Friday, July 31, 2009

Apple Tablet-killer: the Thin-Tablet

While the 'net is abuzz over rumors of the Apple tablet, I'd like to point out a category of device in a form-factor that doesn't yet exist, but would be a killer product. It's also what I believe the CrunchPad tablet should have been designed to be. And that's the "thin^2 tablet". By thin, I mean it's physically thin in dimension, like the iPhone, but it's also thin in the sense that thin-clients are thin when they have nothing but firmware to access a remote server.

The problem I see with a rumored $800-ish device of that size, is that it's highly likely the same buyer will also own a smartphone. For the CrunchPad, at a rumored $400-ish price-point, it's hard to buy into the couch-surfing, coffee shop sipping usage model. In either case, if you already have a capable smartphone, home & work PC, and/or just have an available WiFi network, why duplicate functionality, applications, and user configuration and data files across multiple devices? One company that has identified this kind of thinking is Celio, with their REDFLY product that I wrote about previously. Rather than fall into the trap of providing yet another software stack (see the myriad of netbook-specific OS variants for example), this class of device provides remoting of the end-user experience (screen, keyboard, mousepad, etc) from a local smartphone.

But what I'd like to see is a product that advances in two areas vis-a-vis the REDFLY. First, rather than depend on a smartphone, why not support remote display protocols directly over WiFi etc? Currently, REDFLY is focused on what I call "local remoting". I'd like to see "remote remoting" (as well as local). If you're surfing from your couch, chances are you have WiFi. Why do we need an OS? You can tap directly into your home PC, or run a session from the 'net. Maybe even from Amazon. If you're on the go, why not use the tablet form factor device as a terminal for your smartphone? Just leave your smartphone in your bag, and talk via bluetooth. At home, hand the thin tablet to a family member and let them tap into their own custom environment.

Outside the consumer market, a thin^2 tablet is an excellent proposition for businesses. You can hand them out to employees, walk around the office, take them to meetings, take them home, etc. And data files are never copied to the device. For the educational market, it makes for a universal window into whatever software infrastructure is used (Windows, Linux, etc). Why force making a choice? IMO a sleek, affordable, multi-touch, thin^2 tablet would be the ultimate CrunchPad type of effort.

Beyond that, I'd really like to see thin tablet devices having a dual-mode screen that can function as e-paper, like the Kindle. And flipping mobile device virtualization on its head, why not run Android sessions in the cloud, and remote them back to the device? Then you can tap into your mobile environment from anywhere (thin tablet, home or work PC, web browser, e-console of your car, etc). This would be ripe for an application-level of virtualization (same Linux kernel, multiple application groups) to get really high server utilization ratios.

Who would make such devices? Well, probably at the end of the day there's no margin in the hardware side of this. But there is a lot of business value in the branding and ecosystem enablement. Which is why I think Facebook, Google or Amazon should make one. Any takers?

Disclosure: no positions, related IP

Wednesday, July 29, 2009

A business model for Twitter, Google-style

While the scale first style of attacking a market is still be proven out, getting a critical mass is mostly certainly a key element in the success of a social networking startup. These kinds of startups can pop up seemingly overnight in mass quantities, and one of the key ways to compete is to create an extremely rapid growth of user base and establish a site or service as de facto (and a verb) for the space it's in. This describes the trajectory that Twitter appears to be on.

Scaling to 1 billion users for any one startup is monumentally difficult. Scaling to 10 billion, given the current population, is impossible. Sometime before reaching either size, a startup needs to transition into a real business model. There's always the M&A path, but having a real business model amps up the M&A valuation significantly. In that spirit, here're some thoughts about some changes Twitter could make to allow them to "turn on the revenue" tap when they need to.

Two things I see holding Twitter back from gaining serious revenue potential are 1) you can do a lot from a twitter client without visiting the twitter site and 2) lame SMS-style messages lack much of the richness which would otherwise enable monetization opportunities, as I describe below -- the kinds of things that Google capitalizes on. And as I'll explain, if you can fix #2, you get #1 for free. So really, I believe enhancing Twitter messages will be a key factor in their future business proposition.

To be brief, twitter messages hail back to SMS (text) messages, which are limited to ~160 characters. After reserving 20 characters for the user name, you're left with 140 characters, the size of the Twitter-colored text you just read. If you want to add in a link, you probably will use a URL shortening service and lose another 20 characters or so of text space. There's not heck of a lot you can do in that amount of space. Some people claim this is part of Twitter's charm. Blaise Pascal might have claimed "The present letter is a very long one, simply because I had no leisure to make it shorter." In any case, I'd claim they're giving up significant revenue potential. To demonstrate my point, here's a hypothetical tweet (minus the sender info), which includes a shortened link but no other mark-up:



And here's a similar tweet, if tweets were allowed to be marked-up, both explicitly by the sender and implicitly through automatic means:



A number of improvements are shown: 1) the sender was able to mark-up the phrase "Tesla Model S" with a URL, 2) the phrase "electric car" was highlighted automatically by a keyword (perhaps advertising) engine, 3) the phrase "pic of prototype" was linked to an image file the user attached, 4) a map of the sender's previous or current location is displayed, 5) a (potentially targeted) advertisement is displayed, and 6) a voice version of the message is linked to (could be the sender's recording or voice synthesis). Additionally, links can redirect through Twitter (as shown), so that Twitter can more dynamically decide where to redirect them and collect much richer analytics. The links could also include the Twitter viewer's user name to give further info (not shown).

How would this all work? First is the ability for users to mark-up tweets, attach files, and provide lots of other rich info and meta information. Second, Twitter clients need to be updated to access a much richer API and display richer tweets. But what about SMS? I believe the key here is to separate out the tweet message body from all other stuff (mark-up, attachments, meta info), or at least provide/generate a fairly equivalent alternate text body. This will be passed through to SMS. To make the experience much better though, one could effectively merge the SMS reader and a Twitter client on mobile devices. When an SMS tweet comes through, the client/reader could initially display it in raw form. But as soon as the device reaches networking availability, the client could negotiate with Twitter to identify the message (e.g. each side runs a hashing function on the message body) and convert the SMS tweet to its associated tweet ID in the API world. The mark-up and related info could then be retrieved and used to re-display the raw tweet in its much richer form. Essentially this gives a consistency between the SMS and client worlds, but allows messages to come through SMS (given its robustness and availability w.r.t. mobile data). It also allows words to be used where shortened URLs are currently placed (as shown), since mark-up is moved out of the message.

Many other capabilities could fall out of this: e-biz cards, signatures, per-tweet backgrounds, etc. But the win on the business side is that some Google-class services can be applied, and there is much room for differentiating pay-vs-free accounts. For example, paying accounts might be free of advertising keywords, get indirected less through the Twitter site, perhaps be offered more mark-up capabilities (or at all), get text to voice synthesis for their tweets, etc. This would bring Twitter to a higher plane for use as a professional marketing tool. All without breaking the lowest-common denominator (SMS) as a transport.

And might I suggest a "Twitter Platinum" feature, messages greater than 140 characters...

Disclosure: no positions, related IP

Sunday, July 19, 2009

Yahoo's infrastructural disadvantage to Google: Java performance does not scale

Yahoo(YHOO) uses a Java-based MapReduce infrastructure called Hadoop. This article demonstrates why Java performance does not scale well for large scale compute settings, relative to C++, which is what Google(GOOG) uses for their MapReduce infrastructure.

A couple months ago, I wrote an article about how Hadoop infrastructure should use C++/LLVM, not Java, to be as scalable and efficient as possible. And to be competitive with Google infrastructure. Discussions surrounding Java vs C++ performance often seem to morph into something bordering on religion, are muddled with arguments about various tweaks that can be done in one language or the other, and then dissipate into the abyss of non-action. Very few discussions focus on the real issue.

I thought I'd take a different tact, and benchmark what I believe the real problem with Java is, vis-a-vis its use in large scale settings. Rather than focus on the relative Java-vs-C++ performance, I instead benchmarked the behaviour of multiple benchmarks running concurrently. In a desktop setting, a user may primarily be running one active application. It is possible for the overhead of a single Java VM to get buried in the over-supply of cores/memory/MHz/cache that are available on the PC. But in a large-scale server setting, it's desirable to max out the resources with as many workloads as the hardware can handle, hopefully without making usage of any one resource unbalanced w.r.t. the rest of the resources. And thus, any overhead imparted also means displacement of other work that's not done. Nothing comes for free; sometimes it's just not noticed (which is the "dirty little secret" of Java benchmarking I noted in the mentioned article).

So how does Java performance fare, when there is more than one thing going on? That's what I set out to benchmark. I highly recommend people repeat the same kind of methodology on whatever workloads they deem appropriate. For a quick-and-dirty assessment, I used the benchmarks from here, with the binaries (C++, i686 versions) and compiled Java classes as-is (ran with -server option). But rather than be concerned with Java-vs-C++ performance, I benchmarked each language relative to itself when a number of benchmarks were loaded on the same core.

To do this, I first timed each C++ benchmark individually. Based on those times, I created bundles of benchmarks to be run sequentially, each bundle taking approximately 30 seconds to complete end-to-end. Then for each of Java and C++ separately, I ran from 2 to 10 bundles both serially and in parallel, to see how much more efficiently the system could run the work when it had access to all the work-to-be-done in parallel. This is multi-tasking, and it's how real systems work. Any Java overhead will impart "displacement" of some kind, be it in terms of MHz, cache consumption, etc. And this is the kind of methodology that will illuminate such overhead in real terms.

The above graphic shows the results. Given concurrency, the system can complete Java workloads (bundles) about 15% faster than for the serial case. But for C++, it's about 30% faster. Benchmarking other (more real) workloads will have differing results, and I'd like to encourage others to do so. Note that this C++ multi-tasking advantage is cumulative with whatever gains it may have over Java on single task benchmarks. Keep in mind that large cluster scale applications are the kinds that are worth running after profile-guided compilation. This is a way to offer C++ applications some of the dynamic profiling gains that Java offers, without the Java overhead.

For reference:
bundle 1: matrix + nestedloop + random + sieve
bundle 2: fibo + hash
bundle 3: hash2 + heapsort + matrix + strcat
bundle 4: methcall + random + sieve + strcat
bundle 5: nestedloop + objinst + hash
bundle 6: sieve + random + nestedloop + matrix
bundle 7: hash + fibo
bundle 8: strcat + matrix + heapsort + hash2
bundle 9: strcat + sieve + random + methcall
bundle 10: hash + objinst + nestedloop
For some other reading, you can look at why the Hypertable project chose C++ over Java. And to clear up some mis-conceptions: 1) no, LLVM does not JIT C/C++ code, but it does offer later stage optimizations relative to traditional compilation and linking, and 2) Google's Dalvik (Java-like) VM is an endpoint (desktop, mobile device) technology, and not as relevant to the focus of this article.

Disclosure: no positions

Monday, July 13, 2009

Venture 3.0, Andreessen Horowitz will change venture capital forever

The announcement of the new VC firm, Andreessen Horowitz, and their first $300 million fund, is not just the entry of yet another high-profile person into professional venture capital. It delineates the emergence of a new style of VC, a recipe of successful venture capital going forward, and the Darwinistic demise of those who do not quickly adapt to it.

I've been dialed into startups on the entrepreneur side for 15 years. It's pretty clear to me, the conventional ways of venture capitalism are no longer effective. Entrepreneurs have gotten smarter, are much more informed, and are seeking alternative ways to fund startup companies. In the age of TheFunded ("the Yelp of the VC world"), it's become imperative to think about the funding process as a customer service industry. Treat an entrepreneur poorly, get some bad juju added to your rating.

What's even more difficult to contend with, is that the rate of technology change is accelerating. The Stone Age lasted about 2 million years, the Bronze Age about 2000 years. Twitter is 3 years old. We are moving faster like some kind of technological Doppler effect. The duration of a "technology generation" is probably in the range of 6 months to 2 years. Now think about this; imagine taking 6 months to go through the funding process for a startup. You might be obsolete before you get started! Years ago, when a technology generation may have been 10 years, or even 5, consuming 6 months of overhead in the funding process wasn't the end of the World. It can easily be the death-knell now.

Although the venture world is thought of as the bastion of risk-taking, the truth is many of them are more conservative than you may think; they wait for markets to emerge first (and be proven out by others), then jump on them quickly -- the "fast follower" approach. Again, this strategy worked much better with longer technology generations. But it's quickly hitting the skids with today's rate-of-change. This fairly recent phenomena is pushing many VCs to move up into later-stage financing. Why? If you think about it, funding later-stage startups in proven markets is the same thing as going back in time -- back to startups attacking previous and longer duration technology generations. Rather than adapt their models to new circumstances, they're chasing history. Good luck. At the top of the heap, are other types of funds (hedge funds, private equity, etc) pushing down the financing stack. The early stages funding void left by VCs moving up, is being filled by super-angels and angel syndicates on the bottom. This whole picture is going to get ugly.

What VCs really need to do, is to get much more aggressive and quicker to fund seed-stage startups, network harder and broader, get more dialed into by-the-minute developments, and get on-board a fresh crop of new faces who are the pioneers of what's happening next -- they will often not have the long resumes, "brand names" that VCs so revere, and will probably sound crazy as hell. And by the way, nearly every startup funded will need to change shape drastically as it progresses. Welcome to the new order!

And then came the announcement from Andreessen Horowitz. It took the likes of a team which has angel invested in 45 tech startups in the last five years, to break the Da Vinci Code of startups (which has been hiding in plain site, in places such as Judy Estrin's book). These guys are spot on. Fund lots of initial stage startups, see which ones survive, and then go in with some real money. And just look at the sacrilege: focus on the importance of the tech founders being the CEO (what, you don't want to replace them right away?), don't bother taking boards seats (or even bothering to create a board) for initial stage startups, unafraid of new business models, and more. This is what adaptation looks like! That's how you get access to tomorrow's Google.

To add some texture to just how competitive the VC landscape is, here's a quote from Andreessen:
There are, he says, on average 15 tech companies launched a year that will ultimately do $100 million a year in revenues, and these companies are responsible for 97 percent of the returns in the venture industry overall.
Imagine if a new VC firm swoops in and takes up 2 of those 15 each year. Make sure you're invested in a VC firm that's on the right side of Darwin. And as of the Da VC code, I think I know the next couple code ciphers to find the Holy Grail of 15...

Disclosure: no positions

Wednesday, July 8, 2009

kaChing: the sound of money flowing away from mutual funds

This year's Finovate Startup 09 Conference in San Francisco hosted some 56 financial oriented startups. Attending as a blogger from Seeking Alpha (a conference sponsor) and a serial startup guy, it's hard to beat merging the best of two worlds. If you didn't have a chance to attend, a great way to summarize the big picture painted by Finovate Startup '09 was encapsulated by a remark from a fellow Seeking Alpha blogger and hedge fund manager; there are no areas of finance left which will not be heavily disrupted. Some of these startups represent such disruptions to current financial business models. If you're in the biz, I heavily recommend attending the flagship Finovate in NYC on September 29, 2009. Your life is about to change.

My runner-up favorite theme at Finovate was peer-to-peer lending. This has a lot of potential in that it creates a new asset class which takes banks out of the equation, allowing (pools of) borrowers to directly borrow from (pools of) lenders. And as a general rule, startups in this space tend to tout more transparency to the process. There was a great wrap-up of related startups here. If I were a bank, I'd think about buying into these startups early. And note that transparency is the new trend.

But the one startup that stood out from the pack, and stopped me dead in my tracks as an entrepreneur was kaChing. If I had to describe kaChing in one phrase, I'd say "look out mutual funds!" Here's how it works. Portfolio managers make investment decisions on the kaChing site, and will also be able to import past decisions from previous trading activities to establish more history (assuming it's good!). They also declare their investment strategy, perform research, and blog. To extents, these kinds of things have been done by various services/sites. But here's where kaChing's magic begins. One of the most prevalent (and toughest to solve) problems of such a service is to assign ratings to portfolio managers which have real meaning. Basing ratings purely on returns can be a very poor way of assigning a metric, as returns can change quickly and don't reflect important facets of investing such as risk taken or consistency with a strategy. By contrast, kaChing believes they have "broken the code", creating a meaningful rating system called Investing IQ, which ranks managers by the same criteria that premier endowments look for:
  1. Great risk-adjusted returns
  2. Compelling investment rationale
  3. Adherence to a stated strategy
This of course is not easy to do on any scale. But it's absolutely essential, if you want to provide a service which retail investors can bank on. But then comes the brilliant part of kaChing's story -- one won't have to passively follow a portfolio manager; instead, in September you will be able to actively and automatically mirror their trades in real brokerage accounts!!! And portfolio managers will earn fees from followers, as in any real fund scenario. But to earn money as a manager, and to protect mirroring investors, managers have to earn a score above 70, which turns out to be very hard to do. Click on "Find Managers" on the kaChing site to see how few make the cut so far. Fwiw, kaChing thinks not too many mutual funds would make the cut either, but it's hard to tell due to lack of transparency.

I can see a whole new order of portfolio managers being created. If you're consistently good, you can live and manage from wherever you want. And the more prolific you are in your research and interactions with your followers (blogging, answering questions, etc), the more followers you can aquire ("the twitter effect"), which in turn scales your income nicely for the same amount of work! This is also a great venue for promising finance students and investment clubs to cut your teeth and show what you're made of -- get benchmarked with Investing IQ against the brightest. Ultimately, putting an Investing IQ on your resume may be cover-charge, like taking a GMAT is for entering an MBA program. What I'd like to see is a time when talking heads in the media have to disclose their Investing IQ -- what a great way to sort out hot air.

Going mobile? kaChing's iPhone app is now available for free. You can get real-time quotes for US exchange listed equities/ETFs, check out your account, get top-rated research, look for investing ideas, etc. I recommend checking out the "Investing Ideas" screen. You can see investment ideas where the smart money differs from the rest of the pack. Want another idea, just shake the iPhone. This alone is worth using kaChing.

To stay tuned for the trade mirroring feature coming in September, send an email to 'advanced_notice@kaching.com'. This is the company to watch. And it's worth noting, kaChing is a SEC Registered Investment Advisor.

Disclosure: no positions