proof that the valley does not have a master hypester, but an entire generation full of them) Even more so . . . the rest of us (VC’s, bankers, entreperneurs) who survived the bust and came out better than ever, not giving Frank that same chance seemed somewhat unfair. It wasnt that long ago that VC’s and dot-com snake oil sales guys (read entrepreneurs) were equally prosecuted by the mass media for bringing down the great american economy. A quick 2 years and a Google IPO later, they are again celebrated as the driver of great American global competitiveness. . . innovators and risk takers . . . the great purveyors of the equally great American Dreams.

At a time, when FuckedCompany’s Pud has joined the new party on the other side of the fence (not for workers and employees but for VC’s, executives, and techcrunch parties) . . . the bust has to be a distant memory . . .

Frank was unlucky to have to been the high profile scapegoat while the rest of us laid low and made our comebacks . . . letting frank take (the reputational not legal) blame for the excess that the entire valley participated in . . . . . And THAT is the reason Frank’s comeback is without doubt. . . Guilt . . .

Geoff Yang, a founding partner of Redpoint Ventures in Menlo Park, California, said he “absolutely'’ would work with Quattrone if the government dropped charges against him and he decided to step back into technology investing.

“I’ve always found Frank straightforward and honest in my dealings with him,'’ Yang said.

“I continue to believe he is a man of honor,'’ Barksdale, the former Netscape CEO, wrote in one of the letters to the court in 2004 in advance of his sentencing. Other Silicon Valley executives who wrote letters urging leniency included Adobe Co- Chairman Charles Geschke and Intuit Inc. founder Scott Cook.

“He’s a high-quality guy,'’ said Dick Kramlich, general partner of New Enterprise Associates, a Menlo Park-based venture capital firm. “He would be welcomed back, and he would be extremely effective.'’

“I actually wouldn’t be surprised to see Frank focus even more of his efforts on the California Innocence Project rather than get back into finance full-time,'’ Burnham, the author of the technology blog, said.

“If he does get back into the game, I think he’s much more likely to take part as a principal investor rather than a banker.'’

These are the words of men who knew in their hearts that Frank took one on the chin for the entire team.

(Plus an equally strong incentive. . . money. . . . Given that the current generation of valley bankers have yet to figure out how to help VC’s make money from pubic exits, they must be clamoring for some help from Frank . . . if he goes back to banking)

Edit: Jason Woodrow hits the nail on the head on the last piont I alluded to . . .

On Oct 25th, 2005 Jux2 was sold on eBay for over $100,000.

On Aug 11th, 2006 Yoosi.com was sold on eBay for over $5,000.

Yes, Jux 2 has much higher traffic (Alexaholic). But, my god, Yoosi has tons more technology than jux2. . . .

Yoosi Technology = 20X of Jux2 in manhours to develop (I’m guessing but I dont think I’m off that much)

Jux2 traffic(in Oct 2005) = 5x of Yoosi (today)

that doesnt compute to 20x difference in valuation in favor of jux2 . . .

(BTW, noticed jux2’s pageview really took off, anyone know why?)

Its been a while I posted an idea online . . . I guess my brain has been on execution mode lately. So here goes the setup . . .

There are 3 major themes happening on line today:

First one is obvious . . . the online world has moved quickly from replicating the one-to-many relationships in the offline world to quickly creating its own interaction models through the many-to-many model. In many ways, web 2.0 is the lichpin of the explosion of the movement.

Broadcast -> Peer Participation

Second is the driven by the fact that more people are online and those that are online are spending more and more time on rather than off. What this does is create a critical mass of people online doing EXACTLY the same activity at EXACTLY the same time. This has enable activities such as MMOG, BitTorrent, and various site centric chat features to gain value and critical mass. When the web was first “invented” most of its applications are asynchronous (email, forums), it quickly evolved to realtime (IM, Chatrooms), and now is going through an exponential participation and fragmentation phase.

Asynchronous -> Realtime -> Swarm (to borrow a phrase from bittorrent)

Lastly/Thirdly, ebay was the first to create the p2p transaction model for e-commerce; but missed out (until now) the p2p nature of online shopping between buyers. There are many many social shopping bookmarking sites out there, Yahoo Shoposphere, Wist, MintPages, something Hive?, and Kaboodle etc . All of them are asynchronous. (There is a good reason ofcourse - they want natural search traffic). But what we know through reams and reams of research with consumers is that what makes people like shopping offline vs. online (ie walk the mall on weekends for no particular reason/window shop) is that online shopping has been tainted by search and thus lacks a social/group aspect to its experience. (e-commerce growth in general is slowing because people still spend majority of their wallet offline.) You shop online when you NEED something, you shop offline when you WANT something. Women(and many men) go shopping with their friends at the mall as much as for buying a new pair of jeans themself as for eachother’s company.

Search to buy -> Browse to buy -> Share to buy

Long setup for an simple (still flawed) idea . . . the world need a IM/Skype plug-in that allows people to co-browse and co-navigate online shopping destinations. (If x-fire can do this for gaming, someone can do this for shopping) Invite friends or join an existing “raid” (borrowing from WoW). Instead of emailing friends cool stuff or deals asynchronously, the activity could be done in real time. The interactions could come form discussions (is this vacuum really the best, other recommendations?) as well as discoveries (look at what I found . . . great for eBay). It should allow co-shoppers to diverge from eachother’s path but still show what the other people in the group is looking at so they can converge again. The business model is simple . . . advertising/affiliate program . . . in the short term. But also, the ability to create somesort of wallet could be huge (one click purchase, security, group discount etc). I can see people do this during work hours as another incremental entertainment above just IM between friends. There still some scalability issues (not techincal but usability) I havent thought through . . . but I know the problem exists and this could potentially be one solution.

Cranky PM, my latest blog obsession (that VC secretary blogger slave girl was the last one . . . most of the time they dont last too long, but I do remain a reader), is so right . . . that these so called pundits/visionaries spend all day regurgitating analysis from someone less famous or have less friends and pretent to make it their own . . . (but its hard to say its not a symbiotic relationship). . . Back in the days when I was in the enterprise side of things I had a few meetings like the one she had . . . many of them we had to pay for (not directly of course!) by subscribing to their “research” . . . so I know exactly what Cranky was talking about . . . that both parties are equally guilty!

Of course, it worked as predicted (with 0.8 probability). The analysts / ho-bags — lazy if nothing else — faithfully republished the Cranky Product Manager’s slides, full of compelling graphs and thought provoking methodologies, as if they lovingly created them on their own instead of plagiarizing them from a vendor. Then, the IT departments of the world’s finest companies paid premium prices for this “unbiased” research and believed much of it. Hopefully, as a result, they will buy more of the Cranky Product Manager’s product.

There are other professions in the valley that is dependent on regurgitation as a source of differentiation . . .

1. investment banking research analysts - I dont want to say too much otherwise I might get subpoenaed, but read the footnote of these research reports carefully, if any chart is annotated as “source: company” beaware you are being spoon fed. Remember, there is a reason bankers spend collectively 500hours + to draft a red herring.

2. venture capitalists - ohh. .. this one is so juicy . . . VC’s seem so smart not because they are, its because they talk to smart people all day. There is increasing returns economics working here, that the more famous VC’s gets to talk to smarter entrepreneurs & researchers which in turn helps them sound smart and thus attract even smarter people to work with. Why do you think VC’s usually meet with EVERY companies in the space before making an investment? Why do you think sometimes they schedule it all in the same week? (so they can play off questions from one entrepreneur to another) The best VC’s can take all the data and all the perspectives they gather and formulate a unique perspective (I gotta give credit where its due). THAT is what I look for in a VC . . . plus someone that’ll give credit to how they sound so smart.

3. entrepreneurs/PM’s - . . . I have to fess up . . . no idea or product is genuingly unique. We all stand on the shoulder of giants. Thank god we get paid (equity or cash) for execution, otherwise all we do would be regurgitate, rinse, and repeat . . . plus the execution makes us feel superior to all other people we diss. (source of Cranky PM indignation?)

4. bloggers - I’m just regurgitating something Cranky PM brought up . . . the noise echo ratio of the blogosphere just went up another notch due to my regurgitation.

Hilarious article on the surprising domination of air guitar competitions by Asian Americans in the SF Chronicle . . . ASIAN POP Unstrung Heroes

We all have this genetic heritage of being rock stars, but none of us actually are. But it’s waiting in every one of us. We want to sing. We want to be creative. And when we’re given the stage, we just take that s– and run with it.

He sighs, torn between his competitive instincts and his sense of loyalty. “It wouldn’t be so bad if she won. From C-Diddy to Sonyk, from me to her. Just passing the torch. But then again, I’d hate to lose, too. It’s really funny — I actually have groupies. Sometimes I get recognized on the street. I get asked for autographs. But after I won the nationals, I decided I’d never write autographs on anything but skin. So now I only sign breasts.”

Greg Linden’s eBay, scammers, and self-governance brings up a good point. . . that the whole idea of community contributed value (content, commerce, social, etc) scaling infinitely is somewhat of a myth.

There was a time in my life, that I looked at eBay’s buisness model longingly (5 years ago before I joined) and thought that if one day we could just achieve critical mass, We would be PRINTING MONEY and I could just retire and watch the zero’s grow . . . boy was I wrong. . .

Yes the margins are great, better than the traditional one-to-many business models. But it does bring up a whole slew of other unexpected issues that threatens to negate network effects . . .

Here is a simple test that almost all company fails . . . if value added for a company is truly networks effect driven the difference between its cost of capital and ROI should increase ALMOST exponentially and infinitely. Put it another way (without stupid finance speak) Gross Margins should not only increase infinitely but exponentially as well. There not one company on this earth that has done this yet . . .

Even Google has seen its margins decrease and cash flow growth slow; further more, as much as people think Adsense/word is this self sustaining monster, there are thousands of cute/hot/buffed Stanford undergrads doing menial adwords tech support/filtering/placement etc . . . . just for a chance to date Larry (ok low blow . . . but mommy and daddy didnt mortage the house and get you into Stanford so you can attach one of the phone headsets to your head all day) .

Myspace is just beginning to run into this issue as well. To police its community it hired a Chief Whatever Officer to safequard the community from . . . itself . . .

Digg, with the whole issue of selling ID, digging for money etc, will eventually discover that there are certain things algorithm cant solve for and people will be needed to handle the exception cases.

I guess the summary is that nature has a way of finding balance. . . no one organism or company can grow unchecked forever. . . eventually the very thing that made it successfull will created some sort of negative externality and brings balance back into the world. (hmm isnt this in the pre-amble to Star War VI?). . . eBay with trust, youTube with hardware costs, MySpace with sex, and Google with too many Stanford undergrads . . .

If network effects can creat a platform which enables certain drivers to create value exponentially it can just as easily enable other drivers to destroy value exponentially.