W Media Ventures

…AbeBooks, W Media Ventures, entrepreneurship and investing. Enjoy! (And thanks to Andrew!)

Posted: February 23rd, 2010 under News.
Comments: 1

Since starting W Media Ventures two years ago, I had to realize that the Pacific Northwest lacks a good network of angel investors with active angels like Geoff Entress out of Seattle being the exception rather then the norm. This is certainly not because of a lack of successful tech entrepreneur in this region but many of them don’t seem to be aware of the opportunities of investing in early-stage companies and how rewarding it can be to pass on knowledge to fellow entrepreneurs. So we need to do a better job of spreading the word of how to get involved in angel investing and I am therefore looking forward to speaking at the Angel Capital Overview workshop in Vancouver tomorrow. The workshop is organized by Bob Chaworth-Musters’ AngelForum and provides an overview of the angel investment process from valuation to due diligence to terms sheets in a compact 1 day workshop. And as it is led by US Angel of 2009 and Kauffman Foundation Entrepreneur-in-Residence Bill Payne, I am looking forward to learning a thing or two myself.

Posted: January 18th, 2010 under News.
Comments: 1

Vancouver-based W Media Ventures is one of the premier early-stage Consumer Internet investors in the Pacific Northwest and is looking for an Entrepreneur-in-Residence (EiR) for (all or parts of) 2010. If you are an individual with an outstanding entrepreneurial spirit and mind, who is looking to create the next best thing in consumer internet, would like to assist in the evaluation of potential investments and provide functional expertise to existing portfiolio companies, we would love to hear from you. You need to have a successful track record as entrepreneur or CEO / CTO in a start-up environment, ideally in the Consumer Internet area. Interested? Please apply to info [at]wmediaventures [dot] com.

Posted: January 5th, 2010 under News.
Comments: 8

It is the time of the year for predictions – here is what I think will happen in 2010 in consumer Internet:

• Facebook will lock down on its dominance of the social graph: Facebook Connect will become the standard for the social web with every major website implementing it. Other social networks like MySpace, Hi5, Friendster or our own Nexopia will have to differentiate even more radically and build their business around or on top of Facebook.
• 2010 will be the year of content companies: with AOL’s new focus on content generation, DemandMedia’s looming IPO and tons of innovation in this vertical, content companies will get more attention than ever before and come up with new models to produce high-quality content at scale. I am with you, Tim Armstrong.
• We will see a leader in geo-location emerge: it might be Foursquare, Gowalla, Facebook or Twitter but I am pretty certain that one of them will nail it and get to critical mass. My bet is on Facebook with outsider chances going to Twitter.
• The apparel vertical will see tons of investment activity with the private sales category getting close to bubble stage, new apparel brands being launched as web-only ventures (like Bonobos and Indochino have done) and new types of shopping concepts emerging.
• 2010 will see the IPO and M&A markets come back in full force with a long list of top companies readying for public markets (Kayak, Bigfishgames, DemandMedia, Zynga, perhaps Facebook) and successful IPO’s kick-starting the M&A markets.

So what have I forgotten or gotten wrong? And what are your predictions for 2010?

Posted: December 16th, 2009 under News.
Comments: 1

Michael Arrington’s post about search optimized content creation (”The end of hand crafted content“) started an interesting discussion about the role of social media in differentiating good content from bad content (check out Fred Wilson’s ”Why social beats search“ and the counterargument by Chris Dixon arguing that passed links will be critical inputs to better search-ranking algorithms but not replace search). I am with Chris on this one and see search and social media complementing each other rather than one replacing the other. We should also keep in mind that social media only does a good job in identfying ”head” content but does not play a significant role when it comes to long-tail content. If I have a very specific question that I need an answer for I will always turn to search and not to my group of friends as chances are slim that those friends will have the right answer for me. Last but not least, I would like to remind everybody who complains about search spammers that social media is exposed to spamming in the same extent that search is – where there is money to be made, spammers will find ways to game the system and social media is and will not be an exception. So while social media might probably be the best way to discover current content, search will dominate long-tail content but both will have their spamming challenges

This brings up the question if there might be a third way to identify quality content and such a third way could be based on observing users’ implicit behavior. The big advantage of such an approach would be that it is very hard to game. One of the most developed approaches in this respect is Tynt Insight which tracks the copy and paste actions of users on a particular website. Tynt is now tracking over 7 billions page views / month and has collected some interesting data on how users are interacting with content and what this means for the quality of such content. So tracking implicit user behavior might supplement both page rank and passed links to create better ways to differentiate the good from the bad content. And as content creation is exploding, we definitely need to do a better job at that.

Disclosure: I am an investor in Tynt.

Posted: December 15th, 2009 under News.
Comments: none

While the past 10 years have seen a big focus on marketplaces for physical goods (eBay, AbeBooks, etsy, et al.),  there have been a few success stories of marketplaces for creative services in the past couple of years and it feels that this sector is poised to really take off. The most important success factor for these marketplaces seems to be how well defined the outsourced tasks are. Services that try to replace a complete marketing agency have not taken off, simply because the process is very hard to replicate in a standardized way. But marketplaces that are built around outsourcing a very structured task like designing a webpage or a logo (e.g. 99designs) or optimizing ad copy for search marketing campaigns (e.g. BoostCTR) have gotten some great traction and scale (99design has now over 50K designers on their marketplace). Looking forward to even more innovation in this space, there are still many inefficient processes left in the creative space.

Posted: December 3rd, 2009 under News.
Comments: 4

VC funds go through challenging times world-wide but the situation in Canada is probably worse than in many other places. Most VC’s in this country have been focused on the domestic market, both for raising funds as well as investing their money. Turns out that this created returns that were about 10% below the returns of their US counterparts which is not surprising given the size of the country and the fact that no technology sector in Canada plays a worldwide leading role (which is very different to the world of mining where Canada has created some of the most successful investors and entrepreneurs worldwide). Those sub-par returns have lead to a reduction of the already small number of Canadian LP’s that have the resources and the interest to put significant amount of money into venture capital funds. While raising money from outside the country has been relatively challenging because of Section 116 (which makes tax treatment for US investors a time-consuming and painful affair), we have seen at least the provinces step up in recent years creating pools of money to invest in venture funds (e.g. the BC Renaissance Capital Fund). While this has helped stabilize the Canadian VC industry in the short-term, it might worsen the situation in the long-term as most of these government-sponsored funds require the VC’s to invest a significant amount of the commitment back into companies from that province. What hasn’t created superior returns for the whole country, will create even less returns when scaled back to the geography of a province. So what needs to happen is a change in mindset for all players in this market: We are competing for capital and talent internationally, not on a regional level. We need to get rid of all administrative hurdles like Section 116 and give Canadian VC’s the opportunity to build world-class firms that raise money from around the world and and invest in opportunities around the world. History has shown that most VC’s still invest their money above-proportionally in their home region so the net effect of such a strategy should be positive for everybody involved, including the entrepreneurs at home.

Posted: November 26th, 2009 under News.
Comments: 1

I often get asked what governments can do to help build a tech sector so I wanted to put together a few thoughts on this blog what I think works and what doesn’t:

• Have a vision and speak with one voice: one of the largest problems I have seen in the past is that governments start a multitude of initiatives but often lack an overarching vision and a single department or agency that executes on the vision. The result is often a series of un-coordinated initiatives by too many players that do not talk to each other. Less is more and it needs to start with a clearly communicated vision. In BC the merger of New Media BC and WINBC into DigiBC is a move in the right direction but I still feel that a vision where this province wants to take its tech sector has never been developed (or communicated).
• Building community: communities are built from the ground up, not the top down so governments need to more support people that build such communities instead of putting on large scale events to promote technology (Connect09 comes to mind as an example for BC). The BootUp Entrepreneurial Society (full disclosure: I am a board member) has done a very good job in Vancouver in starting to build an active and lively community for the consumer internet sector but we need more of such ground-up community building initiatives and we need the government to support these even more.
• Attract and develop talent: the most important success factor for the tech sector will be the ability of a region to attract, retain and develop talent. Shouldn’t a region be more aggressive in going after international talent? The City of Vancouver markets itself to businesses but shouldn’t they also go after individual talent? Perhaps we should get a Chief Talent Officer for BC who’s goal is to attract the brightest people from around the world. In terms of developing existing talent, universities certainly play a very important role but we need more unconventional places where people learn how to become entrepreneurs. Look at what Techstars has done for the Denver / Boulder region and you understand how important an incubator / accelerator like BootUp Labs will be for the Vancouver market.
• Provide targeted financial incentives: I am always a bit split on my take on financial incentives provided by the government to a specific sector as I have seen a lot of waste but also a lot of good things coming out of such subsidies. The net effect is probably still positive but I would argue that financial incentives should always happen on the “backend” and go almost exclusively to the actual players, not intermediaries. I would therefore always favor incentives that provide a credit after an investment is made (either by an investor or a company) over incentives that are given upfront. Secondly, the goal must be to get as much of that financial incentive to the actual investor or entrepreneur not an intermediary, be it a financial institution or a consultant (e.g. for SRED claims).

Would love to hear the feed-back from the community about these ideas. While I cited quite a bit of Vancouver and BC examples, every region and province should have such a discussion. Let’s start it!

Posted: November 16th, 2009 under News.
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The past week has been an interesting one for the online content space. First, Wired published a detailed profile on Demand Media and their “answer factory”. Then, Techcrunch reported that AOL is following suit trying to turn AOL into a low cost content production machine. Other existing players in this space consist of About.com, AccociatedContent and certainly our own portfolio company Suite101.com. So why this sudden focus on online content production at scale? There are a few reasons why this vertical is so attractive for an increasing numbers of players:

• There is a fast-growing demand for long-tail content that can be accessed very efficiently through search.
• As online content is generally harder to monetize than offline content, the only viable approach is to focus on economies of scale and minimizing the cost of the content generation – distributing the content production through a network of thousands of (freelance) experts from around the world is one way to generate high quality content without having to have an expert on staff for each topic.
• Based on immediate feed-back loops about what content is being read by users, content generation can be driven based on actual readers’ demand not assumptions about that demand.

It is exciting times for the online content space as it is revolutionising content creation models that haven’t changed for decades. And while the quantity of content being generated is an important success factor, the quality of it will decide the long-term success which is a balance that each of these players has to strike every day. Suite101.com thrives to be the leader on the quality front and it definitely translates into great feed-back from the most important element of it all: the writers producing the content.

Posted: October 26th, 2009 under News.
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Our portfolio company Suite101.com announced today that it has launched French and Spanish versions of their site after successfully expanding to Germany a year ago. Expanding an Internet company to international markets should be part of every business plan but is often easier said than done. At AbeBooks (which has localized sites for Germany, the UK, France, Italy and Spain), we learned a few lessons the hard way so here is a list of things you should consider when planing to take you company international:

• Internationalization cannot be a side project for a company but needs the full attention of the management team, dedicated product development resources and a long-term vision.
• You do not necessarily need an office in every country that you open a website for BUT you need at least a presence in the same time zone and native speakers working for you. Trying to grow European websites from a North-American location with North-American staff will not work but a lot of companies have been successful in running several European countries out of one centralized location with native speakers from these countries. Berlin, London and Barcelona are probably the best choices for such hubs.
• Take your time to build an internationalization framework for your website that lets you very quickly roll out new currencies and languages. One-off launches for a single language / currency are only faster on the first glance.
• Be aware of cultural differences between the different (European) countries – this is where native speakers come in that can help adapt a product, process or communication to local specifics. A few examples: credit card adoption is still very low in Germany, paying by bank transfer much more common. English tag lines are becoming more common in Germany but still are a no-no in France. Logistics in Italy can be problematic as the Italian postal service is not the most reliable.

Despite these challenges it is very worthwhile to think about international markets once the business is the home market is established, There are over 300 million consumers waiting in Europe to be served, with Internet penetration numbers that are gettig very close to North-American ones.

Posted: September 14th, 2009 under News.
Comments: 3